Bank of Montreal's Management Presents at Citigroup US Financial Services Conference (Transcript)

Mar. 6.13 | About: Bank of (BMO)

Bank of Montreal (NYSE:BMO)

March 06, 2013 2:05 pm ET

Executives

Thomas E. Flynn - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Thomas E. Flynn

Well, let's hope they're good enough. Thank you for that introduction. It's good to be here in Boston. I'll make a brief presentation, 10 minutes at most, and then I'm happy to take questions.

Before I begin, please note the caution regarding forward-looking statements on Slide 2. You'll find additional details in our public filings.

BMO Financial Group is a diversified North American Universal bank. We provide a broad range of retail banking, investment banking and wealth management products and services to more than 12 million customers. BMO is the second-largest Canadian bank as measured by the number of retail branches in Canada and the U.S. We're the eighth largest bank in North America by assets and the ninth largest by market cap.

In fiscal 2012, approximately 2/3 of our revenues were generated in Canada and the other 1/3 in the U.S. Our footprint is centered in the U.S., Midwest states: Illinois, Indiana, Wisconsin, Minnesota, Missouri and Kansas; and the 2 largest Canadian provinces: Ontario and Québec. This contiguous market has a combined population of more than 74 million and generates GDP of over $3 trillion.

BMO is well diversified with a retail-focused business mix. We have strong retail businesses in Canada and the U.S. Midwest with over $200 billion of customer deposits and approximately 1,600 branches, 930 in Canada and 630 in the U.S.

Retail banking is the largest contributor to total bank income and, within this segment, commercial banking is a proven strength across our North American platform. We rank second in commercial lending share in Canada at 20%. In the U.S., we have strong deposit share positions, #2 in greater Chicago and #2 in Milwaukee. Our commercial business is also strong, positioning us well in an environment of business expansion.

We're solidifying our position as a leading Midwest commercial bank through a combination of local access, sector and product expertise, and excellent treasury management services. Segments of focus include corporate finance, diversified industries, financial institutions, food and consumer, auto dealership, equipment finance, healthcare, agricultural and commercial real estate. We have top 3 commercial lending share positions in Wisconsin, Chicago and Minneapolis.

Our Private Client Group manages and administers total assets of $479 billion. This business provides a broad range of wealth management and insurance offerings including full-service and direct brokerage, mutual funds, institutional asset management, private banking and ultrahigh net worth family and offices.

During the first quarter, we completed the acquisition of a Hong Kong and Singapore-based private bank and they're now operating as BMO Private Bank Asia. Providing our investment expertise and service to high net worth clients. This transaction is another element of our overall Asian wealth strategy, creating an integrated platform that bridges our North American and Asian markets.

China represents a growth opportunity for BMO outside of North America and we're 1 of only 3 North American banks with local incorporation through our subsidiary bank, Bank of Montréal (China) Co. Ltd.

Importantly, we've established very good working partnerships in China over time, including a 28% interest in Shanghai-based FullGoal Fund Management Co., one of China's leading fund management companies; Hong Kong-based Lloyd George Management, a boutique asset manager we acquired in 2011; and a 19.9% interest in COFCO Trust Co., a subsidiary of COFCO group, one of China's largest state-owned enterprises.

BMO Capital Markets is our fourth business segment. We provide a full range of products and services to corporate, institutional and government clients. We operate in Canada as a bulge bracket firm with a mid-cap focus in the U.S. We have a full offering of investment and corporate banking services including equity and debt underwriting, M&A and trading products with leading equity research. In sum, we have a diversified business mix with personal, commercial and wealth businesses representing more than 75% of adjusted group operating revenue.

I'd now like to touch on BMO's risk philosophy, practices and performance. Our objective is to have a leadership position in the integrated risk management consistent with our strong credit history. In this regard, we developed a statement of our vision, strategy and priorities for the risk group similar to the way we do it for our operating business groups. Our approach is to provide appropriate and independent oversight, while working with all of our businesses, to generate sustainable shareholder returns within our risk appetite. BMO's strategic priorities include ensuring that our strength in risk management underpins everything we do for our customers and our performance, relative to peers, remains strong over time.

Moving now to a few comments on strategy and areas of focus, our brand strategy places the customer front and center. We'll drive revenue growth by achieving industry-leading customer loyalty and delivering on our brand promise, "Making money makes sense." We also have an ongoing initiative to improve productivity. We are targeting efficiencies in both parts of the equation, revenue and expense, and we're making good progress.

In fiscal 2012, expenses increased a modest 2% after adjusting for acquisitions and a stronger U.S. dollar. This was a result of good cost management and continued investment in our businesses, including investing in technology and development initiatives that support lowering the cost of generating each dollar revenue.

And in the first quarter, adjusted to operating leverage improved for the bank and for all business groups quarter-over-quarter, excluding costs related to employees eligible to retire booked in Q1 of each year.

As I've talked about, we are focused on leveraging our expanded North American platform to drive business. At the same time, we have made selective investments internationally to advance our business and expand our reach. Our focus is paying off, with 2012 a year of progress for BMO. We delivered record financial performance with over $15 billion in revenue and earnings of $4 billion. We successfully completed the conversion of our U.S. banking system and advanced our strategic agenda. Each of our businesses is well positioned to build on this momentum and success in 2013.

BMO also had a strong start to the fiscal year. First quarter adjusted net income was $1.41 billion. This marked the third consecutive quarter with adjusted earnings over $1 billion and both reported and adjusted income have been in the billion dollar range for 5 consecutive quarters. Adjusted results adjust for acquisition-related items like integration costs and loan accounting on the acquired loan portfolio, as well as certain other non-core items. In Q1, adjusting items were similar in character to prior quarters and netted to just $7 million. Q1 EPS was up 7% year-over-year to $1.52 and return on equity was approximately 15%.

Effective Q1 2013, regulatory capital ratio requirements for Canadian banks are calculated on a Basel III basis. Our capital position is strong with a common equity Tier 1 ratio of 9.4% at the end of January on an all-in Basel III basis and 12.4% on a B3 transitional basis. Last week, we announced a dividend increase of 3% to $0.74 per share or $2.96 annually. BMO's dividend yield is approximately 4.6%. The return of capital to shareholders was supported by our capital strength and the success of our business strategies.

Looking briefly at operating group results for Q1, P&C Canada adjusted net income was $461 million, up 4%. There was strong loan growth for the third consecutive quarter with both commercial and personal lending up more than 9%. Personal & Commercial U.S. had a very good quarter with adjusted net income of USD 170 -- USD 197 million, up 13% year-over-year, and we're seeing continued good growth trends in core C&I loans. Volumes were up 18% from a year ago and our pipeline remains strong.

BMO Capital Markets had a strong quarter with net income of $310 million, results reflect good execution in an improved environment and the benefit of a diversified business mix. Strong revenue in Q1 was driven by M&A activity, debt underwriting and trading revenues.

Private Client Group produced adjusted net income of $169 million similar to Q4. Traditional wealth was up 36% year-over-year, excluding a gain on a strategic investment recorded last year, and insurance results bounced back nicely.

To wrap up, we had a strong first quarter with good operating group performance and momentum across our businesses. Against the backdrop of slower consumer growth, we're well positioned with other avenues of growth. Our strong commercial banking business, north and south of the border, positions us well in a business-led recovery. We have upside from an expanded and upgraded U.S. platform. This is true of our U.S. banking business, but also in capital markets and our wealth group.

We expect to drive performance and shareholder value through our focus and efforts around efficiency across the bank, while delivering exceptional customer experience to help drive revenues.

And lastly, as mentioned earlier, our capital position is strong.

And with that, I'd be happy to take your questions.

Question-and-Answer Session

Unknown Analyst

Okay. I'll start. In terms of your U.S. business, you guys reported some pretty strong commercial lending results in the first quarter. You noted that your commercial real estate pipeline in the U.S. is pretty strong. As a Canadian owner of a U.S. regional bank, how do you see 2013 in terms of, number one, growth versus peers? And number two, how much margin you're -- how much NIM you're willing to give up in order to produce that growth?

Thomas E. Flynn

And the focus there is on the U.S. business. So a few comments on the U.S. business. We thought we had a very good quarter in the first quarter with good growth, both year-over-year and quarter-over-quarter. The quarter was really driven by strong growth in our C&I portfolio, which was up 18% year-over-year and up 7% quarter-over-quarter. So exceptionally strong performance, I would say, quarter-over-quarter. And as I said in my remarks and we said on our Q1 call, the pipeline remains strong on the commercial side. The performance there reflects, in part, the strong capability in commercial lending that Harris Bank had and M&I, the bank that we acquired about 1.5 years ago had. And combined, we've got just a very good capability in our footprint in the commercial space, and we've been investing in the brand as well. And so we've got a good capability that is paying off for us in the marketplace. Total loan growth for us in the portfolio was positive quarter-over-quarter in Q1. That's the first quarter of total positive loan growth that we've had in the business since we closed the acquisition of M&I. And since closing, we've been working down parts of the portfolio that were higher risk and we wanted to sort of right size. And so we're pleased this quarter to see the crossover point, driven by the C&I growth. And our hope would be that we would continue to show loan growth over the balance of the year. We do have NIM pressure and we're not alone in that. U.S. regionals generally experience some NIM pressure mainly driven by the impact of low rates, although pricing is competitive on the loan side as well. In Q1, our NIM was down 9 basis points quarter-over-quarter. And that was more than we thought it would be down heading into the quarter. A few things contributed to that, including the strong loan growth. And over the balance of the year, we do think that the NIM will trend down through time, but at a lower rate than we saw in the first quarter and more like in the order of around 5 basis points a quarter is the number to think about. And there'll be movement around that number. So that's sort of the picture on the NIM and the loan growth side. We had good noninterest revenue performance in the quarter that was generated from good fees on the commercial lending side that went with the loan growth volume. And we have also been in the practice of selling the majority of our originated mortgages. We're selling over 2/3 of our originated U.S. mortgages. And so we're generating fee income off of that activity. And so against the backdrop of a net interest number that's going to be hard to grow given the NIM compression, we're focused on generating noninterest revenue where we can. And revenue growth in total, we'll have some challenges around it in the U.S. but we're focused on moving the business where we can.

Unknown Analyst

Sure. Now let's talk a little bit about your U.S. business in the context of the overall group. Obviously, the U.S. is in a recovery path. Most your competitors are preparing for the expansion for more lending growth, et cetera. For you, right now, the U.S. contributes around 20% of group net profit. What would you like that percentage to be 5 years from now? Are you happy with 20%? Would you want to have more exposure to the U.S. given the relative growth differential between Canada and the U.S. going forward?

Thomas E. Flynn

So the U.S. retail banking business and wealth business are generating a little over 20% of group income and capital markets is on top of that. And in the first quarter, our U.S. Capital Market business generated about $88 million of income, which was a very good quarter for it. So in total, this quarter we were a little above 25% of the income across the 3 business groups. And the way I would think about your question is that through time, given our outlook for the 2 economies, we do expect the U.S. business to show stronger growth than the Canadian business given the investments that we've made in the platform over the last few years and also slightly higher economic growth in the U.S. than in Canada. In Canada this year, we're calling for sort of 1.5% to 1.8% growth; in the U.S., 2% plus a bit. And our footprint is growing basically in line with the national average in the U.S. So we expect we'll have a positive growth delta organically coming from the U.S. It's clearly a larger market for us to grow into. From an acquisition perspective, what we've been saying is that having completed a large acquisition about 1.5 years ago and completed the integration of it, we're now focused on making sure we get the payoff from those investments. And so we're not expecting to do another acquisition of any size in the U.S. anytime soon and that reflects the confidence we've got in growing the business organically and, again, taking advantage of the investments that we've made.

Unknown Analyst

In terms of synergies from your M&I acquisition, you have upped the guidance up to around $400 million with around 90% of that being phased in by the end of this year. Is there a scope for additional synergies from -- maybe for 2014 onwards?

Thomas E. Flynn

That's a great question. We have moved our synergy target up quite meaningfully, as you know. So when we announced the transaction, we said that we thought synergies would be approximately $250 million and that was based on the initial work that we did pre-transaction. We've increased that number really quite significantly to go from the $250 million to $400 million, and we're now at the point where about 75% of the synergies have been realized, expect to move up into the 90s by the end of the year. And there will be a trickle after this year as we move from in the 90s to 100, but they won't be significant. And I think beyond the $400 million number that we've talked about, the synergies will be more like just benefits from the transaction. And our hope would be that with the stronger platform and the process -- the approach we took to integration, which was really to take the best from both organizations, people, products and processes, that will have a much more competitive bank and that we will take share and we'll realize higher growth than we otherwise would. And so we see upside from that, benefits from that, but I wouldn't call them synergies.

Unknown Analyst

I see. So moving more towards Canada. In a slowing domestic consumer market, in my eyes, you're actually one of the more uniquely positioned Canadian banks because you have the largest market share in business lending, according to the data that we have access to. The #2 player is not very much far away from you, but you are still the top dog right now in terms of share. Yet, you have chosen to expand your mortgage book by offering very low, almost rock bottom, mortgage products such as a 5-year fix or even a 8-, 10-year fix. What is driving you to expand in an area that is slowing, rather than building on your strengths in terms of business lending, something that is looking up in my view.

Thomas E. Flynn

So I guess the way I would answer that question is we were looking to get growth on both sides and we do think that the market opportunity will be larger on the commercial side, given the leverage that exists with the Canadian consumer and having a business-led recovery. But we run our personal business separate from our commercial business. And so putting energy into one side of our business doesn't really detract from our ability to look to grow the other side. And we do think that our business mix is very well-suited to the current environment from a growth perspective, because we are overweight commercial lending in both Canada and the U.S. and we think commercial lending will be higher from a growth perspective than personal. We've also got upside from our U.S. businesses having invested them over the last few years and we think there's natural operating leverage there, plus the U.S. economy we think will grow more rapidly than the Canadian economy and we'll be a beneficiary of that to a greater extent than some of the Canadian banks that aren't as big in the U.S. and our capital position is strong. So we feel good about our mix as it lines up against the current environment. On the mortgage product, we have promoted a mortgage product that we think is a good product for our customers. And the product offers customers a fixed rate for, generally, 5 years and a 25-year amortization period for the principal repayment. And we think it makes sense for our customers to lock in a mortgage rate at the current time because rates are low and also to pay off their mortgage more quickly. And the product that we've promoted, we think, lines up well with market demand but also with good financial planning from an individual customer perspective. And so living our brand of, "Making money, make sense," we think it's a good product. The product has been very successful. We had a campaign around it about a year ago. This week, we've just relaunched the campaign for the -- sort of the spring house sales season. And we've had very good success at cross-selling customers and also bringing in new business. So in the campaign that we had about a year ago, 40% of the business that we did came from customers who were new to our bank, and that was a great customer acquisition strategy. The spreads on the product are in line with the average spread on our overall mortgage product and that's in part, because we're doing the business at the advertised rate versus having a higher rate that you might discount off of to do business and so the spreads are reasonable, and we've had very good success at cross-selling new customers other products. And on average we've crossed sold 1.9 products to the new customers who have come to the bank with that product. So from our perspective, we've got spreads in line with the portfolio, we're attracting new customers, we're cross-selling them other products and we're gaining share. And our share in mortgages is relatively low. It's around 11%, about half of our share in commercial lending. And although growth is likely to slow in the mortgage market, we think it should from a market health perspective, our share is relatively low in that segment. So having growth makes sense in our overall mix.

Unknown Analyst

In terms of your other residential exposures, you do have a fair amount of home equity lines of credit. I believe you are the second most exposed bank as a percentage of the total loan book at around 15% of your domestic loan book is held. It's not materially larger than most of the other banks which is around 9% to 10%, and it's below one of your competitors who is around 20%. Yet that is the one product that could potentially keel over if the consumers slow down. And it's a product that introduces almost nonlinear risks, if you will. You just need a little bit of negativity in the economy, either from the construction sector, in employment, GDP slowing down overall, before the infection starts spreading. Do you think this is something that is -- is this risk overblown? Are people worried too much about it? And what are you doing to sort of mitigate the risk around your HELOC exposure overall?

Thomas E. Flynn

So we have been active in that market as has the other banks as you've said. And the short answer to your question is that we're mindful of the risk, managing the risk, but not unduly concerned about the risk. And we had a U.S. bank through the U.S. downturn and that bank had a home equity portfolio and a mortgage portfolio and an indirect auto portfolio. And we've seen what can happen to home equity portfolios through a significant housing correction. And clearly, there is risk. And the risk, it can be very sensitive to employment and the housing market. But there's one, I think, very material structural difference between the way the business is done in Canada and the way it's done in the U.S. and that difference relates to the loan-to-value that will lend at. And we don't have home equity exposure above an 80% loan-to-value ratio. And in the U.S., it was common to have meaningful exposure above an 80% loan-to-value ratio. And so that's a huge cushion that exists in the Canadian marketplace relative to the U.S. marketplace. And I think materially lowers the risk profile of the product in Canada compared to the risk profile that existed in the U.S.

Unknown Analyst

Does the LTV of less than 80%, is that applicable to both first and second lien through the entire HELOC book? Or just on the first lien?

Thomas E. Flynn

The entire book. And then on the question of first and second lien, I think losses were highest in the U.S. obviously with high loan-to-value HELOC products, and also when a bank was in a second position behind another bank who was first. And in Canada, virtually all of our product is either first in itself or part of a package, a business that we're doing with our customers. So there's very little of that would be in a second position, structurally, behind another institution. And so that's another mitigant to the market. So overall, I'd say we're mindful of the risk. We think we've underwritten the business in a prudent way and we're not unduly concerned.

Unknown Analyst

Sure. And I ask this question of Janus, right before you as well, very, very curious to hear your thinking. What will cause Toronto real estate prices to follow those of more Western cities such as Vancouver?

Thomas E. Flynn

I used to be in the risk group, as you mentioned. And so I've been asking that question for probably at least 3 years. And I would say, there is a reasonable degree of comfort around the Toronto housing market. One of the important drivers of that comfort relates to the net inflow of population into the market, and Canada is a country that has net migration in and Toronto receives a very disproportionate amount of that migration to the city, and the economy is doing well, generally, and attracts people from the surrounding region. So there's a net inflow of population that provides a natural base of support to the housing market. Second point would be that the new supply that's coming on stream is generally not being built on spec. And in the U.S., at the peak, there was a meaningful component of the new construction market that was built on the expectation that the product would sell as opposed to having it sold before the shovels went into the ground. And in Canada, it's more a practice, particularly in the condo market, to have presales above the prescribed level before the construction begins, which also helps with just maintaining supply and demand in the marketplace. And last point, I guess, would be that affordability remains reasonable. And that's obviously helped in a very significant way by the current rate environment. But our expectation is that rates will remain low for some time. And with that, we don't see a big shock to the capacity to pay that individuals have for mortgages. So all that to say is -- prices are up, almost by definition. There, therefore, must be some incremental downside. But we think the market is pretty much in balance at the present time. And for that to change, I think you'd need some combination of a significant downturn in the economy, a spike up in unemployment and potentially an increase in rates. And it's clearly possible that we'll have another recession, we will have another recession at some point. It doesn't feel imminent. But based on all the stress testing that we've done, under fairly extreme assumption scenarios, the losses would be very manageable coming from the mortgage business.

Unknown Analyst

Okay. Well, thank you. Can we open the floor for questions?

Unknown Analyst

I would just be curious to hear how you are thinking about your Capital Markets business, capital allocation within that. Are there certain businesses where you're going to keep pushing for market share and hope that returns follow, sort of what's you're thinking on that?

Thomas E. Flynn

Sure. So for those listening, the question was how do we feel about our Capital Markets business and the capital allocation within the business. I would say we feel very good about the business. We've had 2 quarters in a row with income above $300 million. That's well above the run rate that we had over the preceding 4 quarters. And it feels to us like the capital market environment is improved. And that's partly a function of confidence, slowly crawling its way back and having an uptick in corporate M&A as a result of management teams feeling more confident. And it's also helped by a stronger equity market. So heading into the new year, we feel good about the business, in general, and the outlook for the year and we've had 2 good quarters given that kind of a backdrop. In terms of share, in the Canadian market, we view ourselves as kind of a Canadian bulge bracket player. We've got very good capabilities across the product suite and fight it out for market share everyday with our competitors and feel good about our capacity to compete. In the U.S., over the last 3 or 4 years, we've invested in upgrading talent and strengthening the alignment between the different parts of our business. And we are hoping to see this year, a good payoff from that investment, given that the teams have been together for a while now. They've gelled and we've got a better environment. And as I mentioned earlier, in the first quarter, we had strong profitability from our U.S. Capital Markets business, $88 million of net income. There was a tax reserve release included in that. So the operating earnings would have been lower, but it was still a very good quarter. And the upside that we see from the capital markets, we hope will come from continued good performance in the U.S. where the focus is very much on the mid-cap sector and we're not trying to compete with bulge bracket firms. And taking advantage of some opportunities that result from having a relatively strong balance sheet and trade finance has been an area of focus for us over the last 2 years. We've seen good gains in share in that business and very good returns and we're hopeful that will continue. From an overall mix perspective and a capital allocation perspective, we're happy with the portion of the total business that Capital Markets represents at the current time. And so not looking to make any big changes from an allocation perspective and the return on capital has been good. Our return last year was about 19% and in Q1 was 21%.

Unknown Analyst

Could you provide more color as to your stress test scenarios that you used?

Thomas E. Flynn

I'll provide more color. And we do a variety of stress tests as you would expect. And do some stress tests individually as an institution where we look at different scenarios and then our regulator has the industry run through different scenarios. And we run scenarios where the market is down for housing by 40% and by greater amounts in the large markets in the country. Unemployment is double-digit and interest rates are up, so what I would describe as pretty extreme downturn scenarios. And in those scenarios as you would expect, the losses that are modeled go up. They go up meaningfully. But they don't take away from the profitability in the Canadian retail business. So I come back to the point about the structure of the market and I think people in the room know this. But when you don't have exposure above an 80% loan-to-value position in either home equity or the mortgage product, you really have a different risk profile were you to head into a downturn. And that shows up in the stress testing results that we run.

Unknown Analyst

You just talked about economies of scale in your U.S. business. I mean, I know you were asked about whether you had more ambition there. But do you get economies of scale from the U.S. business being part of the group? Or do you need some other national franchises in the U.S. to really make U.S. regional banking work because that's what you are in the U.S.? All the regional banks that are really good in the U.S. seem to have some other national franchises, something special in them not just deposits and C&I?

Thomas E. Flynn

So I'll answer that question in a few ways. Firstly, on whether we get economies of scale across the broader group, the answer is that we do and it's part of our focus on productivity. We're working to increase the extent to which that is true. And the phrase that we use internally is that we want to leverage our platforms north-south. And that's a reference to getting activities on common platforms in the Canadian business, north, and the U.S. business, south. And our technology and operations group, I would say, is very focused on this, has been focused on it for over a year. And there's a constant challenge to try to leverage platforms in that kind of a way. It isn't always easy, because you do have differences in products between different jurisdictions and, clearly, it can be hard to put different products on the same platform. But we're making good progress. And as example, we run our call center business and support centers on a north-south basis with one management team. Our computer backup systems are on a common platform with the redundancy built-in into a location in Toronto. Our senior management teams across the business groups and the functions are common management teams across the different parts of the business. And there are also customer benefits that flow from being active in both Canada and the U.S. So for example, our Capital Market business is absolutely more relevant to our Canadian clients, both investing and corporate, because we've got a window on to the U.S., we can raise debt and equity in the U.S., we've got perspectives on M&A in the U.S. and we've got research coverage on a large number of U.S. stocks and that's helpful for our Canadian investors. And vice versa to a degree, but more so for the Canadians. And so we're focused on it as a theme and see benefits and are going to continue to work it. On the point related to national businesses, we don't have at the current time, what I would call a national asset gathering business, and we don't have plans to create that right now. We feel good about the ability to grow the business. We've got -- see leverage in that and likes in that and are focused on that right now, and aren't in the process of ramping up a national asset origination type of a business.

Unknown Analyst

Any more questions? I have one more question for you. Your interest rate sensitivity as reported by yourselves has gone up over the past 2 quarters. I think you now would benefit by $50 million to $60 million in earnings from a 100 basis point increase, while just a few quarters ago the impact would have been negative. So this is quite a significant change in how you have positioned your balance sheet. Now this is obviously most likely due to your view on interest rates going up over the short to medium term. What if that doesn't happen? What is the risk to your potential P&L and balance sheet if rates do not rise?

Thomas E. Flynn

So we have changed the positioning directionally in the way that you've described. The change is based on a view that given where rates are, they're more likely to go up than to go down. And I'd say, we have more upside sensitivity to increases than downside exposure to decreases. So the exposure isn't symmetrical. And I think the real answer to your question though is that if rates stay low, then there will be, for a while longer, a continuation of the pressure that we and other banks have seen on margin. And that comes from basically reinvesting assets that are maturing at old higher rates into a lower rate environment. And we're not fully through the cycle of reinvesting in a low rate environment given the duration that we've got on our equity and our deposit investments. And that will continue a little bit further if rates were to stay low. That said, we're, we think, well through the halfway point of sort of repricing into a lower market.

Unknown Analyst

Okay, great. Well, Tom, thank you so much for your time and for your insight. We'll be back in 5 minutes and we'll be meeting CIBC's CFO.

Thomas E. Flynn

Okay.

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