Call Start: 9:25 Call End: 10:01 January 1, 0000 ET

RBC Capital Markets Canadian Bank CEO Conference
January 11, 2021 9:25 AM ET

Company Participants

Darryl White - Chief Executive Officer

Conference Call Participants

Darko Mihelic - RBC Capital Markets

Darko Mihelic

And welcome back everyone to the conference. We are now going to be joined by Darryl White, the CEO of Bank of Montreal. He has been the CEO since 2017. And before we begin, I’ve been asked to tell you that Darryl’s comments today may include forward-looking statements. Actual results could differ materially from forecasts, projections or conclusions in these statements. Listeners can find additional details in the public filings of BMO Financial Group.

Darryl, welcome to the conference.

Darryl White

Thanks, Darko. Thank you for having us. It’s great to be here in Quebec. Congratulations to you and your team for carrying on with the show.

Darko Mihelic

Yes. It’s a tough one in the virtual environment. But we’ll get through it I am sure. I think in your case today, I think what we’ll do is, we’ll start with credit quality. My reason for going with credit quality is, your bank actually gave pretty good guidance in Q4 on provisions for credit losses. And I thought maybe, I’d start here and just ask why did you think that you needed such good strong guidance?

What were you hoping to accomplish? And has anything changed in the last few weeks here with some of these lockdowns or anything to sort of knock you off of that PCL guidance? And do you think the street is well aware and comfortable with your guidance on PCLs? I think you said high 30s to low 40s. So, over to you Darryl. It’s the first question on credit quality and PCL guidance.

Darryl White

Yes. Okay. Thanks. Thanks for the question, Darko. Quite like we did with our Chief Risk Officer, Pat who described the outlook on credit quality. I think you are right, it’s at high 30s to low 40s. But I guess the question why that we come out and talk about it with that level of precision. Yes, and that’s actually pretty simple.

We were of the view and had been for some months prior that the market was effectively not consistent in its expectations relative to our 30 year history, our client lived experience and most importantly of course our view of the future and our expectations.

So when we see that sort of disconnect, we think we have a duty to clarify effectively. So that’s what we are doing and it wasn’t new that we saw us pretty clearly talking about our outlook on credit at our Q – I guess, our Q3 earnings. We had an Investor Day in the fall where we did quite a bit of, I think transparent disclosure on how we think about credit going forward.

Again in Q4, we - particularly I said to you, which was by the way was a view for 2021, we think in its entirety. So not – not particularly consistent with what we thought the market expected. But in line with what we saw. So, I think the fact that your question now you ask me whether you’ve changed since then, no not really. I mean, as we sit here today, you have to sort of think about very near-term and then medium-term.

As I think about the very near-term Darko, next two to four months. I think there is a difficult period here ahead of us from the perspective of lockdowns for sure. But fundamentally, as we look out over the full year, we don’t really see a change to that outlook and in fact in the near-term, we might even see the outlook a little bit better than what we talked about in the fourth quarter, because frankly we are just not seeing the impaired losses come in at the rate that people would have expected.

So that trend of credit quality being better than expected continues and in fact, it’s even a little bit better than we expected that.

Darko Mihelic

And maybe you touched on something there with respect to impairments and gross impaired loans and as a CEO of the bank, when you think about credit, what is it that you really want to sort of focus on? And what would you like investors to think about with respect to maybe the progression of impairments, your expectations around that? And how do you characterize and how do you think about your reserves in terms of adequacy?

Are the metrics that you zero in on as a CEO that might be different from what Pat talks about? Maybe just give us some sort of a flavor for your expectations on impairments and how well reserved you are as a CEO?

Darryl White

Yes. No. So, the first thing I would say is my sure hope nobody would had a disconnect between a CEO and the Chief Risk Officer on the metrics base. I spend a lot of time in the marketplace as well. So my lived experiences with our clients and they are – I’d say it’s entirely consistent with our reserve practices and the reserves that we’ve taken. Darko, if you look at the consumer side, as you know, this is now ordinary recession alright. This is a recession that is extraordinarily well supported by government stimulus. So there is a lot better outcome both on the cross-sector losses and exact delinquencies in the market than many would have expected when one entered this ten months ago.

And on the commercial side, it’s narrowly focused. We are seeing a lot of difficulty in the obvious places in tourism and real estate and in airlines and so on. But broadly speaking, and those sectors that I just mentioned by the way represent 5% of our total loans, 9% of our business loans. So broadly speaking, and the other vast majority of our book, we actually don’t see that particular experience.

I think, you ask about coverage, when you look to – then when you look on anything, you think about do we measure it. We had 68 basis points of allowance in our fourth quarter and when you consider that relative to, if you want to use a measuring stick, if you consider that relative to the 30, 40 – high 30s, low 40s that Pat guided to, that’s one-and-a-half times coverage going forward.

So, we are covered 50% higher than we actually think. We’ll see performing losses roll through and when I think about that as a CEO, I am very comfortable and we said repeatedly we think we are adequately covered. It may be in the case that in the fullness of time that we are much more than adequately covered. But we will have to see in the mean time we are really comfortable.

Darko Mihelic

So much, so, in fact, with comfort that – I think the other thing that you may have stated during the conference call in Q4 was that the build of stage two reserves is sort of over. So which naturally brings us to, well, how do we see them being released into earnings and we’ve had a similar discussion this morning with Dave.

Over to you, but how do you see that progressing? And will it be lumpy in your case? Because I think, one of the things is, we do view Bank of Montreal is being a little more commercially focused which tends to be a bit lumpier. So is it also that we should think that your stage two releases might actually be a bit lumpier going forward? Or do you see it being more of a steady progression of releases throughout the year and into 2022?

Darryl White

Yes. I think – I don’t know when we start releasing, Darko, to be clear. I think you have to remember that overall with the performing loan allowance, we – I mean, I know we all know so just to ground yourselves with the performing loan allowance that takes into consideration a view of the macro outlook as well as the underlying credit migration. And you know you are got to look at any further than Q2 of last year where we saw a drastic change in both all at the same time and we see the big build on the PLA.

And so, when I go forward, I think what we’ll see is, there will be some mitigations as we go look into 2021. And we may see a drastically improving environment as we go forward on the economy in the back half of the year. In fact, I think we will, I think that’s almost a certainty. But at the same time, there will be the flow through on some of the migration on the credit.

So, when we begin to see releases is really, it’s really hard to call. Our view is that, we will be cautious on releases and when we start to see some sustained improvements on both the macro outlook as well as the migration on the underlying, then we will start to see releases. I don’t expect that they would be particularly lumpy or any lumpier for us and then would be for others when that happens, Darko. But we’ll see when it come and when it come I think there will be pretty clear.

In the mean time, we sort of think about this as the back half of this year. But it’s really hard to say. So that’s not a forecast. That’s a hypothetical at this stage.

Darko Mihelic

Okay. And you mentioned something and that expecting a bit of a much more – I think a drastic recovery in the back half of the year. So maybe we can switch over to the theme of recovery and talk a bit about how you view it playing out? And what I am really interested in – from your perspective is, you’ve got a sizable U.S. business. So maybe you can touch on how you think the recovery will play out in North America? And touch on differences between Canada and the U.S. if you might and how it might impact your bank?

Darryl White

Yes. Sure. Look, maybe I will go broader than that. I mean, I’ll start with the plan. I mean, I think that we are going to see 5%, 5.5% global growth in 2021. It’s really fast than I think about that, because we had a contraction on global growth in 2020 of about 4% with the biggest drop that we had seen in the post work era prior to that was I think a dip of 0.1%, just for that perspective.

So, here we are down 4% where we hover on a global basis 5%, 5.5%, maybe 6% this year. Inside of that, your question on North America, I actually don’t see big differences between Canada and the U.S. There might be some around the margin. I mean, every time I get this question, I remind people that the U.S. purchases 75% of our export products. So this is really never going to be a very big difference over time on the relative performance.

And there we would see something in the neighborhood, Darko, of 4.5%, maybe 5% growth Canada and U.S., which I think is a little ahead of consensus, but not much. And it might be related to the really substantial savings that we’ve seen accumulated in households and we really don’t anticipate too much of a release on those savings until a return to travel or return to density comes around hopefully later this year.

But when it does, we actually see a very rapid acceleration both on the consumer side and on the business side. I think the more interesting question frankly isn’t the progression through 2021 necessarily there? I am convinced we will see a progression. We can have a healthy debate around the slope of the curve and what happens in Q2 versus 3 versus 4. I think in 2022 is the big question, meaning, do we see a sustained recovery?

Do we see sustained growth? Remember, coming out of the last recession in the global financial crisis we saw eight years of roughly 2% growth, which was interesting, but very different from prior recessions where you are going to review periods where you’d have 3% or 4% or 5% growth coming out of the recession. And I think we have the possibility of doing that here.

I think that in 2022, we could see a contained sustained growth rate of 3% or 4% into 2022 and that would be really interesting for our bank and for our customers. It remains to be seen. We’ll have to see how inflation plays out underneath that. But if you assume a 1.5% to 2% inflation rate within that same time period, it’s very unlikely that we’ll see any rate increases through that time period. But it is very likely that we will see, as I said 5% growth in 2021 and maybe 3.5% or 4% in 2022. Same for Canada, U.S. within a margin.

Darko Mihelic

And given that outlook, which, yes, admittedly sounds bullish. Will your bank do anything visibly different in 2021 versus 2020? Do you plan any sort of major pivots? And maybe you can touch upon your view? I mean, it sounds similar to the previous speaker in the sense that consumers are waiting in the weeds to spend. Do you view that as being the major part of the recovery? And your bank being commercial, what does that mean for your bank or more commercial-oriented I should say? What does that mean for your bank? There is a lot in there.

Darryl White

Yes. Well, okay. So, there is a lot in the question. The question on major pivot or I think is the way to put it on strategy, no, I don’t think you should expect any major pivot on strategy. I think you should expect frankly, more of the same in an accelerated way. And what I mean by that is, when you think that, Darko, to a couple of years ago, when you and I had this conversation at your conference here, we talked about increasing the profitable share of our earnings that came from the U.S. prior to that we were on 25%, we were not capable of 35% of earnings coming from the U.S. and we love it where we are now.

We are at about a third. And in the mean time, we grew while improving the profitability of that business. The P&C business in the U.S. today has a 55% efficiency ratio which is actually better than the average of the rest of the bank. That trajectory we think as the recovery picks up should continue. The other thing we talked about is overall delivery of operating momentum throughout the entire banking.

In the pandemic last year, we reduced our efficiency ratio by 160 basis points which led us here. So we are pretty happy with having done what we said we were going to do. As we move into this recovery, I think that you should expect an acceleration of existing priorities. In addition to that, if you are watching closely, you’ll have seen that we’ve started to pivot certain aspects of the portfolio where weren’t satisfied that the returns either ROE or efficiency or both were sufficient to be accretive to the overall portfolio objectives and/or we didn’t see a path of leadership position.

So if you go back year and a half ago, we’ve started down winding our insurance business. We announced in December of this year that we would be exiting over time the non-Canadian energy business. We announced a week ago that we are selling our private bank at Asia. Individually, these are small and the only thing I have in common is the most important thing which is that we are looking to harvest investments where the returns frankly just aren’t good enough over time and make sure that we have that capital deployed where they might be better.

So in terms of sort of the next leg of our strategic acceleration, I would add that to the existing performance that we are all very proud of which is that we’ve put in a really sharp lens on businesses where we think we can retreat capital and potentially put it into places where we can return better capital over time. And that’s not. We’ve been doing that – we’ve been doing that for a really long time.

As the recovery picks up, particularly through the back half of this year and next year, I think we’ll be in an extraordinarily good position to take advantage of all that. Because then what you’ll have, Darko, I predict what you’ll have is we will continue to be peer leading on our operating performance. We have been over the last year, year-and-a-half end up with. So we will lead the peers on operating performance. And we’ll be better than expected on credit performance and when you put those two things together, I think it’s a pretty powerful cocktail for us as a bank.

Darko Mihelic

And perhaps, one of the things that are – that is I get asked the most is, is my outlook on commercial loan growth, specifically in the U.S. where you have been over a period of time outpaced the industry. Maybe you could touch a little bit upon your expectations for commercial loan growth in the U.S. and maybe tie in also a view on your net interest margin as well.

Darryl White

Yes. Sure. So, you are right. There was a period of time where we outpaced the industry when the industry was growing itself and you saw loan growth in C&I across the U.S. growing pretty rapidly. That period of time sought there out the second quarter of last year it did that when the pandemic came along. So, for those who haven’t observed us closely, if you go back and look at the four to six quarters prior to that, the industry grew quite robustly and we grew above the industry.

We said at a bunch of times we make no apologies for that. Folks who sought that there would be a credit concern underneath that growth I think are already being proven wrong. We will continue to prove them wrong as we go forward here. So, we accumulated – we’d like to say we’ve accumulated clients not loans.

And since that period of time, when the market has really flattened out on loan growth you’ve seen that with us too. So, we’ve flattened out over the last couple of quarters. What do I expect going forward? I am not here to tell you that we are seeing a pickup in that loan growth yet. It’s picked up, I would say, very slightly.

So you might call it green shoots, but certainly not at a rate where I could tell you that the loan growth game is back on in commercial. I absolutely believe at the same time that it will come back on in that period of time as summarized earlier. We get through these next two to four months in the winter and we start to see the vaccine overtake the virus.

Then we are in a period I think where loan growth towards the back end of this year can begin to be very substantial and when it does, we expect to perform well and we expect to perform above market, why? Because we’ve shown in the past that we can do that. We can continue to grow our business and drive down our efficiency at the same time when we grow those loans. We are not there yet. I am super confident though of our ability to take advantage when we get there.

Darko Mihelic

And just on net interest margins, if you can just touch on that?

Darryl White

Oh, yes. So, you know, here this that the NIM – this is really – it’s a fascinating story really. We – I would have projected more NIM compression in the back half of 2020, Darko, than we saw when we loan and that lots of people would have. We manage that through the relationships very well. You have to remember that our commercial business 9% of our relationships are lead or sole relationships.

If you are really beholding to a syndicate, you are beholding to the management of the relationships both on the loan side and the deposit side. There isn’t much question that the market overall should see some continued NIM softness. I think you are asking about the U.S. in particular. This should be true in Canada too by the way. But I guess, I would say, with the full flow through of the rate cuts from last year, we should see increased compression in NIMs in the United States.

I will say to you that we are not seeing it yet. We might see a little bit of compression in the quarters we are in right now. But not dramatic as we go through the year. I think you should expect a little bit more, if I am a betting man, I would say you’ll see some but less than people expect.

Darko Mihelic

Thank you for that. I appreciate it. And then what about fees? What about that side of the ledger? And maybe you can weave in capital markets. I mean, one of the things that we myself included, we think capital markets simply cannot reproduce the revenue picture that it did last year. Am I wrong? Is there something that should make me more bullish on the capital markets business?

Darryl White

Yes. It’s the toughest one to call. You know it well, because things can change very quickly in the fee businesses. I will say that in our case, the theme of, let’s look to recent history. In Q3, we had exceptionally strong quarter in capital markets. Not sure we and others believed that it would be as strong in Q4 and yet it was. And here we are going through Q1 and I would say to you it continues to be strong.

Can the full year be as strong as it was last year? We’ll see. I mean, at this point, I think you should expect that the fee businesses overall, capital markets, wealth and otherwise by the way we’ll do a really nice job in the near term mitigating that revenue challenge that you got in the lending businesses that you and I talked about a couple of minutes ago. That’s fantastic.

That’s the benefit of the universal model and it’s working like it’s really working real-time. And then you have to kind of look portfolio-to-portfolio to judge one to the next. In our case, we think we got some advantages. We went through over the last couple of years some pretty important portfolio moves within our capital markets businesses.

So think about some of the headcount adjustments we’ve done. Think about the beginning of the wind down of our non-energy, our non-Canadian energy business which wasn’t getting it done from the return perspective. You think about the additions of businesses that are high return like KGS and Clearpool which we’ve acquired.

And so those are replacing earnings that were displacing. So I am – net-net, I am very bullish on the capital markets business, Darko. That of course assumes ongoing constructive markets. If we have ongoing constructive markets, I think we’ll do quite well and we continue to do quite well as we sit here today.

Darko Mihelic

And are you more bullish on Canada cap markets or in the U.S. capital markets?

Darryl White

Both. Both.

Darko Mihelic

Both.

Darryl White

I think what we are seeing in Canada, we have not yet seen the same pickup in the M&A fee stream although the pipeline is building very substantially. The pipeline is as healthy as I’ve seen in the long time. We have seen pretty robust performance in our markets businesses in Canada. We were very proud to be the number one equity underwriter in our lead tables last year.

So we see ongoing strength there. And in the U.S. where, I remember saying to you and others a couple of years ago if we were able to produce $7 million of NIAD in a quarter in our U.S. capital markets business. That would be a pretty good day and here we are way, way, way through that in the most recent performance. And I would expect that to continue as well.

So, again, markets can take this whole story sideways very quickly, because you could see a dry up of client activity. But in the mean time, so long as the markets continue to perform, I think the job the team has done to reposition this business is just really frankly fantastic. And I haven’t even mentioned within that expense control which has been peer leading as well.

Darko Mihelic

And so, maybe switching gears now over to the capital side of the equation. One of the things that we are thinking about is that, right now, what seems as though the banks can generate more capital than they can actually deploy and we are thinking about 2021, where there are some restrictions in place. So, do you believe that to be the case for your bank?

Are you in a situation where you cannot organically deploy as much capital as you are actually generating? And we used to get some sort of numbers from the banks in the past, are you willing to talk about how much capital you think you could generate in 2021. And maybe I’ll stop there and let you sort of tackle that and before I dive into the second part of that question.

Darryl White

Yes, yes. No, I would guess, it will be interesting to see it. This is what I’d say to you, 2021 Darko, so currently the theme that you are talking about is correct. We are generating more capital that we can deploy. When you have a certain stance where you are restricted from deploying in your traditional manners where we can buy back or we can increase our dividend, that’s going to happen as long as you are continuing to earn money on the NIAD side and build without excess deployment of RWA when the loan book dries out. That’s just a natural outcome.

We are scratching at 12% CET1 right now and I would expect that ratio to continue to get stronger for the early part of the year. As we move into the back half of the year, we’ll have to see what happens with respect to capital distribution restrictions. I guess, you’ll hear more about that from your keynote speaker at lunch time.

So I’ll leave that there. But as we go through the year, and then you have to remember, we’ve got a pretty convicted view that we are going to see a pickup in demand for the lending product in the back of the year and when that comes we are there for it as a first priority in terms of how we deploy that capital and for other opportunities are there at the same time then we will consider – we will consider the NIM.

But I do think you should expect that over the next couple of quarters you will see a continued build of capital. The release of that capital as and when that’s available to do that we’ll have to see how that plays out, but that will be a couple more quarters.

Darko Mihelic

And one of the questions that I often get surrounding your bank is, is inorganic opportunities. For some reason, your bank has singled out more than others with respect maybe perhaps a perceived desire to do something inorganic. So, as we think about that, what is your focus 2021, 2022 and I am giving a long timeframe there because deals don’t happen overnight and sometimes it can’t happen.

Is your focus on earnings per share growth, is it ROE? Maybe you can talk a little bit about, which of the two you favor and that should give us a window into the thought process around deploying that capital?

Darryl White

Yes, so, Darko, for the most part, that conversation isn’t really a trade-off, because usually the circumstances that something that helps you with your escrow also helps you with your ROE. It’s not always a trade-off. So, I guess, I would start there. I think what’s more important to us is, when we consider inorganic growth, we first look at compulsion.

And I’ve said this a lot of times over the last few years. We don’t feel the compulsion to transact and we think that we think we’ve got sufficient scale. We don’t feel like we have scaled us disadvantage and we are able to continue to grow that business particularly in the U.S. when markets are good at a faster rate the market, why? Because market structure is really quite interesting when you are competing with 5,000 banks, 50 or 100 of them are pretty good and a lot of them just don’t have the resources to compete with you can take share. And we are going to continue to do that.

And then, as we look to the prospects of inorganic growth, here I think more about the strategic benefit to growing the platforms. The strategic benefit over the long run, scale and the effect of synergy, which is interesting. But it becomes more interesting if you start to think about the ability to add more and more customers and more and more capabilities and perhaps if the right circumstance came along, something that’s out of the core footprint.

So you can start to attach yourself to a broader swats of customers across the continents. And when we look at that, I always like to remind people that, currently, we are thought of as a Midwest bank in the United States. The United States itself representing a third of our earnings. 50% of our revenues in the United States comes from outside of the Midwest today.

And so, I think we’ve got an opportunity as we think about M&A to be focused on the – what does the strategic math look like for the long run. We are in this for the long run. It’s a long game and if we see something that makes sense that grows our bank and serves us with more customers over time in growing markets, we’ll have a hard look at it. But we’ll always look first to serving our existing customers and growing organically.

Darko Mihelic

And, yes, you mentioned that we have the keynote speaker here today. I certainly intend to ask him about the restrictions. I am not sure that he’ll give me an answer. But what about you? Would you want the restrictions lifted right now as a CEO of a Canadian bank? Would you hope for the restrictions to be lifted tomorrow?

Darryl White

Well, I think the banks are all very well capitalized, Darko. And I think that the – if the restrictions wre lifted, we would all make prudent decisions as to how we deploy that capital. In the mean time, I can absolutely understand it’s an uncertain, well particularly with the shut down – the revamp of the shutdowns that we’ve seen in the last couple of weeks and we might see over the next few weeks. So, I am sympathetic to a lot of a period of restrictions.

I think that when the restrictions are lifted, we always have to remember that the bank investor in Canada has enjoyed more returns over time from dividends than they have from buybacks which isn’t really the same in the United States as you know where the restrictions are going to be lifted faster. So there they continue to enjoy the dividends.

And I think it’s fair to say that when you lift restrictions, the dividend question is different from the buyback question, because buybacks get turned on and off pretty easily, but dividend increases don’t get reversed particularly easily. So I think investors should keep that in mind as well. I’ll leave it to the regulators to decide when it’s appropriate. We’ll be ready when it’s appropriate. I think they are doing a reasonable job right now.

Darko Mihelic

Okay. And with that, I am going to switchover to questions from the audience. I am looking at – so the top questions. The first is one is an extreme one given that we’ve talked a little bit about exiting the oil and gas business. So, what prompted your decision to exit the U.S. oil and gas? And why just the U.S. and not Canada? In other words, what is bad in the U.S. that is not similar in Canada and I guess, obviously, with U.S. oil and gas?

Darryl White

Yes. So, yes, it’s the right question. And I think the way – thank you for the question. I think the way you should think about it is what prompted the decision is exactly the same analysis that prompted the decision two years ago to begin to unwind our reinsurance business. It’s exactly the criteria that prompted the decision to sell our private bank in Asia which you might have seen we announced last week which is that when we look at it and we deepened close and de-average our portfolio, the returns that we were generating, the return on equity, the efficiency that it was generating was just not accretive to the overall ambition and it wasn’t on a path to get there, meaning, we didn’t see a path of leadership in that particular business.

So it didn’t really matter where the business was located. It didn’t really matter what time segment it was servicing. We looked at it through the lens of return to shareholders and we said that there would be better use for that capital over time. And therefore we’ll make that decision. What’s different from Canada is that we in fact do have good returns.

We have very good returns. We have longstanding relationships. We have leadership positions in those businesses and we are able to drive returns that we think make sense for shareholders. It’s that’s simple as that.

Darko Mihelic

And what’s the major factor there, the difference is, is it just the credit loss situation? Is it the spreads are too narrow. Or is there something that you can point to specifically that it makes - that it creates a much bigger difference or is just leadership and scale?

Darryl White

It’s all of those things, Darko. When you have a leadership position and you are a top three player in a market, you’ve got a lot better chance of taking in a greater share of the client wallet and the clients have very healthy respect for the ecosystem for folks who have supported them and support them with lots of capital and advice and the provision that all starts to service us over time and when you are further down in the hierarchy of preference, that’s just a harder thing to do.

Occasionally, you find places where you can say, alright, that’s fine, but it have a clear path of leadership over time in which case I am going to continue to follow that path. But in the case of our energy business U.S. versus Canada it was a pretty stark comparison and we decided to better focus on Canada where we have good returns and good relationships over time.

Darko Mihelic

Okay. Next question is, based on what was said earlier, does this mean that capital markets is trending similar to Q4 or is it better than Q4?

Darryl White

Is it trending similar to Q4 versus better to Q4? Look, that’s a tough corner to put ourselves into, because we are not even half way through the quarter. But based on what we’ve seen so far in Q4, the returns are really good and they continue to be very, very strong. We’ll have to see what happens in the back half of the quarter.

Darko Mihelic

Okay. I think I got time to sneak one last one in here. It’s an interesting question. What should investors expect from BMO’s new CFO versus the prior CFO? And what are the strengths and weaknesses of Tayfun?

Darryl White

That’s a good question. So when you will get to spend some time with him, he will be on our Q1 call and he is doing some IR at the conference here today. And I think what you’ll see is that we’ll go from strength to strength. We’ve had a CFO in role for longer than a decade helping the – through two crises and he has just done a fantastic job.

When we decided to go to market and consider alternatives, Tayfun popped up as a strongest alternative by far. We were really excited about his experience overall, his ability to bring to us an analytical frame as well as a strategic frame. So I don’t think you should anticipate in little with the CFO much different. We think we’ve been really, really, leading in the space and I would expect it will just go from strength to strength. And you’ll get to know and as I said as the year goes on quite well.

Darko Mihelic

Yes. I look forward to that. Thanks. And so, we are now at the stage where I am going to pass the floor over to you for the last – your last remarks and key messages for shareholders this morning.

Darryl White

Yes. Okay. So, I think I can be pretty straightforward on this, Darko. I am net pretty bullish on the outlook and I am particularly bullish on how we are set up with our agenda within that outlook and here I would say, you have to kind of think about two timeframes. Over the next two to four months, we are going to witness the race between the vaccine and the virus and that will be a difficult race and I think we are all braced for perhaps a tough winter on the revenue growth side, on the lending products.

But there we haven’t mitigated, as I said earlier, pretty well with the fee side. So I am pretty comfortable over the next two to four months and then beyond that, my confidence just continues to increase, because when we see loan growth pickup, we are very well positioned to take advantage of that. We are very focused on our North American businesses.

What’s different from before, we’re pivoting our portfolio a little bit to take advantage of higher return businesses. And my expectation, when you roll that up is that, we will in the near-term despite the revenue pressures see positive PPPT growth. We will see operating leverage despite the revenue growth. The revenue pressures in the near-term.

And then in the longer term when we do start to see the balance sheet businesses take off, I get even more confidence as time goes on. So, as I said earlier, you couple that with the full year flow through of our expansion – that new program which we are really didn’t start to see until the back half of last year. I get really bullish on the end of 2021 and 2022 because we have an opportunity to continue to outperform on the operating side relative to our peers and to continue to outperform relative to expectations on the credit side.

Darko Mihelic

Alright. Well, with that, thank you very much for your participation, Darryl. It’s been a good conversation. Thanks very much.

Darryl White

Okay. Thanks, Darko. Good luck.

Darko Mihelic

And with that, we’ll end this session. Thank you.

Question-And-Answer Session