All right, for our last fireside before the lunch break, thank God. Susan Rimmer from CIBC, Group Head of Canadian Commercial Banking and Wealth, welcome to the stage. Good to have you here, and look forward to the discussion. Fellow Ottawa person—I should throw in there.
[Non-English content]
Uh-
Thank you. It's a great pleasure.
Where do we start off here? I do wanna talk. You know, we have some thematic stuff, but CIBC has the Commercial Banking and Wealth businesses together, and we get the gist of the strategy. Maybe you can put some meat on the bones and talk about the connectivity between the businesses, how it's been progressing, you know, over the years. It, you know, you're familiar with the business even before you were running it. How's that working out?
Thank you, Gabe. We've got Commercial Banking and Wealth in one business unit at CIBC, and that's really a consequence of our strategy to bring these businesses closer together. What is it that we can accomplish by bringing these businesses closer together? We actually call it connectivity. I'm really proud of the momentum that we have in really delivering what I'm gonna call enterprise solutions to our Commercial Banking clients. There's a couple of very interesting proof points here. One would be that over 32% of our Commercial Banking clients also have a private Wealth relationship with CIBC, and that's been a consequence of a deliberate effort to, again, surround these clients by our solutions. We've co-located our bankers across the country. We train our commercial bankers on our Wealth offerings, and we encourage them to meet clients and deliver solutions together.
It's been very well received by the client base. I think it's a key opportunity for us to grow. In terms of other points of connectivity within the commercial bank, I'll point to the relationship between assets and liabilities in Commercial Banking. From a lending perspective, 95% of our Commercial Banking lending clients also have a deposit relationship with us. We're looking to build a very balanced Commercial Banking business at CIBC, and I think balancing assets and liabilities in that origination effort are a very important part of our stability and our sustainable long-term success.
95% of Commercial Banking clients have a deposit product.
The lending clients have a deposit product with us.
Dumb question, but can't get much better than that, so-
What's the next step, right?
Yeah.
The next step is, let's see if we can turn those deposit clients into real cash management clients-
Okay
...start to expand that product suite of services, payments, et cetera, such that we can really deepen those liability side relationships for our shareholders and make sure that we're delivering sustainable results.
Okay.
Yeah.
Growth outlook specific to the commercial bank. The message from, you know, your peers and your own bank, I believe, is that, you know, it's gonna be slow out of the gate, accelerating in the back half of the year. But that's also been the message that we've been getting for the last couple of years, and it's not really played out. What's your... You know, do you think this year's gonna be different? 'Cause we've just had a major macro disruption and, or maybe it will still be more of a wait and see kinda situation with the Commercial Banking business.
Yeah, Gabe, it's a great question. The first thing that I will respect is that it's an uncertain environment out there for all of our clients and for all of us, quite frankly. That being said, last year in Commercial Banking, we posted high single-digit% loan and deposit growth, again, in fiscal 2025 and then again in Q1 of this year. We are very proud of that growth, and we do believe that we can continue to drive mid- to high single-digit% growth in assets and liabilities in Commercial Banking through the balance of the year. Again, the back half probably more robust than the front half, although we have been able to post, you know, good client-driven volumes.
It kind of leads to the question, "Okay, Susan, where are you seeing this demand from?
Right.
It's from a sentiment perspective and from a growth perspective, where we've seen the lion's share of our growth has been in what we'll call our diversified segment, C&I right across the country. Let's be clear, there's exceptions to that. The segments and sectors who have been hardest hit by tariffs, we don't have big exposures here. As you would expect, it's been really tough for the folk in the auto industry, steel, aluminum, lumber. That's been very tough. We don't have big exposures in our books in those segments. That being said, there are green shoots. If I kind of map across the country, I would say that in BC, for example, we're seeing strong results in hospitality and in tourism.
If I go to our next biggest market in and around Alberta and Calgary, there's quite a lot of optimism around, you know, the Major Projects Office, the big infrastructure and the big energy projects that the Carney government is planning. There's excitement around not only the companies that will fulfill those contracts, but also the adjacent suppliers. There's some excitement around that. If I go closer to home in Ontario, for example, many of our larger diversified clients will see opportunity to perhaps scale up by way of acquisition. In Quebec, the manufacturing sector has been remarkably resilient in the face of tremendous challenge in and around tariff uncertainty.
Again, we'd see that as green shoots as we come through what we expect to be a, some kind of a resolution on USMCA this year. Again, in Atlantic Canada, very good opportunity in and around the defense spend that we see coming from Ottawa. We think that Atlantic Canada will benefit from that.
Sentiment is a big, you know, driver of-
Yes
...of credit demand, and you're actually seeing I mean, the tone has changed over the past year, and that's actually having an impact on the business in a positive direction, I guess.
I would say that we're leaning into the places where we can see growth. We're relationship bankers at CIBC. We bank through the cycle. We're very selective, with respect to, you know, the clients that we bank and the segments that we support. Again, the idea is that we bank through the cycle. We drive enterprise thinking across the commercial bank. We surround our clients with the Wealth offering. Again, we're very focused on where we can achieve growth for our shareholders.
Okay. We can't really talk about the Commercial Banking business without talking about, you know, commercial real estate. You know, similar to other Canadian banks, it's biggest chunk of the Commercial portfolio. If I take a very, you know, simplistic perspective, say, "Oh, well, rates are high, housing market's slow, 40%, 30% of the book's just not gonna grow." Is that you know, where am I wrong? Prove me wrong, whatever.
Well, I think you're right-
Yeah. Okay.
-on CIBC's
Darn.
Yeah, on CIBC's Commercial mortgage book, you know, I'd say fully 40% is CRE.
Mm-hmm.
Within CRE, that growth has been slow. I would say we have to look at the sub-subsegments in-
Right
...CRE. I think that's really important. I think you know, the most challenged piece is gonna be in and around you know, multifamily condo developers in Toronto and in Vancouver. We're very confident in that book. We have a book of business. We do bank that segment, but we're confident in our loan-to-value. We're confident in our structuring. What I think is really important at CIBC is that our real estate business, we actually run a central team. Imagine that we've got a team of subject matter expertise at our head office that covers commercial real estate right across the country. That team has been together for over 20 years, and we've had outstanding credit performance in that book vis-à-vis our peers. We're very comfortable with the risk.
Mm-hmm.
We're very comfortable with our origination strategy. To your point, we're not gonna see a tremendous amount of growth in that segment until such time as we see sort of a real turnaround in the economy and in some of the soft spots.
Okay. Well, I guess, what about some of the other like industrials or?
Yeah. We see there's opportunity in industrials. There's opportunity in student housing. We like, we love grocery-anchored retail. We do all the segments very well.
Okay. Margins. I'll kind of wrap in a just broader margin discussion. Where do you see your margins going in the business? You know, if I was talking to somebody on the Personal Banking side, they'd bring up mix, you know, the personal core versus term. You know, what dynamics are relevant in the commercial bank? Product-wise, is there any angle there that influences your margin outlook? 'Cause again, on the personal side, we'd be talking about mortgages. They're flat. That's good.
Yeah.
You know, stuff like that.
Yeah. Of course.
What's the broader dynamic both on the asset and liability side we should be thinking of? We can, you know, talk about competition a little bit after.
Sure, yeah.
Yeah.
Gabe, you know that the margin story has been really important to CIBC.
Yep.
This business unit is absolutely contributing to the expansion of NIMs. The way I think about it in the Commercial Banking business, it's really three key factors. Again, just to give you the numbers. We actually expanded our NIMs. You'll remember Q4 to Q1, 14 basis points from 296 to 310. The way I think about it is it's a couple of factors. Number one, it's business mix. As we grow our deposits more quickly than our loans, that is a contributing factor. Check the box. That's a good thing.
Mm-hmm.
Two, it's the Factoring. Three, I would say it's the pricing and the service. We talked about that connectivity between asset and liability. We're really delivering full service solutions to our clients, and that really does help with our margins as well. I think we feel good about the level of our margins. I don't think we're gonna continue to expand at that kind of rate-
Right
... quarter-over-quarter this year. I am comfortable with the direction of travel and the robust strategy we have around really maintaining that margin piece within the NIM construct.
Your outlook would be, I guess, similar to what Rob would say on the consolidated, not, maybe not as much as what we've seen-
Yeah, that's fair.
...still upward bias. What about the competitive dynamic? 'Cause everybody wants more deposits. Deposit growth is kinda sorta flat, personal or Commercial. I mean, depending on which one you're looking at.
Yeah.
When I see that, then there's one player that has lost a bit of market share in recent years on Commercial deposits that's amping up and has been rebounding. That could add, you know, be the fly in the ointment to the margin story.
It could, absolutely. I would say that the deposit business in Canada is always competitive.
Mm-hmm.
Our pencils are always sharp. You know, every large Canadian bank runs a very good wholesale funding program because we have, you know, at the top of the house, more asset opportunities than liability opportunities. I don't think we're any stranger to competition in the deposit sector. Again, I'm gonna come back to the sort of the key tenets of coverage, which will be, we've got to have great products, we've got to have great advice, we've got to have great servicing and good technology. All of that combined, you know, drives a robust platform for continuing to really originate the deposit business alongside the lending business.
Okay. What was my next question? There you go. All right. Commercial deposit competition, what are you seeing? Wealth advice. Yeah, there we go. Let's bring it back to the Wealth business. AI disruption. You know, that came up in a. It always comes up. A while back it was pretty intense for, you know, some of the broker-dealers in the U.S. That industry, the stocks got whacked. I mean, a lot of it's reactionary and maybe overdone in the short term, but long term, clearly a major disruption risk. The Wealth business, it comes to mind, of course. You got a situation where you've got to invest in AI tools, so there's cost pressure. You got some disruptors that could come out of nowhere and, you know, negate those investments. Like, how do you...
It's hard to question the answer. How do you know, build enough moats around the business to make sure that, you know, those risks are mitigated?
Yeah. The AI thesis-
Yeah
... is really important to the Wealth business as well as, frankly, CIBC as a whole. The way we would think about the relevance of AI to the Wealth business, a couple things. One, it's what tools can we put in place to really enhance frontline productivity. How can we make those private bankers, those Wealth advisors, as well as our partners in our retail business, how can we make those frontline providers more effective with their clients every day? We're developing tools to help productivity in the frontline every day. We're excited about those tools. We're also looking at what tools can we develop to enhance our client experience. Are there better analytics? Are there better desktops? Is there better engagement, better opportunity to serve our clients in a more meaningful and digital way?
That's a very exciting trajectory as well. I would say that the third thing would be there's an opportunity to get productivity into the middle and back offices such that we're really affording our teams the best-in-class tools to be more productive in their day. Lastly, I would say that as we really develop the tools, it gives us the opportunity to realize some value from the treasure trove of data that we have in the business. You've got to have that data in a place and in a structured way that you can actually glean insights. I think it's gonna make us better and faster in the Wealth business to the extent we can really harvest the conclusions that we can surface with the new tools on our data lakes. It's an exciting time for the Wealth business.
I do think that the AI opportunities that present are gonna be really helping us drive growth and drive productivity.
Okay. Where is the biggest demand for resources, I'll call it, like AI investment in the Wealth business? Is it the direct? Is it the, you know, IA network? 'Cause, you know, you... I'm just thinking about the IAs that are, you know, aware of this threat-
Yes
...quite eminently. Are they asking for bells and whistles all the time, a new enhancement? How do you balance that need to give them what they need-
Yes
with maybe this isn't the right investment?
Yeah. I would say that we've got a couple of different Wealth channels at CIBC.
Yeah.
You'll all know Wood Gundy-
Right
which is one of the top two investment advisor channels in the country. 886 investment advisors across the country. You know, tremendous channel. We've got our Investor's Edge channel, which is our direct investing channel. If you haven't been on the site, get on. It's a beautiful thing.
I'm not allowed.
It's a beautiful thing. It's a beautiful thing. That's been a real an important chassis for us to build, and that's really where we've been investing, what I'm gonna call, broadly speaking, our technology dollars. Anything that we build in Investor's Edge can be used and have application to our investment advisory channel, as well as to our Investment Counsel channel, as well as Investor's Edge. Imagine that you build once, and you use a multiplicity of times across the Wealth business. Some of the applications that we'll develop will also be relevant to our partners in Imperial Service in the retail business. We're really thinking about these technologies and these applications as modular. We're thinking about them as utilities and competencies that we can build once and use a multiplicity of times.
I guess, I'll talk. I have an ROE question to follow up. For all these investments, the good thing investors hear is that the ROE targets are pushed higher. For someone in your shoes, that means the hurdle rate is, it keeps moving higher. How does that challenge your job?
Yeah. This is the balance between ROE and growth question, right, Gabe?
Yeah.
Yeah.
Well-
not really.
I have it-
Yeah
so well worded.
Okay.
I'll ask that one.
Yeah. From an ROE perspective, I think we're very focused on delivering, you know, best-in-class return on equity at CIBC and also within our Commercial Banking and Wealth business. The way I think about it is, you know, we want to do robust client business, but we take into account what I'm gonna call total client returns across the enterprise. By having Commercial Banking and Wealth together, I think we can take better decisions for shareholders because we can actually accommodate pricing across our business in a dynamic way such that we deliver on ROE return hurdles but also keep the client close, you know, close to the bank. That's really how I think about it. You know, are we trading off growth for ROE?
Yeah
It's always a balance. I'm not gonna chase growth or encourage our teams to chase growth at the expense of ROE hurdles. That's not good business. Again, you will have heard that at the top of the house, you know, our CFO, Robert Sedran, and our CEO, Harry Culham, will talk about a premium ROE, and will talk about that 15% minimum as a real priority for CIBC. The vision within Commercial Banking is Wealth, and Wealth is that we would be accretive to that.
Yeah, your-
priority
... your segment ROE is already well above that.
Yes.
You're in the mid-20s. I guess mathematically, is it possible? Like, say we have an environment where organic growth is actually increasing, and therefore, you know, balance sheet capacity requirements increase, capital requirements increase. Can you accommodate that type of growth and still deliver ROE expansion or even a standstill in the short term? Because I guess longer term, bringing on new clients is a good thing. You start selling them new products, so you might take a step back to be higher up down the line. What's the-
Yeah.
trait, you know?
Yeah. Yeah.
Yeah.
It's a great question. The way I think about it is, you know, we are planning for mid- to high single-digit growth in Commercial Banking, and Commercial Banking is really where we pull on resource utilization. You know, you pull on funding, you pull on RWA. We are planning for mid- to high single-digit growth in that segment for this year and years beyond. I like to build sustainable businesses. I like to think that we are there for our clients through the cycle, and I like to think that we're always delivering on that relationship approach. Will we grow opportunistically well beyond those parameters if market opportunity presents? Well, I think we'd have to revisit our capital allocation question.
At the enterprise, we'd be asking ourselves, you know, "Where is the next best use of that marginal dollar of capital?
Okay. We got a few minutes left here. Let's talk about... Well, I call it anecdotes, and a couple, you know, bullets beneath that would be the discussions you're having with your clients. We did, you know, touch upon it a bit earlier, but, you know, the word uncertainty has been floating around for a number of years now, and businesses have been dealing with it. It's constricted. They're restricted to credit demand. Like what, you know, what's the pulse of the Commercial borrower these days, and how is it any different than what it was a couple years ago? Yeah, I do have a follow-up to that.
Maybe a couple of anecdotes. You know, one client said to me in recent weeks, he said, "You know, Susan, it's not a stop. It's just a pause for now." Getting some certainty around USMCA is gonna be really important for many of our entrepreneurs across the country to be in a position to plan and make decisions.
Mm-hmm.
Our house view is that, you know, there will be a deal. It will include Canada, Mexico, and the U.S., and it will bring some certainty to this, the decision-making box that, you know, all of our entrepreneurs across the country face.
I don't know if you can answer this question, but what if there's not? Like, the certainty could be we have a deal and, you know, Canada, U.S., Mexico, different version of what we have now or they do a bilateral deal just with Mexico and we're waiting around. I mean, that's still certainty. We don't have a deal, and then they can-
Yeah
move forward. Is that-
I think.
Is that a good thing?
It's better than the uncertainty.
Yeah.
What we're hearing from the line and what we're hearing across the country is that, you know, certainty is gonna help with decision-making.
As far as the other type of discussion, then, what are they other than trade certainty, which is a big one, I don't wanna dismiss that, but is there anything that the businesses want to see from the government, whether it's less red tape, lower taxes? I mean, what are the big, you know, wish list items if you will?
Yeah. I think right across the country, I think folk are excited about the opportunities that the federal government is now creating by way of investment in the country. I think folk are excited about the prospects of growth that will be driven by, you know, like the Major Projects Office.
Right.
Folks are excited by the defense spend. I mean, the CapEx in Canada is gonna be important to the growth trajectory of this country. We just need to get moving.
Yeah.
I do think that the sentiment in Canada is being impacted by the global macro uncertainty. No one knows how long this conflict, this war in the Middle East is gonna last. The longer it lasts, the tougher it's gonna be. There'll be winners and losers. It could have an impact on, you know, inflation expectations in Canada, and that then could have an impact on, you know, how our clients see the opportunity set. But again, from CIBC's perspective, I would say that we stand ready to bank our clients. We stand ready to support our clients despite the uncertainty, and we would, you know, be, you know, really ready to embrace the growth as they see opportunity come forward.
Okay. Great. I think that gets us to time. Hopefully next year we have less of a crazy backdrop and you know things are more normal. Normal seems like a distant concept, so.
Great.
Anyway, thanks for the.
Yeah. Thank you, Gabe.
Thanks for your time. Enjoyable discussion. Yeah.
Much appreciated. Thank you.