Meny Grauman: Got it. Thank you very much.
Bharat Masrani: Thank you.
Operator: Thank you. The next question is from Paul Holden from CIBC. Please go ahead.
Paul Holden: Thanks. Good afternoon. Wondering if anyone on the call would like to provide guidance on Gabe’s age?
Bharat Masrani: What’s the consensus? [Technical Difficulty] with that Paul. What’s the consensus?
Paul Holden: Sorry, I just had to roll with the birthday joke. Okay, so first serious question is, just looking at the PCL trends across the book of business, I’m just trying to figure out why U.S. Retail is increasing faster than Canadian Retail. Because I just look at the economic trajectories of those two economies and it looks like Canada is weaker than U.S. I’m just wondering if this is simply a matter of loan mix and maybe that is the simple answer. And then also maybe you can give me a sort of expectation going into 2024, again, given the different trajectories of the two economies?
Ajai Bambawale: So, I think you got to look at those over a longer period of time. So if I have the numbers in front of me, if I look at the full year, if PCLs are up both in Canadian P&C and in U.S. P&C. And if you look at impaired and performing, actually impaired and performing are both up, okay. But performing is greater in Canada and it’s for the full year. So what you may be seeing is maybe fluctuation between quarters and the reason for that is the Canadian consumer is more vulnerable in our view than the U.S. consumer, both from a leverage standpoint and also an exposure to interest rates. This quarter, I think there were some puts and takes and there was some divergence between impairs and performing between the two — the two segments. But I do feel the quality in both segments is good and we are adequately reserved in both segments. So I would just tell you to look at it over a long period of time.
Paul Holden: Okay, that vulnerability comment makes sense, thank you for that. And then a question, I guess for Riaz on the Wholesale Banking business. When I look at the current quarter, I understand that’s not the standard you’re operating to, but I see an ROE of 5%. You know, I guess last quarter was somewhere around 10% or 11%. What do you think is required to get this business to be ROE-neutral at the all-bank level or maybe perhaps ROE accretive over time and is that the fair way to think about it? Is this always going to be an ROE dilutive business?
Riaz Ahmed: No, I don’t think so, Paul. Like, you know, global trends for wholesale banks would say that ROEs tend to be in the 11% to 12% range through a cycle and, you know, full-year ’22, that’s kind of exactly where we were in the mid-11% range for ROE. I do think that as we gain the revenue synergies that we were talking about and get a more normalized expense ratio, that basically solves the issue. If you just do some normalizing math and just say, you know, if we think CAD1.5 billion, CAD1.6 billion of revenue per quarter, which is sort of the run rate of the full TD Cowen quarters in Q3 and Q4, and, you know, we’re going to get lift in that revenue as the markets become more favorable, as they have been in the last few weeks, we’re seeing nice momentum, a little bit of opening again, and we get our coverage models and our integration correct.
I feel very confident that we’re well on our way. So I think if we focus on what we said we would, which is expand our client base, deepen it, we’ve got a whole bunch of work to do with Leo on the middle market investment banking side to drive revenue growth. You know, I feel very optimistic about the potential for this — for the wholesale franchise.
Paul Holden: Okay. Last one from me, since expenses is very topical and you provided some guidance around expense growth, just and maybe it’s for Kelvin, how do you think about the efficiency ratio for this bank over time? Like, what do you think is the appropriate level? Because clearly in the short-term, you’re going to be somewhere above that target efficiency ratio and remind us of what your targets are? Your medium-term targets? And maybe based on your growth trajectory for this year and then 2% going forward, how long it may take to get to sort of the efficiency target?
Kelvin Tran: Yes. So the efficiency target is really dependent on the mix of business that we have, depending on which year, which business is growing faster than the other. Our focus is on delivering positive operating leverage in the medium-term. And we know that if we do that, our efficiency ratio will just continue to improve over time. So that’s the measure that we focus on.
Paul Holden: Understand. I’m sorry, did you include this in early commentary? The efficiency — sorry, the operating leverage for 2024, is that expected to be positive?
Kelvin Tran: No, our operating leverage target is medium-term. We don’t do that for — from year-to-year.
Paul Holden: Okay. Had to try. Okay, thank you.
Operator: Thank you. The next question is from Mike Rizvanovic from KBW Research. Please go ahead.
Mike Rizvanovic: Hey, good afternoon. I want to go back to Kelvin on the expenses. And, what I’m wondering is that second restructuring that you’re expecting next year, does that have a similar dynamic in a sense, that all of those savings will basically be offset by additional investments, or are you going to see that latter part fall to the bottom line?
Kelvin Tran: No, they have the same dynamics, because when we look at the expense savings, we look at the full program would generate about CAD600 million pre-tax, and for 2024 would be 400 pre-tax. And as you know, that would be lower than the amount of increase in expenses that we expect in risk and control in the corporate segment.
Mike Rizvanovic: Okay. So then, at some point down the line, maybe not until 2026, you would see your corporate loss come down to more normal levels. Is that how we should think about it? I know it’s far out, but is that a rough proxy?
Kelvin Tran: It is far out, but that’s what we’re targeting.
