Start our next session here with Harry Culham. Before we begin, I've been asked to tell you that Harry'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 CIBC. Harry, welcome to the stage.
Thank you, Darko. It's great to be here.
I'm going to dive right into a few questions directly. And I think one of the things here, as the newest CEO, I sort of want to dive into a couple of things. CIBC had a record year. You've just stepped into the CEO role. And it did feel like, I would say, in your last conference call, that there were hints at a higher ROE objective. And I think you maybe even hinted there was going to be an Investor Day coming in 2026. Now, many of the other companies that I've been following, including life insurance companies, they've had CEO changes and often, not always, but really often lately, it seems. They're followed by strategic reviews, sort of medium-term objective updates. How should we think about the leadership transition at CIBC in that context?
Well, that's a great way to start it off, Darko. Thank you. And the first thing I'd say is I've had the privilege of sitting on our executive team for well over a decade. And I've had the opportunity to run areas like strategy and corporate development. So in this transition, maybe it's a little different than others in the sense that we're working together very closely as a leadership team for many, many years. And so we have that consistency around our strategy, the way we execute, that clarity of purpose around our clients has been very consistent for a long period of time. And we're really focused now on the acceleration of that execution.
But we had time, lots of very good time, to engage with all of our stakeholders, to listen, to understand what our clients are expecting from a transition, what our teammates, what our regulators, what our shareholders. And we listened, and we've been acting on that. And we feel very good about the transition. We have a culture that's very focused on our clients. We're very, very connected. And we're very much focused on driving those results for our stakeholders with predictability.
You had a record year. The question I was going to make, as the new CEO, how do you steer the bank into another year? I'm getting the sense that from your first answer, that doesn't sound like there's going to be a lot of change. Maybe you can just touch on things that might change under your leadership. Again, just having reported such a strong year with very strong metrics, maybe you can just touch on what might change.
Sure. Happy to. I mean, the first thing I'd say is I did talk about our strategy, that clear strategy we outlined years ago, in fact, with four pillars that we're very focused on delivering. But I would say that we've really been focused now on doubling down on that acceleration with excellence of the execution of that strategy. And what I mean by that is really drilling down into the enablers of the execution. So doubling down on that connectivity, north, south, east, west, back to front, delivering all of CIBC for our clients, really doubling down on that client focus would be the first enabler of our execution.
The second enabler, as we call it, is really focused on that modernization journey, that drive for efficiency as we look to the new technologies of the financial services industry and the opportunities there to take costs out to further invest, and I think the third and maybe the most important enabler of our strategy is our Human Capital and the development of our Human Capital for the next generation, and I think we have a leadership team at the top of our bank, and that permeates throughout the organization that is highly aligned around all three of those areas of enablement for the execution of our strategy, and I think we're focused on taking that to the next level, and to get to your points around what's a little different, we are focused on the discipline around resources, and we're focused on taking the numbers to the next level.
We can go into those details if you wish over time.
I'd love to get into those details. So let's talk about it. So how do you press into a premium growth and returns? Maybe you can talk about some advantages you have. And let's dive into how you push for, I mean, I get the enablers, but I really want to understand a bit of a deeper dive into how you push and bridge into premium growth and premium returns.
Right, well, I think we do have some competitive advantages. We have some really great personalized offerings in our retail bank, our personal and business bank. If you think about Imperial Service, you think about our partnership with Costco. If you think about, I talked about our modernization journey, you think about our opportunity to use new technologies in terms of AI and data and so on, and we're really focused in driving those areas to higher efficiency, to more productivity, et cetera, so we are thinking about the business as we move forward. We have a 2030 strategic vision, Darko, which I'm not sure if I've ever mentioned to you or not. Hratch may have mentioned it to you, but we look at what our bank can aspirationally look like with all the things I've just talked about over the next five years.
And we started that journey over the last couple of years, in fact. And we're very confident that we can deliver at the very higher end of the numbers that we've been talking about as we move forward over the next five years. And so we're taking a longer-term approach to many of these initiatives and these competitive advantages I just spoke to.
Okay. There's a lot to dive into there. I think the more immediate thing, I think I just, because I caught on the word efficiency, what we've seen lately has been there's been some restructuring charges, and banks are pressing into and leaning into some cost side. Your bank didn't take any restructuring charges. You're the new CEO. I would kind of thought that might be something that you might want to do. So how should we think about the approach under you now on efficiency and the possibility of restructuring?
I think the first thing I'd say is I just go back to we've sat together as a leadership team for a long time, and I've had the privilege over the last several years of running various different businesses, and so the strategy is consistent. How we execute now is longer-term in nature, and we're very excited about where we see the bank over the next 5- 10 years, our bank, and when it comes to charges or those type of things, we look at Human Capital development over the long run, and this is a continuous assessment of talent. It's a continuous opportunity to develop talent, to drive to higher productivity with new technologies. So will there be opportunities to find efficiencies from a talent perspective as new technologies come in? I absolutely think so, and we are driving to a lower efficiency ratio over time.
But we're not in a hurry to take large charges. As I said, this is a journey that we've been on, and we continuously evaluate our Human Capital.
Can you give us some examples?
Sure. I mean, at the end of the day, if you look at the ways of working, if you look at agile as an example, that's a word that everybody's using these days, we are very much focused on doing things just a little differently. With extreme discipline around everything we do, delivering the entire organization to our clients means that we can do things more efficiently. So new technologies are going to help, and the way we embrace these technologies will help. So rather than hiring, call it 3% or 4% or 5 % incremental FTE per year, perhaps we don't need to do that anymore. And so when we look five years out and work backwards, we realize that we can find some efficiencies, and we can do things a little differently.
And so using the new technologies that are on offer now and will continue to evolve rapidly, we think we're in a really interesting time to really service our clients. I mean, if you think about these new technologies from an offense perspective, the personalization of data, the offerings we have, the productivity of our people, the defense of the organization, using AI for fraud, for AML, all of these, offense, middle of the organization to defense, it all comes into play and will help us from an efficiency perspective.
What might be the biggest help this year in 2026? What's the more near-term efficiency opportunity that you can?
I think, to be honest, I think we've got all of this in motion. There are several larger opportunities that we're looking at that we have implemented. We've been investing heavily over many, many years. In fact, we probably invest close to 20% of our expense base in our technology systems and data and AI. And so we're going to continue to do that. And that will provide opportunities to, as we grow our revenue base, to take our efficiency ratio a little lower over time and drive that ROE higher.
So you mentioned a couple of other things too in your response to the advantages. One of the things you touched on was Imperial Service. And it's always been something that I've sort of zeroed in on, and I wanted to sort of touch a little bit upon that. It is something that's focused on the mass affluent, gaining wallet. I wanted to touch on just a couple of things with Imperial Service because it sounds to me that the focus is shifting. When I hear you guys talk about it now, it's maybe changed. I mean, last year at this conference, Victor told me you were hiring advisors. Now I'm sensing a small shift in the discussion. So first and foremost, maybe just to use a baseball analogy, what inning are you in with Imperial Service? And what are the next steps with Imperial Service?
Maybe just flesh that out because it's the only bank that has this strategy, and it's very unique and different.
Yeah, absolutely. It is a premium offering for the mass affluent segment, which is part of one of the key pillars of our strategy that focuses on mass affluent and private wealth. And we've been doubling down in this strategy for a number of years now, actually. And Imperial Service, many of you hopefully will be Imperial Service clients. And if you're not, I'm happy to help. You can call me anytime. But it is an excellent offering for the mass affluent, the affluent. We have about 10% of our core client, retail client base in Imperial Service. It's personalized, it's financial planning, it's advice for families. And there are about a million clients, and actually a little more than that now.
And the revenue per client is about 5x what it is in the core client space, in the core retail space, with about 10x the sort of assets that a core client would have. And we also think that there is an opportunity to double the size of our Imperial Service offering through the use of data and AI with our existing clients and our core client base. And so we think there are tens, if not hundreds of billions of dollars of assets outside of our bank with some of our core clients in the personal and business bank. So we're very, very excited about this opportunity in one of our core areas of expertise. And we are really focused as a leadership team on ensuring that this is delivered.
So you have a million clients, and you're looking to essentially double.
Right.
So it sounds like there's a lot of.
So we've got 2,250 financial advisors and other 12,000 or 1,300 associate financial advisors. And we also think not only will we enhance the coverage in areas where there's opportunity, but we're also focused on increasing the productivity of the advisors using new technologies, data, AI, et cetera, and taking the number of clients that an advisor can cover up by about 30% over the next year or two.
Okay, so it doesn't require doubling the number of advisors.
Exactly.
Okay. Gotcha. Okay. Interesting. You also mentioned Costco.
Right.
We don't talk about it too much in conference calls, but similar question. Where are you in that journey, and how should we think about that opportunity for CIBC?
Yeah, the Costco partnership is a fantastic partnership. They're very like-minded with their membership. We're very pleased with the way this is evolving. This is what we believe will be a long-term partnership. There are 3 million+ credit card clients. We have franchised almost 10% of those clients, and almost 10% of those franchise clients are actually Imperial Service clients. So we're looking for the journey of these clients, and we're looking to deliver all of our bank to these clients. And we think there is an enormous opportunity to continue to grow that franchise. There are millions more members within the Costco membership that we are able to work with Costco to go after and provide banking services. So we're really optimistic that that's another competitive advantage that CIBC has, that our bank has.
So the opportunity there is grow the membership, or sorry, grow the cardholders from the membership and increase your franchising. Do you have targets you want to share, or is there anything that we can?
I don't have any targets I'd like to share at this point in time, but we are really focused. I mean, we've taken in billions of dollars in assets, as an example, upwards of CAD 15 billion+ in the last year, year and a year and a half. So it's working, and we're really pleased with the partnership, and we think there's a long way to go here.
Okay. So maybe just before we leave the retail strategy, one of the things that I've also picked up on the last little bit from CIBC, which is a bit different from, it's certainly different from pre-pandemic. And I think during the pandemic, maybe the view changed. But I just wanted to touch on it because when you hear CEOs talk today, they are less, I mean, they love the mortgage product, but it's not something that they're chasing. And you used to hear the term mortgage as an anchor product. And I'm fairly certain your bank has now sort of shied away from that and doesn't really view it as the anchor product anymore. So maybe can you just describe the shift of thinking and how we should think about your strategy going forward if it's no longer the mortgage product?
So the mortgage product is obviously important to our clients. And tailoring the right product for our clients is really, really important. But we are very interested in delivering our entire platform to our clients. And we've shifted our focus to everyday banking, if you think about checking, credit cards, investments, where the margins are higher. The world has changed from a mortgage perspective as well as, you'll know, Darko. The mortgage broker market now accounts for, I think, more than half of the market. And those are not deep relationships. We're focused on building deep relationships where we can deliver our entire bank to our clients. And that goes to the growth margin efficiency frontier that we're driving towards. And we think that we've hit the right business mix, coupled with the right Treasury Management to hit that margin that makes sense.
The margin on broker-originated mortgages is significantly lower than the margin for accounts or clients of CIBC.
Okay. Maybe we can move on from retail c ommercial lending. At the industry level, things have slowed. In Q4, you guys had big growth, like 10% or something like that. What do you attribute to your above-market, kind of above-industry growth and commercial? And how should we think about that into 2026?
So the first thing I'd say is our Commercial Banking team is the same Commercial Banking team that's been around for years. We've added some great people as well to the team. And we build deep relationships. Don't forget, we are the Bank of Commerce. Been around for over 150 years. We're known as the Bank of Commerce. Commercial banking is in our blood. And we're good at it. We're good at it from a risk perspective. We're good at it from building deep relationships where we deliver our entire franchise to our clients. Clients want the entire franchise. They don't just want a loan. And so we're there to provide them with advice, insight, hedging, other opportunities, Wealth Management. And so that combination of that commercial and wealth franchise, we've seen incredible referrals, both north and more so now south of the border.
Upwards of a third of our commercial clients have a wealth relationship with us. So that's worked very well in terms of driving that connected nature of our bank. And I think that's contributed to the growth in our lending platform in the commercial space. At the same time, we're really focused on both sides of the balance sheet. So you'll notice in our numbers that they largely coincide. In fact, this year in 2026, we expect that we'll probably grow deposits a little more quickly than we will the lending franchise, subject, of course, to what happens in the world around us, given the environment is a little uncertain at times. But those deep relationships, that ability to risk manage really, really well with that institutional knowledge we've had for 150 years has been very helpful to build that business with the right ROE in somewhat uncertain times.
It's interesting you mentioned that the deposit growth might exceed the loan growth in 2026. What is driving that?
It's a combination of, well, first thing I'd say is these are just deep relationships. So we are trying to drive the opportunity to deliver all of our bank, not just a lending product. So we are investing in our cash management platforms. We're investing in our, I mentioned, our data to understand exactly what our clients are doing, how we can be very helpful. So really bringing that whole suite of products to our clients. We've seen a shift, and it's been working very well in terms of driving that deposit franchise.
Okay. And now maybe we'll just touch on Capital Markets. I mean, your bank, pretty much every Canadian bank, frankly, benefited from a lot of tailwinds in 2025. It was pretty strong cap markets. Can you walk me through these tailwinds and how we should think about CIBC's cap markets business into 2026?
Sure. I mean, the first thing I'd say is our Capital Markets business is a client-driven business. The good news is we talked about a seamless transition. I kind of stepped away from Capital Markets well over, called over a year ago. And this same team is driving the Capital Markets franchise. We came out in 2022 with our investor day. We talked about what was possible, what we believed we could deliver on, and we've delivered on that and more in concert with the rest of our bank, growing at the higher end of our 7%-10% earnings growth in the Capital Markets space, growing above 10% in the U.S. And we've delivered on that. We've delivered on a higher pre-provision pre-tax earnings growth than anyone on Bay Street for really the last 10 years. And I see that continuing.
And I'll give you the reasons why in a moment with a higher ROE, our ROE that is in the 20s of late over the last several years. And what's happening there is an extreme discipline around resources. Every single resource we look at, every single resource that goes out the door, we measure and we understand it by client. We understand it by product. We understand it by region. And that great discipline that we have in the Capital Markets business is also we're now seeing across our bank. And so that lower volatility of earnings, higher ROE, higher growth is, I think, here to stay in our Capital Markets business. We're very confident in the client franchise that we're building north of the border. Obviously, we compete in just about everything with all of the other major players. We are a bulge bracket player north of the border.
South of the border, we are not trying to be all things to all people. We're really focused on building deep relationships, delivering the entire suite of Capital Markets products to our clients. And so we have hundreds of clients where we deliver multiple, multiple products and with a much higher ROE and great discipline. I think that will continue with this leadership team. We see outsized growth in the U.S. There's just a much larger opportunity in the U.S. Our clients in Canada are all active in the U.S. The areas that we're focused on, the industries we're focused on are very active. And I would say, Darko, we've had an incredible start to 2026, just like we finished 2025.
The opportunity in the U.S. is all, I mean, it's big for everyone, presumably. It's all organic. Is there anything that you think you may want to consider bolting on to your franchise, or is this really just an organic kind of?
This is an organic build. I would say, in general, our bank is focused on the organic build across the platforms that we have. With respect to Capital Markets, it's worked well for us. We've been extremely disciplined on who we hire and where we hire, such that the culture is maintained, that culture of connectivity, that culture of care, that culture of accountability. It's funny. Sometimes we put senior managing directors at very large institutions through 17 interviews. It's very important that the culture is the right culture for CIBC, for our bank.
Okay, then maybe we can switch from the business units to talk a little bit more about credit quality, I think, and I think it was quite stable in 2025 for CIBC. Your guidance for 2026 seems good, maybe a bit better on the Imperial side, but we sort of continue to hear concerns about the consumer credit, and even though actually in Q4, yours was very stable, but we continue to hear some predictions that the consumer can continue to sort of deteriorate a little bit at the margin, so maybe can you start us off on credit quality with how you would describe the health of your consumer loan portfolio and what we should expect into 2026? I'll just leave it open-ended there and we'll.
Okay. And I think you heard Frank Guse on the call, very confident in the credit quality across our platform. In fact, he's calling for mid- to lower-30s in gross impaired. So that would be an improvement on this year, a slight improvement on 2025, that is this year, for 2026. When it comes to the consumer, yes, there is some pressure from a delinquency perspective in the mortgage space, the credit card space, but it's all very manageable. And if you look at the mortgage business as an example, on renewals, our payment's going to go up. They're going to go up a little bit in the very low single-digit percent of one's income, assuming income hasn't increased over the last number of years, which it likely has. And the qualifying numbers all still apply.
The losses on the mortgage portfolio, I mean, it was in the neighborhood of CAD 10 million in 2025. So it's irrelevant, immaterial. It's relevant to our clients, and we're there to be proactive and help them navigate a difficult environment. But the loan-to-value, the margin gives you great comfort that you're not going to take actual losses. The credit card portfolio is a premium credit card portfolio. I just talked about Costco and that mass affluent segment. And that's kind of a third. I think it's about a third of our overall outstandings. And that's a good example of the kind of business we're running. And so we feel very good that that strategy intersects with those deep relationships with the client segments that we're focused on to drive really good credit risk management.
So as we think about, I mean, often the discussion on PCLs, and I think about this year's look at the guidance, it's very stable or modestly down from 2026. How should we think about it longer term? Right. Because 2027, 2028, should we, is this more or less the right level, or do you think it could go lower?
I think we can see some improvement. I mean, listen, what we can control is the controllables. We don't know what's going to happen in the outside world, in the environment. But we do have great confidence in our ability to execute on that strategy. And that strategy takes into account excellent credit risk management. And over history, it would have been in the 25-30 range. So that is a possibility. At this point in time, our Risk Management team led by Frank Guse are very confident in our credit risk underwriting. And we feel very good about our books. And we're looking for a move lower in the gross impaired loan space, but modestly and somewhat dependent on unemployment and other factors in the economy.
And when I think of that 25- 30 range longer term, essentially, I think what you're also saying then is that the loan mix is more or less the same going forward. Is that something, or is there really a category where I think you might emphasize over the course of the next?
I think that the focus on the mass affluent and that understanding your clients in a more meaningful way using data and AI will be helpful from a credit risk management perspective. I think from a commercial lending perspective and a Capital Markets lending perspective or corporate lending perspective, we're in a really good space. In fact, in the U.S., as an example, we would expect that loan losses will move lower over time. There was an elevated loan loss provisioning over the last number of years across the industry, so we're optimistic in that space as well. And that's an area where the U.S. is an area where we have invested heavily in the foundation and the infrastructure, so there is upside as loan losses come lower as well to help the ROE.
And since you touched on the U.S., I mean, how should we think about the U.S. business? Because when I look at your U.S. business relative to some others, it's smaller. It's a little more, I would call, focused. Is this something that over your tenure now as the new CEO, maybe you can give us an idea of your vision for the U.S. business and where you see that going over the next four to five years?
Absolutely. Yeah. Really pleased with what our team is doing. This is a relationship-oriented business. We bought the PrivateBank in 2017. We bought Atlantic Trust wealth business before that and have done some bolt-ons since then with great team and good culture, of course. We have invested very heavily in the commercial and wealth platform that was the former PrivateBank and Atlantic Trust over the last several years to build that foundation that we can now start to drive incremental revenue from. We think that there is a really good opportunity to continue that connected nature between commercial wealth, connected business between commercial wealth and Capital Markets in the U.S. And so we are seeing very, very good referrals and very good opportunities to do business together across the platform for our clients and deliver all of CIBC also in the U.S.
The referral volume is much lower in the U.S. than it is in Canada thus far. But we think there's an opportunity to move towards the levels that I mentioned earlier in Canada from a wealth referral perspective. So we're optimistic in the U.S. I think the marginal business being done now is in line with what we're seeing from an ROE perspective in Canada. Don't forget we have goodwill and intangibles from the purchase in 2017. But the business that we're putting on the books now, highly connected across the platform, is very promising from an ROE perspective.
So it sounds like it's organic, not.
Correct.
Not inorganic. It doesn't sound like there's a lot of retail in your future either.
There isn't a lot of retail. We have nine branches. We'll have nine branches at the end of this quarter in the Chicago area. We're really focused on we built a new system, new technology that rivals some of our best-in-class mobile offerings here in Canada for our mass affluent client base, our wealth client base, and we're really pleased with that. These things take time, of course, and they take investment, and we've been really focused on getting that foundation in place that we can now build from organically. Will we have tuck-ins? Very likely over time. We'll have some small tuck-ins that will be accretive to ROE over time, but we're not looking to make a big inorganic splash.
Sorry, as I struggle with the technology here, it looks like my Wi-Fi just crashed. So I'm sitting here trying to find your questions. And I'm getting the circle of death. Apologies to the crowd here. Well, while we.
Go to paper?
While we wait for that. Let me see what else I've got in my bag of questions for you.
Bless you.
I think one thing that obviously we haven't touched on capital yet. So we've seen rising capital requirements. Your ratio is. We've talked about ranges and such. And maybe we can talk on where you want to manage the bank, why you want to manage it there. And most importantly, the biggest question that I get from investors is how much capital can you generate? And I'm thinking about 2026 and 2027 specifically. So maybe you can just touch on those things from a capital.
Sure. I mean, I think, excuse me, from a capital perspective, I mean, obviously, it's an uncertain environment. And we think that there are a couple of gating factors for us to target where we want to be. Number one, we think we should be 100 points above the minimum, and that puts us at 12.5. And then our competitors, we're all in the sort of 13s at the moment. And so we think we're in a really good position right now to drive organic growth as it returns, as the opportunities to help our clients grow and prosper in 2026 and beyond. And so we have ample capital. We're generating ample capital. We're generating, I think Rob's here, kind of 10 basis points a quarter, something like that. We also have some other opportunities.
And we think that the ROE at this level is a. We've targeted 15%+ . We think we can deliver 15%+ at this level of capital. And you're going to see capital at these levels likely for a little while. But as uncertainty in the economy, in the environment recede, which we think is the best case base case, we will be well positioned to deploy capital with our clients and help them grow.
Okay. Apologies to the crowd that I didn't get to your questions, but we're now at the time where I'd like to throw back the last word to the CEO, so Harry, your closing remarks and/or key messages for investors today, please.
Firstly, thank you for having me. I'm delighted to be here. First thing I'd say is we have an aligned leadership team that's been in place for a number of years. Leadership team, I'm talking about not just the top 10 or 20 people, but the top 100- 400 people across our bank that are helping deliver on that client focus, doubling down on that connectivity, really focused on that modernization, that drive to efficiency, and outperformance at the end of the day. That's what we're driving for. We have a clear strategy. We're focused on investing for the future with new technologies. We're focused on investing in Human Capital.
The execution of our strategy, accelerating the execution of our strategy is first and foremost for us, really focused on driving that 7%-10% earnings per share growth plus in environments like we have today, as Rob pointed out on our call in the fourth quarter, driving an ROE north of 15%+ . All this should hopefully lead to outperformance of our total shareholder return. My goal is to deliver consistency, sustainability in terms of growth of our platform with predictability. I would like to thank you all for your interest in our bank. Thank you for having me today.
All right. Thank you very much, Harry.
Thank you. Thank you, Darko.