Earnings Call: Q3 2014

Nov 14, 2014

Good morning, ladies and gentlemen, and welcome to the Equitable Group Third Quarter 2014 conference call. Before we begin, we would like to remind you that certain forward-looking statements may be made on this call, including statements regarding possible future business and growth prospects. You are cautioned that such forward-looking statements involve risks and uncertainties detailed in the company's periodic filings with the Canadian regulatory authorities. Many factors could cause actual results or performance to be different from those expressed by such forward-looking statements. Equitable does not undertake to update any forward-looking statements made by itself or on its behalf, except in accordance with applicable security laws. This call is being recorded for replay purposes. It is now my pleasure to turn the call over to Andrew Moor, President and CEO of Equitable Group and Equitable Bank. Please go ahead, Mr. Moor. Thank you, Michelle, and good morning, everyone. Joining me is Tim Wilson, our Chief Financial Officer of the bank and Equitable Group. We are webcasting our remarks today along with the accompanying slides, and those slides we posted to our website following this call. This is the best quarter in Equitable's history. The bank generated record earnings, record mortgage originations of CAD 1.3 billion, a record level of single-family fundings, a characteristically high return on shareholders' equity, and record book value. Our single-family portfolio also climbed by 29% year over year, reaching CAD 4.6 billion. The company's strategy of rewarding our shareholders with steady dividend increases continues, with our board raising the dividend by another 6% to a new annualized rate of CAD 0.72 per common share, which is 13% higher than the dividends declared a year ago. We also declared a dividend on our new Series 3 preferred shares covering almost five months from August 8th to year-end. This elongated period, which takes into account the better part of two quarters, means the aggregate cost of preferred payments in the fourth quarter will be CAD 1.99 million. Going forward, that cost will be CAD 1.2 million per quarter, reflecting the coupon of 6.35%. I'll note that this is almost 1% lower than the 7.25% coupon on the Series 1 Preferred Shares that we redeemed on September 30th. Last quarter, I expressed excitement about the momentum in our business. If anything, I'm even more enthusiastic today, not just because of our recent results or the performance trends over the past few years, which were a direct result of repeatable value creation process. But because we are taking significant steps to increase the bank's potential for future growth and performance. I'll have more to say about that in my closing remarks when I will also update you on our outlook. First, a summary of financial performance and operating highlights. For the three months ended September 30th, we surpassed the previous quarterly record for net income by making CAD 27.8 million, or CAD 1.71 per share on a diluted basis. EPS was up by 19% year over year and coupled with earnings in the first two quarters, sets us up for another record year. ROE was 17.8%, above our consistently high average of 17.6% over the past five years. And book value per share increased 17% year over year, another 4% quarter over quarter. This performance was strategy-driven. In other words, supported by our ongoing emphasis on using service quality to grow the bank's core lending business. In particular, single family is the largest of our core lending businesses, and it had a tremendous quarter. Single-family mortgage originations were at an all-time quarterly record, CAD 646 million, up 39% from a year ago and 28% above our previous quarterly record for originations. With all the attendant pressures of a seasonally active quarter, the single-family team did a fantastic job in servicing our broker customers to again grow our customer base. In terms of underlying drivers, I believe that the alternative mortgage market has grown in size. I believe the mortgage broker channel is taking more business. As a partner to the mortgage broker community, Equitable is growing its share. In our case, share gains are the result of our approach to service, which puts a premium on responsiveness, accuracy, listening, and just plain doing what we say we will do when we say we will do it, qualities that differentiate the bank in our key markets. It is not just me saying that Equitable is a service leader. Our mortgage broker partners recently gave the Equitable team significantly higher ratings among alternative mortgage lenders on all metrics that I care about in the recently published 2014 Brokers on Lenders survey by Canadian Mortgage Professional Magazine. I am very proud of our single-family teams, led by Brian Leland, our VP of Residential Lending, and Kim Kukulowicz, our VP of Residential Sales, for exemplifying service and achieving this honor for Equitable, which obviously is going to pay dividends for our shareholders over time. Returning to our results, the strong origination growth and our ongoing mortgage renewal success allowed us to grow our single-family mortgage principal to a record CAD 4.6 billion, up a remarkable 29% from last year, as noted earlier. Turning to the bank's commercial lending services, mortgage principal is up 1% from the second quarter, although down 4% year-over-year, as we maintained our capital allocation and pricing discipline, lending only on projects that met our ROE thresholds. In this context, we are pleased with the originations in the quarter, which amount to CAD 194 million. Looking ahead, we certainly have the talent, the capacity, and the desire to expand the commercial part of our core lending book. But at the same time, it has been challenging for us to find business that allows us to realize our target levels of return. As a result, we expect the portfolios to remain around current levels for the remainder of this year and through 2015. Finally, in the quarter, securitization financing mortgages under management grew 2% year-over-year to CAD 5.9 billion. Originations to this business were CAD 479 million, just over two and a half times more than the same quarter last year. The level of originations in this business can be quite volatile and is not a highly relevant metric, in my view. In this section, Tim will speak to this business in more detail and give more color to some of my comments. As you know, we continue to follow strict underwriting standards and credit practices, and this has resulted in consistently positive credit metrics. To quote a key one, our impairment provision was only CAD 300,000 in the quarter, reflecting the low level of losses anticipated on our impaired loans. There's no catalyst on the immediate horizon that would fundamentally change our credit performance, which I hope you agree has been stellar for many quarters. In fact, when you consider net realized credit losses against total loans, EQB has consistently outperformed not only the well-known regional banks and large trust company, but the average of the Big Six for most of the past decade. I'll now ask Tim to provide his analysis before discussing our outlook. Thanks, Andrew. We're very pleased with our results for the quarter and year to date. From a profitability perspective, the quarter played out better than expected. Total net interest income was up 16% year-over-year as NIM expanded by 22 basis points, and we grew our average asset balances by CAD 46 million. Margins within core lending were up again, driven by continued improvement in our single-family renewal pricing and stable rates on new originations. With respect to the outlook, our strong momentum in single family, combined with trends in our commercial portfolio, have caused us to update our expectations for NIM in 2015. As growth rates on our lower spread, but higher return on equity, single-family assets have continued to surpass expectations and outpace the growth of our commercial book, we now believe that core lending NIM will decline slightly next year. With respect to securitization financing, recall that we originated quite a bit of business with unusually wide spreads back in 2008 and 2009 during the global financial crisis. This business has been rolling off over the past two years, leading to a gradual decline in spreads within this portfolio. As mentioned last quarter, we anticipate that this effect will dissipate in 2015 because loans originated since 2010, so those that start rolling off next year, carry roughly the same margins as mortgages being originated today. Overall, securitization financing margins should be down only slightly next year. Looking across portfolios, as expectations for securitization financing growth rates have increased and converged with those of core lending, we anticipate getting less lift from the shift in mix towards the bank's higher margin core lending business, the opposite dynamic from what we have seen over the past few years. As a result, and because of trends within each portfolio, we now believe that total NIM will decrease slightly during 2015. This effect will be more than offset by growth in our assets, however, leading us to believe that net interest income will continue to grow at high rates. Shifting to costs, non-interest expenses grew 16% year-over-year. This reflected an additional CAD 2 million to support 27% growth in our FTE, among other factors. Despite these increases, which are predominantly investments in the bank's expansion, our efficiency ratio remained low at 31.5%, and we expect this ratio to stay roughly at current levels to close out the year. Our capital ratios at September 30th all continued to surpass minimum regulatory standards and most industry benchmarks. As expected, our recent Basel III compliance Series 3 preferred share offering did bolster our period end position, and we expect to continue operating above most industry benchmarks going forward. The final topic that I want to spend time on is our securitization financing portfolio, and specifically, the multi-unit residential mortgages within it. The dynamics of that portfolio are changing as we head into next year, and I want to explain the implications to you so that you can model it appropriately. I will start with how we use the CMB program. As you know, we use the program primarily to finance multi-unit residential mortgages and seek to utilize the full amount of our CMB allocations each quarter through renewals and newly originated mortgages. Generally, we have CMB allocations of approximately CAD 350 million per quarter. This is comprised of CAD 200 million of 5-year allocation and CAD 150 million of 10-year allocation. The changing dynamics that I mentioned earlier are driven by a lower level of maturing mortgages next year. When we look at CMB maturity trends this year and over the past couple, we see a high level of maturities, levels that approached our annual allocation of CAD 1.4 billion or CAD 350 million on a quarterly basis. Looking ahead to 2015, there are only about CAD 450 million of maturities for that entire year. This has positive implications for both portfolio growth and origination levels. To illustrate the implications of maturity levels on AUM, in a low maturity quarter, when our allocations are CAD 350 million and maturities are, say, CAD 200 million, we have the capacity to grow assets under management by a net of CAD 150 million if we are able to maximize the use of our allocation. On the contrary, in a high maturity quarter to what we have seen recently, and assuming the same CAD 350 million of allocation, but matching maturities of 350, AUM would remain flat. That is pretty simple math, and the reason that we expect AUM to grow in 2015, as we are looking at lower maturity quarters for the foreseeable future. Likewise, maturities have an impact on securitization financing origination levels. Again, for illustrative purposes, consider a scenario where maturing mortgages amount to CAD 200 million and we renew 50% and re-securitize those mortgages. With the same CAD 350 million of CMB allocation, we would have room for CAD 250 million of originations. By contrast, consider the alternative where maturing mortgages amount to CAD 350 million, and we again renew 50%. That would leave room for only CAD 175 million of originations, CAD 75 million or 30% less than in the previous scenario. That math hopefully explains why we expect to be at a higher rather than lower end of securitization financing originations going forward. I will also add that we plan to report our prime single-family business in the securitization financing portfolio, which will further enhance the growth rates and origination levels in it. These single-family mortgages will be financed mainly through the MBS program, not through CMBs, so in 2015 won't be subject to the CMB dynamics I just discussed. Table 2 of our supplemental information package provides a breakdown of the securitization financing portfolio by property type to allow you to better analyze and understand these performance trends. We should also note that we hope to derecognize the vast majority of these prime single-family mortgages, so the income will be recognized as a gain on sale, and as such, won't affect our NIM. I hope that provides some useful insight into our performance and our securitization financing portfolio. Now back to Andrew. Thanks, Tim. Beyond record results, the third quarter was notable for the debut of our single-family prime lending business with a comprehensive product offering marketed under the name EQB Evolution Suite. Prime single-family clearly offers attractive economics and also provides important risk diversification benefits. While there are many providers of prime mortgages to the mortgage broker community, we do believe the bank has distinctive positioning, offering on the one hand, the assurance of a commitment from a well-established Schedule I bank without the potential, on the other hand, of competition from a branch or captive mobile sales force. While it is difficult to create differentiation in this business, we are working on every angle we can. In this regard, we've infused our prime business with the customer service knowledge and capabilities that we've advanced in our alternative mortgage lending operations, and we feel very confident this will be important as we carve out a strong market position over the next few years. We also see opportunity with Equitable borrowers whose financial needs to evolve to a prime mortgage and who previously might have felt compelled to leave us for another lender. Our rollout in the prime market is being staged to ensure that we can build the necessary supports to deliver desired service levels. On September 3rd, we launched in the Greater Toronto area and launched in Alberta on October 8th. We plan to expand systematically to other communities from here. This incremental rollout also affords us with the opportunity to refine our offering as we expand it by continuously listening and responding to and learning from our mortgage broker partners. These are early days, but we're extremely pleased with the reaction to our efforts in the mortgage broker community. We see every reason to believe that the bank will become a significant player in the prime space, capable of originating between CAD 1 billion and CAD 2 billion per annum. We're putting a three- to five-year time horizon on that and expect to be originating a few hundred million CAD per quarter by the end of 2015. In the immediate term, to ensure optimized use of our MBS capacity, we have supplemented our own prime production with that originated through business partners. In the quarter, partners originated about $156 million of prime business for us, and we expect this level to increase throughout 2015, subject to the usual seasonality associated with residential mortgage lending. Our entry into the prime single-family market has also afforded us with the opportunity to further broaden our funding sources. Yesterday, we were pleased to note the successful pricing of the bank's first-ever issuance of a syndicated MBS. We priced $209 million at a spread of 56 over the benchmark government yields, and we are very pleased with investor reaction. This will be the first of many to come. Momentum is also building for our other growth initiatives, both on the lending and deposit sides of the bank. Growing our single-family footprint in Quebec is the most recent example of our territorial expansion in lending. We are progressing on plan by building trusting relationships in the Montreal and Gatineau regions, and based on early success, we are expecting to soon commence lending in the Quebec City region. As in other parts of Canada, our lending in Quebec will be focused on the major urban centers. Interest and participation in our HELOC is also increasing as it provides a very cost-effective alternative to unsecured credit card borrowing. On the deposit side, we continue to grow our Equitable high-interest savings account balances. As at the close of business yesterday, HISA balances surpassed $318 million, making it a growing and, for the future, important component of our almost $7 billion savings business. Stepping back for a moment, across all of these new growth avenues, our objective is quite clear. We want to take Equitable to the next level as an independent bank with more diverse lending and deposit platforms, and therefore a larger consumer following. We expect the execution of this strategy will be a catalyst for further increases in shareholder value. Getting the right balance between growth and performance is critical, and it is something I think the bank has done exceptionally well over the years. In this regard, our plan for the second half of 2015 is to begin increasing investment levels to expand consumer and mortgage broker awareness of, and affinity with, our products and our brand. Our current thinking is to spend an additional $3 million-$5 million in 2015, beginning in the second half of the year. Though the exact expense level is subject to further internal discussion as our plans coalesce, part of these funds initially would be allocated to the launch of new digital banking capabilities that will help us to attract new customers to our savings business. We are encouraged by the evolution of our digital banking plans and branding approach in this channel. From a profitability perspective, we anticipate new revenue from our prime business will offset these costs, so the impact on earnings will be neutral. Although we will continue to operate efficiently relative to most benchmarks, we expect our efficiency ratio to rise in the back half of 2015 as a result of these investments. Efficiency ratios are simply one data point, and my ultimate measure of success remains the return on equity within our relatively conservative risk appetite framework that we are able to generate. On that front, we will maintain our characteristically high ROE next year. The bank is ready for the next stage in its development, and the growth we are targeting will fully justify itself through higher earnings, strong returns for our shareholders, and sustainable competitive advantage for the bank. In terms of our immediate outlook, it is well articulated in our own MD&A. I would just emphasize, in the final quarter of 2014 into 2015, we expect solid year-over-year growth, and it will continue to deliver high returns on equity. In summary, the third quarter was one for the record books. Record earnings, record quarterly growth in core lending production, and a strong ROE. We raised our common share dividend. We launched our new prime mortgage business and made good progress with our other recent growth initiatives, and in so doing, continue to execute on our vision for the bank. The successes we are enjoying financially and operationally inspire us to pursue that vision, while our proven team and value creation processes give us confidence that we can achieve it with continued hard work and perseverance. That concludes our prepared remarks, and now we would like to invite your questions. Michelle, could you please open the lines to our callers? Thank you. We will now conduct a question and answer session. If you wish to ask a question, please press *1 on your touch-tone phone. If you are on a speakerphone, please lift the handset before entering your request. To ensure as many voices are heard as possible, please limit yourself to two questions per turn. We will now take our first question. The first question comes from Jeff Conn of RBC Capital Markets. Please go ahead. Hi. Good morning. Morning, Jeff. I just have two questions for you. First off, was on the non-prime business. You've been having some good momentum there. I know you've talked a little bit about it. I just wanted to maybe flesh that out a little bit more. Just trying to get a sense of where you think the drivers are. I think you talked about, you think brokers are taking some more shares, so that's probably helping. I was also just trying to understand what some of the other factors in terms of B20 has been around for a while now. Are the banks still pushing out a lot of these borrowers and that's falling into your lap? Is it impact of immigration? Is it maybe some more people that are changing the composition of employment or where they're maybe becoming more self-employed? I think probably all of those things to some degree. My sense, and it's very hard to have data around this, but our corporate development group has been doing a lot of work on this recently, is that it continues to be a result of the Big Six really starting to fully implement B20. My sense is that even one or two of the large ones were, I'm sure they were adapting to it as they went, but have felt the need to continue to tighten to fully comply, and I think that's continuing to grow the alternative market as a percentage of the overall market. I think that's the biggest driver. I think brokers generally, of course, we believe that a broker is the best way to get a mortgage, and they continue to gain share. So that's a secondary impact. I think that the primary impact is just the importance of the alternative market is becoming larger quarter by quarter. Do you think with the banks, as they get more comfortable and understand, call it the goalposts around B20 and in the context of kind of slowing loan growth for them, broadly speaking, but also potentially in the mortgage market that happening, do you expect that they may start to take back some of these customers or do some of these credits that they may have turned down previously? I don't really see it, to be honest, Jeff. My own perception is that looking over the years, it's been surprising sometimes the loans that get done at the Big Six banks, which really should be coming to an alternative lender. I certainly remember when I was running one of the biggest brokers in the country, some of our people would talk about walking a loan into a bank branch that they couldn't get done anywhere else, or they couldn't get done with an alternative lender, but they'd walk into a bank branch, they would get done locally because different credit decisions are being made. I think if anything, we're going to see more consistency right across every part of the entry point of a mortgage into a Big Six bank system that will prevent that kind of thing. I still think that there's the potential for a little bit of that to be going on. So if anything, I don't see that there's much that the banks can do to start to recapture more of that share if they're really diligently following the letter of the law. Okay. Just the other question, Andrew, is just on the dividend. Payout ratio, I think, is roughly around 10-ish percent. Is there any thought process around gradually increasing that payout ratio over time? I think as we discussed before, the basic business model is if we can generate, let's say, a 17%, 18% return on equity, pay out 10% of that, so roughly 1.5% a year, retain the rest of the earnings, and then generate another 17% or 18% on that amount return. That's the best way of building shareholder value for our shareholders. Increasing the dividend would happen in an environment where we see it as being difficult to redeploy that capital and generate a 17% to 18% return. I don't see that as being a risk right now. There seem to be so much and many opportunities ahead of us that we can continue to safely deploy it and generate good returns to our investors. Clearly, if we saw either returns slipping or the growth opportunities also not being as good as we currently see, then dividends would go up, and they might go up quite fast because, as you say, the payout ratio is pretty low. But I think that would be an indication of us really feeling that the opportunities aren't as big in the market as we currently view them to be. Okay, great. Thank you. Thanks, Jeff. Thank you. Ladies and gentlemen, if you do have a question, please press star one on your touch-tone phone at this time. The next question comes from Steven Boland of GMP Securities. Please go ahead. Morning. Couple questions. Morning, Steven. Tim, I appreciate the color on the CMB and the allocation. Let me just try and summarize it. Your allocation, CAD 350 million with less maturities this year, but the origination volume is still pretty robust. You are anticipating asset growth, meaning more staying on the balance sheet. If that is true, then what is the implication for your ACM? Is that going to put pressure on that metric? Yeah. I think we've communicated in the past that we still feel we have plenty of room to grow and that ACM isn't a constraint at the moment. I think that would be our view going forward as well. Certainly, more asset growth would. If asset growth outpaces growth of your capital, your ACM will climb and get closer to and become a constraint over time, but I don't see that happening in the foreseeable future. We still have pretty robust capital growth because of our earnings retention. Okay. So really, it's the higher earnings that are driving the capacity. Well, that and the fact that we're relatively under-levered compared to our committed amounts right now. So there's plenty of dry powder in the gun here. Okay, that's great. Second question. Andrew, you said that your partners originated some prime product for you. Can you just walk me through the process and the economics of that when that happens? I'll leave Tim to talk about the economics, but essentially, we're dealing with wholesale originators of single-family mortgages. These are people that face the brokers directly. We're buying them in chunks once or twice a week and then putting them on our balance sheet. As we did yesterday, securitizing them in a mortgage-backed security pool and selling them off through a group of dealers. The next stage of that will be to sell the IO strip, and then that'll then result in derecognition and, at the same time, some recognition of some income. Tim, I don't know if you'd like to give some more color on the actual economics of that. Yeah. I don't think we'll disclose the detailed economics given that they're a result of proprietary contracts that we have with these companies. But the essence is that we have agreements with them, as Andrew mentioned. We pay them a fee, effectively, for brokering the mortgage for us. In most cases, they also retain servicing of the mortgages. So we'll pay them an ongoing market-level fee for that service. All of that gets rolled into the gain on sale, which we will hopefully recognize when we sell the strip. Okay. Maybe if you could just update me on the demand or the market for the strips. Obviously, you're going to be ramping that up. Maybe you can just say, is that market evolving? Are there more players coming into it? Demand? Maybe if you could just give us an update on that. Yeah. I think we're very close to that market, keeping in touch with all the potential buyers. We have seen more emerge over the course of the past quarter. The good news is that that's making the market more competitive from a pricing point of view. So yeah, we think there's plenty of demand for this product and at very reasonable prices. Okay. Great quarter, guys. Thanks. Thanks. Thank you. Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. The next question comes from Graham Ryding of TD Securities. Please go ahead. Mr. Ryding, please go ahead. Yeah, sorry, I had my mute on there. Andrew, maybe I could start with your comments around the regulatory opportunities that you are seeing. Maybe just some specific details around what those opportunities are and how you sort of rank them as to how you think they can positively impact your business. Well, I think that generally the view from Ottawa is a desire to encourage the growth of smaller banks. It was very clear it was an economic action plan in February. Recently there was a large conference with all the major players from Ottawa, the Bank of Canada, OSFI, CDIC, Department of Finance reaching out and meeting with a group of our peers. The other regional banks being Canadian Western Bank, Laurentian Bank, and Manulife, the CEOs of all those companies were there as well. We had some really engaging dialogue around things that could be done that leave the system with the same integrity and safety as it is today, but open up the opportunity to allow more competitive solutions to Canadians. Those range from things like the ability to open up a bank account remotely without coming into a branch in a seamless and easy way is one thing. Some certain nuances around accessing some of CMHC's programs. There's a wide range of things. It certainly feels as though Ottawa is listening to those issues and trying to make sure there aren't any artificial impediments to competition with those larger institutions that got very broad branch networks. Okay, great. Does the agenda from Ottawa, in your opinion, include credit unions and smaller financial institutions, or are they focused really on the smaller Schedule I banks? It certainly relates to all deposit-taking institutions under federal jurisdiction. I think the credit union world is not one I spend a lot of time studying, but I believe some of them are moving under federal jurisdiction. They're being forced to either go under federal jurisdiction or provincial. I don't think the federal government's going to spend a lot of time working with provincially regulated credit unions or for that matter, provincially regulated trust companies. But they will be interested in all the things under federal purview in terms of that providing competitive alternatives. Our basic message is there are six big banks. There's the Big Six, and then there's the mid four, which is the four I mentioned, ourselves, Manulife, Laurentian Bank, and Canadian Western Bank. Really we're the four that have enough capital, enough processes around FCAC compliance, OSFI compliance, that we can provide a meaningful competitive alternative for Canadian savers and people using financial services. Our basic message is to make sure that you allow us to be part of that basic agenda. The public policy interest is very clear. Government would like to see more competitive alternatives for Canadian consumers to fund their businesses, to build their savings and so on. We think that those companies as a group are large enough to do something meaningful. The headwind right now for those smaller banks is just red tape and bureaucracy. Is that- Well, sometimes. OSFI is doing a very constructive reach out around the supervisory provision process. As you can imagine, it's very different for an institution like yours at TD where you've got subsidiaries all over the world doing complex derivative trades and foreign exchange trading and so on and so forth, as well as the domestic banking business. I think that OSFI feels that they've had a bit of a one-size-fits-all approach to supervising a large institution, a complex institution like that, as well as a company like Equitable, which is much simpler and could have a different, more efficient supervisory approach. I think potentially there's wins on both sides in terms of how the supervisory teams within the regulators can look at somebody like an Equitable and also things that we can do to be more efficient in meeting regulatory expectations. The regulators just being more nuanced about there's one approach for very large institutions and another that potentially leaves smaller institutions just as safe, but has a slightly different supervisory regime. Okay, great. My last question would just be the investments that you're planning in the second half of 2015. Sounds like they're focused on both growing your single-family prime platform as well as building out your digital banking platform. Is that accurate? On top of that, what's the outlook for 2016? Should we expect the efficiency ratio to drop back down after this is completed, or is this an ongoing build-out into 2016? I think it's pretty fair to say that the spend at the end of next year is mostly around our savings business. We expect some ancillary spin-off into prime as Canadian consumers get more familiar with the Equitable Bank name. Mostly that's around acquiring customers in the deposit side of our business, our digital banking platforms. They'll be able to access their savings account off the mobile phone and have some sort of state-of-the-art ability to see what they're doing there. We've got a very good system that we're building there. That'll be the major area of focus. I do expect that our efficiency ratios might continue to be relatively high into 2016. I would stress, as I mentioned in my comments, our driver is not really efficiency ratio. Efficiency ratio is an important measure that helps guide us to ROE, and we would expect our ROE to continue to be very strong in both 2015 and 2016. In and around these historic levels I indicated earlier, 18%, 17%, 18%, that's what we expect to be able to maintain for the foreseeable future. Okay. Thank you. Thanks, Graham. Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. Mr. Moor, there are no further questions at this time. Back to you. Thanks, Michelle. As there are no other questions, I'd like to thank you for joining us. We look forward to reporting our fourth quarter results on February 24, 2015. Thanks for listening, and goodbye for now. Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line and have a great day.