Well, good morning, ladies and gentlemen. Carrying on with our Canadian content, very happy to have Hratch Panossian, the CFO of CIBC. Hratch, thank you very much for joining us.
Thank you, John. Great to be here, and good morning, everybody.
Hratch, just wanted to kick off the discussion, talking about the strategy that CIBC presented last year on the Investor Day. Can you give us just a brief overview of that strategy to catch people up like myself, how that's and how that's progressing?
Yeah, absolutely, John. And certainly an interesting question at a time where the world seems to be unpredictable, right? But a good thing for us is, when we set out to craft that strategy, as we communicated back last June, we wanted to come up with a strategy over the last two years, refining it, that we thought was future-proof and cycle-proof. So it's really rooted in the strengths that we think we have and the segments of the market that we believe have resiliency to continue to create growth and opportunity. And so by marrying those two things, our strategy was meant to be allowing us to outperform, and outperform in terms of core value generation for both clients and our shareholders and our team, over time, despite whatever might happen in the environment, right?
We're very pleased with what we've done with that. So just to catch everybody up, there's really three pieces to our strategy. One, we've been talking about leading in our high value, high growth client segments. Those tend to be the ones where we, as CIBC, have proven over time we have great capabilities. They're high-touch, relationship-based sectors. There is a few pieces to it. There's a North America-wide focus on more affluent clients on the personal side. So in Canada, that's mass affluent and up. In the U.S., it's high net worth focus. We don't go all the way down to mass affluent. So growing both wealth and banking services for those clients. And also commercial clients, mid-market in the U.S., a bit more than that in Canada, capital markets, corporate and institutional clients, again, a high-touch, relationship-based sector.
The reason we focused on these segments is they're growing faster, we have those capabilities, and we've proven over time that we can gain share in those sectors, and they represent a very material part of the wallet available to the banking system. So those are very focused for us. We're building future differentiators. That was the second category, so that includes digital capabilities. We're building what we believe are leading digital capabilities in Canada for mass market consumers and all Canadians. We've got our innovation banking business, so we've got capabilities in our energy transition and so forth in capital markets. So a number of areas where we're building future strength. And those two things will drive revenue outperformance, short term and long term for us.
And then lastly, we were focused on enabling and simplifying the bank, and that to us is an efficiency focus, but it goes beyond cost, right? It's efficiency of, for our team, making things easier to do for our clients, less hours spent with us doing things and a better customer experience, and it also translates to cost savings. And so we've been doing a lot of investments to enable that as well, and we're very pleased with where it's gone. So if you put all that together, you ask about business performance, right? The world does look extremely different today than it did before.
But if I look back at the financial targets that we set out at the time, we're actually very pleased to have been continuing to deliver really good core performance by relying on that strategy, and I'm sure we'll get into pieces of it in a second. But when you look at our revenue growth, we accelerated coming out of the pandemic, our revenue growth to the top of our peer group, where right at the top, one or two for a long period of time. We kept that revenue momentum for a while. We started slowing down as we started seeing the environment turn a little bit, but at the same time, that allowed us to rely on the efficiency and simplification and pacing our investments to pull back our expenses.
So when we look at pre-tax, pre-provision or what in the U.S. people refer to as PPNR, right? From a PPNR perspective, we continue to be best in class and above average in terms of our growth, and we think over time, we can continue delivering that. Our credit performance also continues to be strong. You know, we've had some U.S. office issues we've discussed, and performing provisions seem to be some differences across banks and how they're handled. But when we look at core impairments in our bank, we continue to perform well relative to industry, and we don't see that changing over time. So we're very pleased with that. Over that entire time, and going into this year as well, right, we've been able to have that PPNR growth. In the target range, we had an EPS growth range of 7%-10%.
Now, clearly, you're going to go through a cycle, and the credit losses will go up and down, but from a PPNR perspective, we have delivered within that range, and we're confident about continuing to deliver within that range. And so through the cycle, getting to an EPS growth of 7%-10%, which was our target, I think is still very much achievable. And then on the ROE front, lastly, we did set a 16+ ROE target. That's the one area I'll say the environment's changed a lot, particularly capital requirements, so we're continuing to reassess that target. But just on the face of it, given higher capital requirements, we're carrying... We had said 11%+ capital at that time.
We're carrying probably, call it, about 150 basis points more capital than we thought we would be carrying, and that's almost dollar for dollar. So that's about 150 basis points ROE. So through the cycle 16%+ target, equivalent basis with a higher capital today would be a 14.5% target. But we're extremely focused by pushing on our strategy, by growing capital like revenues, by creating opportunity levers and efficiency to try to offset as much of that increased capital requirement as possible to drive ROE up.
You talked about, as part of your strategy, on the individual side, the high touch on the affluent, and this is something that honestly, every bank talks about, not just Canada-
Mm-hmm
... but the U.S. as well. How does CIBC try to differentiate itself in, within that segment?
Yeah, it's a good question. We get that a lot, John, right? And, I'll go back to, we do believe we have differentiated capabilities, which is why we chose to focus on the space. And there's two things that I'll point out. One is something we've had for a long time, our Imperial Service model, which is a model of having a dedicated financial advisor that's a licensed professional from an investment advisor perspective, and also does the banking side of the relationship. And that's offered to clients with assets of CAD 100,000 and up in the mass affluent space. That's something that's fairly unique to us in terms of how that model is set up, and we've had that for many, many years. We're doubling down on that, and we're investing in that space.
The second differentiator we have is something we built over the last two years through our investment in the Costco portfolio. So the co-brand portfolio that we entered into, that gave us entry into several million new clients to CIBC, many of whom fall in that mass affluent and up bucket. And the ability to franchise those clients to the bank is, again, something that we have as an advantage, and we've seen very good results on both of those. If I look at the Imperial Service side, and there's three prongs to that piece of the strategy. Having clients that are within the CIBC umbrella, but potentially not in our Imperial Service offer, moving them to that offer, giving them that dedicated advisor, sitting down with the clients and understanding that, their needs.
And when we do that, we've actually noticed almost 40% increase in funds managed from those clients. Same clients we have, just because we franchise more of their assets by having them in the right offer. New clients to the bank, so we continue to attract new clients. We've been disclosing our numbers of new net client acquisitions have been going up, and a good part of that is in these segments. Both people who are affluent today and up-and-coming folks who will be in that mass affluent bucket in the future. And then the last one is around building some of our tools and capabilities. And we've talked in the past quite a bit about CIBC GoalPlanner which is our financial planning platform we built, and we've been deploying that.
Over 50% of the households in our Imperial Service offering have now gotten a plan. And again, we see a very material uptick in funds managed when we go through and do those plans with clients. And so all of that will help us continue to deepen those relationships, grow funds with these clients, and particularly as we focus again on the ROE side, it's investable asset growth, it's deposit growth. This segment is more credit-like, actually.
Mm-hmm.
You look at the ROE of the segment. It's significantly more attractive than the ROE of other segments. So, that's been going very well for us, and so is the Costco portfolio so far.
Hratch, I wanted to touch on a couple of things that is unique to CIBC, and first off is the Costco portfolio. It was a very different transaction than we've seen CIBC do in the past. Can you... You know, you've talked about how well that's going. Can you talk about what you've been able to do in terms of trying to access new clients from the portfolio, how successful you've been, and what impacts are there in the various segments that you operate in Canada?
Yeah, absolutely. We've been... Look, we've been very pleased with that. It wasn't, you're right, it was something different for us.
Mm-hmm.
So we gave it a lot of thought before we did it, right? And if I go back for a second, what we thought it was going to give us and where we are now, we knew it would give us significantly more share in the payment space overall and consolidate our position as a number three player and number three market share in the card space, and it's done that, right? And frankly, it's outperformed in terms of balances and the share of the cards market it's provided us, and we feel pretty good about that. The card economics standalone are fine. They're okay. We said that at the time, so those were attractive.
Mm-hmm.
But the biggest value was really the ability to get access to clients. We have a partner who's a very trusted brand, and the ability to continue building broader relationships with those clients and clients who are, you know, the majority of them are not CIBC clients today. We have sort of our fair share of that client base, as you know, which is our natural market share and the teams. But the rest of them are opportunities for us to franchise, and the majority of them would fall in the affluent bucket. So that was really the value for us. And so we brought several million clients over with that acquisition. The growth that we're seeing is actually above our business case.
So when we look at, we're adding hundreds of thousands of new cardholders and as they add members every year, and that has been above our original business case. The balances that we're seeing are above our original business case. The transaction volumes and spend is significantly above our business case. So the card overall, the core metrics are doing really well. Now, there are things that haven't gone our way, right? The biggest one to point out is cost of funds. Nobody expected the pace and expense of interest rates to be out, and a card portfolio requires funding. So the balances are impacted by the cost of funds, but more than offset by the other positive factors. When I look at the franchising, we've been seeing some very good success.
So we've been able to grow that relationship, particularly on the deposit side, with these clients, better than we thought. We've franchised a significant portion of those clients, and about 10% of the clients that we've franchised, which above our business case, have been in that affluent segment and have been part of our Imperial Service offer, and we're seeing good opportunities to continue to build that relationship. So we're very pleased with the card, and we think it's going to give us everything strategically that we thought it would.
The other thing you mentioned that's fairly unique to CIBC was the innovation banking. Can you explain what that is, how it's differentiated from your other offerings, and what benefits it brings to the platform?
Yeah, absolutely. So that's a business, again, we, we thought about a space that we wanted to be in, and we don't like being in businesses where we don't have the core capabilities to compete. So we had bought a credit fund, Wellington, who came with a team who were experts in the space, to enter the space of essentially providing banking solutions for the, what we call the innovation economy. Mostly, it's the tech space. So it is, you know, post-revenue, pre-cash flow positive software, largely tech companies who are in high-growth mode. And so the credit underwriting experience there is very important.
We like the sector because it relates to our focus overall in what we call the private economy, banking, those companies, sponsors behind those companies, the individuals and principals involved with that, both on the personal banking side and the wealth side. We wanted to get into that space the right way, and we've been pleased with that. Look, we've. That's been a space, certainly since this spring, that's been in focus, right? But I can say for us, the business has done extremely well. We've actually seen more opportunities since the spring and some of the disruption at some other banks, where we've seen clients and team members approach us and try to be part of our platform. It's an important part of our business, but it's a very small part of the overall business.
And so I think for us, it's diversified within a far larger bank. It's about 1% of our assets and deposits, more deposits than assets. Performance continues to be good. We're seeing deposits continue to grow. We've seen stability through the period of disruption we had in that industry, and again, like I said, some interest in joining our platform. And on the loan side, I think because of the credit experience that our team has, because of the relationships they have, both with the equity behind these companies and the companies themselves, we've actually seen very good performance so far. Nothing that's concerning.
Take a chance to see if there's any questions out of the audience. We have it. Come back.
Is it on? Yes. Sorry, question may be a little niche for this audience. I'm interested in your strategy south of the border, that's the U.S. border. You own, CIBC owns FirstCaribbean in the LatAm region. I'm just interested of your view of that specific ownership, if you plan to expand-
Mm-hmm.
or sort of how you see that overall.
Yeah, absolutely. So CIBC FirstCaribbean is a core part of our business. It's a distinct region, right? But I think the strategy that we follow in the region is very similar to what we do here. We try to focus on client relationships with a significant part of that business that's in the commercial space, and not as much corporate down there, but in the commercial and larger commercial space. And there's a retail side of the business, and there are some wealth capabilities. So very much the same kind of things we offer in North America. Look, that's a business that is, it is one that, you know, in the past, we've explored the strategic value of it, but the path we've recently gone down is to continue growing and optimizing the business, and it's done extremely well, right?
When you look at our international banking revenues, which is vast majority FirstCaribbean, we've seen tremendous growth over the last couple of years. Part of it is the interest rate environment. There is a significant exposure to U.S. dollar interest rates in that business, just naturally on the balance sheet, so it's benefited from higher interest rates. Part of it is the team continuing to do a job growing those relationships. In terms of expanding, we've actually been more focused on optimizing the business, and so we announced exiting certain jurisdictions that subscale. You know, I think the challenge you can have in that region is there's a lot of smaller markets. Each individually, are different markets with different regulators, with different legal entities, and there are some that are just subscale, so we decided to exit.
But with the optimization we've now done, the cost structure and the efficiency of the platform has improved as well. We've got something that earns very strong ROEs, contributes capital to our organization, and over time, can be a, an avenue for growth. So, you know, we remain committed to the region.
Hratch, one of the things that came out of the quarter was the uptake in provisions, but it was largely on performing provisions.
Mm.
This is something that CIBC trued up its reserves after taking some drawdowns in the previous quarters. Can you talk about what's driving this, and what's the bank's outlook for consumer credit?
Yeah, absolutely. Thanks, John. So, I think we covered this a bit on the call, right? Performing provisions represent your expectation of future losses, but the core of that expectation is driven by models and the FLIs, right? Our CRO, Frank, covered on the Q3 call. This was driven predominantly all FLIs, and the particular FLI in question here is the Canadian consumer debt service ratio, which you would have seen in our disclosures in the quarterly report and the loan notes, moved up. The average debt service ratio, for our base case scenario, moved up by a few tenths of a point.
Mm.
That doesn't seem like that big of a factor, but it is a pretty sensitive input into the models, and so that was really the large driver of this quarter's expansion. That was on the back of what was the two unexpected interest rate increases by Bank of Canada and the expectation that those will now stay with us for a while. And so, overall, though, we look through that quarterly volatility. If you look at our overall allowance level at 73 basis points total last quarter, which compares well, well to industry. If you look at our coverage relative to last 12-month losses, which again, compares very well. If you look at what the change in our allowance, our performing allowance is just under CAD 3 billion as of Q3, which is up in the teens percent year-to-date.
Mm-hmm.
When I look at the group overall, that's in line with everybody. So I think that proves the point of what we've believed, and we continue to tell folks, is we believe our credit performance is strong relative to industry. You know, quarterly volatility of performing provisions, people take different approaches, so I wouldn't focus too much on that. So we focus on our overall coverage. We focus on the core indicators of delinquency and and credit impairment, all of which look extremely strong for us. So we feel that we're going through a cycle here, but we feel that our portfolio, in terms of the Canadian consumer credit, will perform well relative to the industry.
If you look at all the metrics so far, delinquencies, charge-offs, and so forth, with the exception of personal lending, we're still normalizing to Q1, 2020 levels, pre-pandemic levels, right? Mortgage charge-offs are still under 1 basis point. Credit card charge-offs are still below where they were, which was in the 300 basis points, right? You've got, every category, if I look at 90+ delinquencies or charge-offs, and we disclosed that in our investor presentation, still normalizing other than the personal lending, where it would make sense. The personal lending, which is a variable rate product, has seen the quickest repricing as the impact of the policy rates kept going up. And so you're seeing some of the early signs there. But again, we've been very clear, this is a cycle.
We're normalizing and we're likely to go through normalizing, and 2024 is likely to be higher in terms of impaired losses on the consumer side than 2023 is. But that's just going through a cycle, and on a relative basis, we think we'll perform extremely well.
Then on the other side of the book, obviously, you took some charges on commercial real estate, office related. Can you talk about that specifically, and is there any other sector that you're looking at, or that the bank is being cautious on, on the commercial of the corporate book?
Yeah, I'm happy to touch on that. So, yeah, I think the most important thing about that portfolio is it's a finite portfolio that we're working through at this point, and it'll be something that will only be an impact on the bank in the short run. So why do I say that? It's a portfolio, and where we're seeing the issues is really isolated to office real estate, which is institutional in nature, which is pre-2020 originations. And so it's really the COVID-related dislocation after the pandemic and the occupancy rates falling, that the portfolio is impacted by. And so the pre-2020 vintage is a finite thing. It's less than 1% of our bank. It has actually declined by 10% in balance since we started talking about it.
It's less than 1% of the bank, and it's less than 10% of the U.S. business. So it's not a strategic part of our business. We had already de-emphasized originations in the space post the pandemic, so it's not something that has been an area we've been growing in recently. And I think the impact will be limited to a few more quarters, as our CRO said, a few more quarters of elevated PCLs, and that will be behind us, right? Now, how does it affect the business in the U.S.? As I said, it's a small part of the business, and it hasn't been part of our growth in the recent years, so it doesn't affect the strategy or the go-forward plans for the U.S. business.
We remain committed to the commercial space, to the wealth business in the U.S., and we think we have a great strategic value proposition to continue growing that business with that line.
Are there any other sectors that you're keeping an eye on?
Really none right now, right? So what we're seeing outside of that, we covered the Canadian consumer piece a bit, overall. Outside of that, in the commercial space, in the public credit space, performance has been really, really strong. You look at our impairments in capital markets, and, and there's been virtually nothing recently. You look at the commercial space in Canada and the U.S., outside of the U.S. office space, they're one-offs. They're one-offs, and it's company-specific things that will happen. There's no specific sector, no specific theme underlying it yet that's that's causing any issues. And so we remain focused on things, but we're not seeing anything now. And I think when you look at the overall numbers, when you look at our impaired ratio in Q3, it was 35 basis points. Office was a big part of that.
You take office out at 26 basis points, right? To put that into context, our long-term, pre-COVID, long-term average PCL ratio at, in the 25-30 basis point range. So we're still on the lower end of our long-term average outside of the US office, and we do think that trends up over time, as I said. For this year, even with the office, as we've said a number of times, we'll be on the upper end, so towards that 30 basis point mark on PCLs, and that remains the same. And as we go through next year, I think the office element will work through, and as that happens, then some of the other pieces continue to normalize and go up.
You know, you might have PCL ratios that exceed that historical average, but again, the historical average, you go above and below as you go through the cycle.
Pause and see any questions from the audience. Actually, you've touched on the policy interest rates a couple of times. What is the bank's view moving forward for both the Canadian and the U.S. geographies, and what implications does that have for your outlook for margins?
Yeah, we, I think our view would be fairly aligned with the general market view, right? And I'm not an economist. I don't, I don't try to be, and so we rely heavily on our economics team, right? And, we publish our economic expectations, and I would summarize it as generally a soft landing in both countries. So our expectation is that GDP growth slows, and you're seeing that already happen in the prints. So for 2024, sub-1% are generally very slow growth from a GDP perspective. Unemployment picks up in both countries into the range of 6% in Canada, into the mid-4% in the U.S. So pretty similar picture in both countries, but nothing that dramatic.
In terms of interest rates, we generally rely on the forwards, and so that would suggest that you don't see any policy change through 2024. And, you know, the forwards would suggest, again, you would see a little bit of sort of pullback on the upper end of the curve, on the further out of the curve, but again, nothing that dramatic. So in that environment, we've said this before, right? We manage our margins for stability, and we benefit over the long term from higher rates. And so if rates do stabilize at that level, and we disclose our interest rate sensitivity rate, which has been moving around, but call it CAD 350 million of NII the next 12 months for every 100 basis points increase or decrease.
That sensitivity is roughly, again, it moves around quarter-over-quarter, but roughly it's always been sort of 50/ 50, 50% on the short end repricing, 50% on long end. So if you assume the curve stays where it is, short end doesn't move, there's no impact there. That long end repricing continues to come in, where you're seeing the current balance sheet replacing what's rolling off versus what's going on. There's a 300 basis point plus positive spread, both in U.S. dollars and Canadian dollars in that today. So even if you start seeing some of the, you know, the swap curve further out, come in a little bit as the market expectations change, there's still positive momentum from margins in Canada and the U.S. built into our business.
Now, eventually, when policy rates do decline, then you're going to start to see an impact of that with the short end repricing. But so far, it feels like for 2024, this environment would suggest some upwards momentum on margins.
And then, you know, look, because the pushback that I always get from investors is the revenue growth.
Yeah.
So tailwinds on margins, but basically, the GDP expectations slowing down, what's the outlook for lending? And then we'll touch on fees after through with the loan growth.
Yeah, things are slowing down, no question, right? And look, we—as I said earlier, we deliberately slowed down and took a cautious approach before the peer group would have in Canada, particularly on lending in the commercial space, where Jon Hountalas , the head of that, commercial and personal business, was very clear on one of our calls, that we're prioritizing existing clients and credits we know well, and we are less willing to stretch for credits we don't know well with new relationships at this point, and I think that's prudent, right? The upside for us has been we've really been focused on quality and margins and quality of relationships, and I think you're seeing that in some of the numbers.
When you look at personal banking revenue growth, which all the banks do disclose, we've slowed down, the whole industry slowed down on the consumer side into low single digit growth. And I think that probably it'll be slower in that kind of environment we just talked about. And we slowed down more. We've lost some share on that side, and I would say that's been a deliberate approach for us. But even though we've lost that share, the personal banking revenue growth has actually been above the industry average. And we've been doing that by continuing to focus on relationships and profitability, full value, and the margin. You look at the commercial side, we've grown our loan books significantly slower than some of the competition in the last few quarters.
Even with that, our business, Canadian business banking revenue numbers are right on the line with the industry average, right? So what does that mean for revenues going forward? Look, I think the loan growth will continue to be slow, but I think our approach has been working. Our core performance has been extremely strong. Our P&C business has continued to grow revenues. We were at 6%. We think we can continue to grow revenues fairly robustly. We think we can continue to get operating leverage as well. So the pre-tax provision earnings growth, like I said earlier, going into that high single digit range, we think is something that we continue delivering on, right? But overall, I think you have to expect, you know, this sort of trend to continue.
We went from double-digit revenues to high single-digit revenues for the full year. This year, we'll see where we land. But then as of Q3, on a standalone basis, we're at 6% revenues, and I think next year, probably the environment might look similar to that, right? So we're in that environment on continuing to drive that operating leverage to get our pre-tax earnings, pre-tax, pre-provision earnings up into that upper single range.
It's a great framing on the revenue growth. Thank you. But on the fee side of the equation-
Yeah.
Is that something that could potentially pose a surprise on the positive side?
Oh, potentially, right? It could also go the other way, John, right? Nobody knows. Look, I think this year, if I go back to everything we talked about, we had put out targets at the Investor Day, which were 7% and 10% revenue growth for most of the businesses. If you look at some of the banking side and the balance sheet side, even though we've slowed down, we've been close to that. The thing that's really surprised to the negative have been the wealth revenues, both in Canada and the U.S., right? AUA and AUM haven't grown, and both market appreciation, and when everybody's a little bit cautious about the market, the net flows and the net inflows also are impacted by that. So this year, that's been sort of a, you know, less robust from a revenue perspective.
You know, some believe, and we have this argument with our business all the time, right? Some believe exactly the opposite, right? And you guys see the different perspectives out there by, by various folks all the time. So I, I think that's going to depend on markets, and part of that will depend on the economy. I think once we're through the uncertainties and things that are creating some caution, I think you could see some tailwinds in the market, and we're certainly positioned to benefit on that in our wealth businesses.
Then, just touching on deposits, liquidity, given the dislocation we saw in the U.S. market earlier in the year, can you talk to CIBC's experience and whether or not that has changed your approach to that business?
Not really, right? Maybe so I can answer it a little more specific. What exactly are you thinking of in terms of dislocation?
Well, in terms of the U.S. deposit base.
Yeah.
You know, the fact of the matter was that there was an exit of liquidity in the marketplace. And a no change is a perfectly valid answer.
Yeah.
You know, from that experience, were there any lessons learned?
... Yeah, absolutely. Look, you always have to observe what happens around you and try to learn from it, right? Let me go back to the experience itself, and then we'll, we'll go back, and we'll go to what it means going forward. We actually benefited during that period of time. As I said earlier, I was referring to the innovation side of the business. But in aggregate, I think we've got a pretty unique model in the U.S. We've got a focused, smaller organization that is high touch, client-focused, and manages the relationships with mid-market commercial clients and high net worth individuals. We think in a better way than some larger organizations can, and we hear that all the time, feedback from clients.
They will deal with us over much larger organizations because they matter to us, because they have a dedicated commercial banker, they have a dedicated wealth advisor, they're not calling a contact center. And so that's a competitive advantage to us. But that model, on a standalone basis and concentrated in a certain industry, also leads to some challenges, and we saw that play out for some institutions in the spring. I think the model of having that U.S. platform with a strong, almost trillion-dollar balance sheet parent on the back end in Canada works really well, and we saw that we were seen as a flight to quality. We did see deposits, small, but small net inflows during the period of disruption.
We saw advisors and bankers calling us, wanting to be part of our platform because they want to be part of a niche player like this, but they like the stability of the big parent. We saw clients doing the same thing. So I think that was interesting as well, right? When you look at the deposit side, yeah, we saw some disruption. Everybody did, right? You saw that across the market. There was. You know, in Canada, we had seen this shift from demand or non-interest bearing to term early. It started last year. In the U.S., it was more of a lag, but it certainly started a big wave of it after March, and we saw some of that.
We saw some pressure on demand, and we saw the term products go up, but that actually stabilized pretty quickly, and I think it did impact our margins a little bit over the last few quarters. But as you saw as of this quarter, we've rebounded from that. And I think that is a sign of the quality of our deposit franchise in the U.S., the quality of our business, the strength of the parent behind it. And we're now seeing demand deposits being more stable. We feel good about getting some momentum behind that going forward. So not much that we need to do different, but we're thinking about things, right? We always think about diversification of lending and diversification of deposits, and continuing to strengthen that side of the balance sheet, and we'll continue doing that.
Last chance for questions from the audience. Okay.
Yeah, the one thing I'll add to that, John, right, is... And we've talked about this quite a bit. It's related, but it's a good opportunity to plug this in. We're extremely focused in the U.S., as we've said before, on the personal side. And that also goes back to my ROE comments before, right? Across the business, and the U.S. is no exception. You know, emphasizing growing the personal side of business and growing our wealth business, and the fees associated with that and the ROE impact of that. And that also comes with deposits, right? So the deposits from that client base, again, very good ROE characteristics to deposit revenue, so that side of the business remains there.
All right, I'm going to close off on something you've actually mentioned a couple of times, the expenses, efficiency. Something that I hope you take a lot of pride in, because that's been, from my standpoint, very successful for CIBC, and honestly, I don't think it's recognized well enough in the marketplace. Can you talk about what you've been able to do, and what is there still left to do? Because you are indicating there's still some more efficiency improvements available.
Absolutely. Look, it's... We like to think of efficiency as a capability, and a capability that we can use to continue delivering momentum to the business and creating capacity for the business, right? I think if you take efficiency as an episodic thing of, okay, once in a while, oh, my expenses have blown up, and I've got to go at it, right? I don't think that's the right way to run an organization, right? So if you step back again a few years, we talked about this at our Investor Day, right? The philosophy with which we come at things is, for us to outperform, which is always our goal, we think we need to grow revenues at a pace that's faster than market, and we laid out the strategy on how to do that.
We also think we need to be able to have an efficiency capability that is strong relative to peers in order to create some room for ongoing investment, because you need to invest in order to continue to excel and grow revenues in the space that we are. And we said at Investor Day, that means we should keep our expenses around mid-single digits, but we can dial it up and down from there, depending on the top line growth and so that we can get the right operating level. So in order to do that, we had to do a few things, and we laid them out. We talked at Investor Day about having taken out CAD 1 billion of costs through efficiency programs over the last five, six years, which would have been in the neighborhood of CAD 150 million a year.
We said we can continue on that pace, which would have been a little bit over 1% of our expenses. We've been pushing harder on that. We've been building our capabilities in terms of, you know, automation capabilities, technology investments that we've been making, rationalization of applications, starting to leverage things like AI. Going across the board to reduce our costs and creating that in a way we're now on track to actually get towards 2% a year efficiency. And it's something that we're pushing our businesses to say, "We got to do this every year." If you can take out a couple of percent every year, you offset some of the inflationary factors, some of the normal business cost increases, and you can essentially open up in a low single-digit expense growth environment before you make your discretionary investments.
So then you can dial your discretionary investments in to get to somewhere below or above that mid-single-digit range and get your operating leverage where you want it. We also went on this investment program, and we talked about it again at our Investor Day, right? We had a very deliberate investment portfolio. We track everything very closely. We've got our plans forward and the roadmaps for it, and that gives us the visibility to be able to pace that more effectively. So in the middle of last year, we started talking about seeing revenue growth slow down and the fact that we were going to start taking actions, right? Some of our large investors have recognized that. We laid out a plan when we were asked. Here's exactly how we would go at pacing things.
Here's exactly how we're going to get that couple of percent out, and we're going to get ourselves to stabilize at mid-single digits and try to get to positive operating leverage. Look, I'm very proud of the team. It's not me. The team has delivered on that. More importantly, I think we've built a capability where we can continue doing that going forward. The other side of that, and you didn't ask specifically, but I'll say it, right? I think the reason we believe it's better to manage this way is we don't like having these big discontinuities of coming in and doing large restructurings and so forth. I'll give you an example of that. If you go back to 2020 Q1, we had a restructuring charge that was CAD 339 million pre-tax, right?
You go to last Q4. We had a severance amount in the last Q4, but it was sub CAD 7 million. So I think that, that shows you in numbers the value of being able to manage things on an ongoing basis, so you have, like, less large discontinuities. So I think that positions us. There's certainly more to do-
Mm-hmm.
And we try to do as much as we can normal course. But sometimes when there's larger opportunities where we've created an efficiency, we've automated something, demand has shifted drastically, you might need to take some severance here and there. But I think in the future, it'll be closer to the end of the range of what we had last Q4, if we do one, rather than the range of several hundred million dollars.
That, that's fantastic. I really appreciate the depth of the conversation. Thank you.
Thank you, John, and thank you all.