Victor Dodig: Well, good morning, Mario. Two things. Just on the specific concerns that you’ve raised. I think Frank did a very good job. And the team, quite frankly, under Sean’s leadership, has done a very good job in rectifying a problem with US real estate that none of us were pleased but we were disappointed with the performance. When these loans were originated, they are well within our risk tolerance, both in terms of size and the nature of the business, nobody expected a global pandemic. That happened. We worked through it. And that issue, as we’ve outlined, is really in the rearview mirror, as we work through the rest of the year. On domestic mortgages, we feel very comfortable in the mortgages that we’ve underwritten and the client relationships that we’re building.
The overwhelming majority of our clients have deeper relationships with us. They have more deposits than they have – had means not anxious but from a bank standpoint, the loan to value across the board is on average about 50%, it varies location by location. So that doesn’t remain a concern. Quite frankly, what’s really a bigger concern is the lack of housing. That’s a bigger concern for me, that’s an issue. Well, what can go wrong for us, it’s really geopolitics, capital G, capital P, but we don’t own that. We don’t own the economy. We own our strategy. And what we’ve committed to our shareholders, Mario, is to deliver on our strategy of growing in the affluent and the high net worth space, attracting clients to our bank clients are running to our bank.
There are 700,000 net new clients attracted to our bank, building connectivity across our bank and using technology and the technology investments we’ve made to drive scale and to drive better operating efficiencies. And what you see quarter-over-quarter over time is improved operating leverage, quarter-over-quarter over time pre-provision pre-tax earnings growth improving and our goal is just to continue to deliver on that consistently going forward to make sure that strategy continues to work. And over time, we will earn the rights of more shareholders to invest in our bank. And with that, we will close those multiple gaps and continue to grow and prosper. So, thanks for the question. I’m always worried, but I’m not worried about our strategy.
Mario Mendonca: Right. And on your — for the — I can’t think of a better term, like your risk dashboard, presumably, you have something to that effect, some report that you look at, is there anything–
Victor Dodig: Yes, we have risk appetites, risk dashboards. We look at operational risk, we look at market risk, we look at credit risk, we look at reputational risk, and we manage all of that.
Mario Mendonca: Is there anything there on the dashboard today that you would want to highlight for us?
Victor Dodig: I would want to highlight our Capital Markets business, which has consistently delivered market-leading return on equity, market-leading VAR in terms of return on low VAR. It’s just — really the business is highly connected, more than 30% of revenues are connected to the rest of the bank. The U.S. business is growing. So, when I look at all of that, our goal is just to make sure that we continue to deliver and make sure that we have operational resilience. That is something that we need to always continue to focus on.
Mario Mendonca: All right. Thank you for indulging this line of question.
Victor Dodig: Thanks, Mario. Have a good day.
Mario Mendonca: Thanks.
Operator: Thank you. The next question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.
Sohrab Movahedi: Thank you. Maybe just quickly for Jon Hountalas. Obviously, a good set of underlying results. I wonder if you could pinpoint any of it on the Costco credit card acquisition or if there’s any update you want to give us on how that vector of growth is performing for you? Thanks.
Jon Hountalas: Thank you for the question. Yes, the results were good, Sohrab, happy to see them. Just high level, I’d say the revenue was 50% rates, 25% broad volume and just 25%, let’s call it, pricing discipline. The Costco deal has gone well. It’s still a small part of our overall results. I would tell you on the Costco transaction, every key metric we look at, revolve rate, loan losses, outstandings, new clients, every key rate is performing better than business case. Our franchising efforts are going as well or better than we hoped. So, it’s performing better than we thought. But I can’t tell you that Costco is the key contributor to these results. These results are broad-based based on a lot of hard work, a lot of execution against many smart investments that have been made over the years. I hope I answered the question.
Sohrab Movahedi: Thank you. You did. Thank you very much.
Jon Hountalas: Thank you.
Operator: Thank you. The next question is from Lemar Persaud from Cormark Securities. Please go ahead.
Lemar Persaud: Yes. A bit of a busy morning. So, apologies if you addressed this in your opening remarks. But for Hratch, the stability of margins through this rising rate environment, can you talk about expectations as you see rates move lower in Canada and the U.S.? And does stable rates, I guess, include potential rate cuts? And then moving forward, does this experience the lagging margin gains relative to peers and weaker stock price performance, change how you’re going to manage rate sensitivity over the longer term, perhaps you’d look at making the bank more rate-sensitive moving forward?
Hratch Panossian: Thank you, Lemar, for the question and good morning . So, look, I’ll start with the first part of that. We’re very pleased with our margin performance. And off the bat, I’ll answer your question, we think we have the right approach. We’re not changing our approach. Our approach in managing the balance sheet is not to take a position on rates. We don’t believe that’s a productive risk to take if you look at it over time. And so we manage the margins for stability. We’ve shown you the slide, the stability through unprecedented movements down and now up and maybe back down on rates has been, we think remarkable and we’ll continue managing that way. But in terms of what we’ve done, right, that margin stability has helped us.
