Earnings Call: Q4 2020

Dec 4, 2020

Good day, bonjour, and welcome to the Fourth Quarter Results twenty twenty Laurentian Bank Financial Group Conference Call. Today's conference is at this time. I would like to turn the conference over to Ms. Susan Cohen, Director, Investor Relations. Please go ahead, ma'am. Good morning, and thank you for joining us. Today's opening remarks will be delivered by Rania Lewallen, President and CEO, and the review of our first quarter and twenty twenty financial results will be presented by Francois Laurin, Executive Vice President and Chief Financial Officer. After which, we will invite questions from the phone. Also joining us for the question period are Liam Mason, Executive Vice President and Chief Risk Officer and Kelsey Gunderson, Executive Vice President, Capital Markets. All documents pertaining to the quarter can be found on our website in the Investor Center. Before we begin, let me remind you that during this conference call, forward looking statements may be made, and it is possible that actual results may differ materially from those projected in such statements. For the complete cautionary note regarding forward looking statements, please refer to our press release or to Slide two of the presentation. It is now my pleasure to turn the call over to Rania Llewellyn. Thank you, Susan, and good morning. Today, Laurentian Bank reported its fourth quarter and fiscal twenty twenty financial results. Before Francois provides us with an overview of our performance, I would like to share some impressions of my first few weeks at the bank and how I plan to approach the next few months. Since October 30, my first official day in this role, one of my priorities has been to meet with and listen to as many employees as possible from across the bank. I want to take a moment to convey my personal thanks and immense appreciation to everyone for sharing their time and ideas with me and especially their efforts in serving our customers and this organization during what has been an unprecedented year of change. In my conversations with them, it has become clear to me that they share a commitment to reshaping Laurentian to become more relevant to our customers. But I have also heard that they are craving a new strategy and clarity around the path this organization will chart to achieve greater success in the future. To that end, we've launched a series of initiatives in three key areas. First, work is underway to strengthen our organization, beginning with a reassessment of our current priorities. We are in the process of conducting a thorough review of the bank's operations and assessing key projects, including all the previously announced transformation related activities. This focused effort will continue over the next few months. It is an important step that will help validate that the foundation we are building upon is strong and that we are taking the right actions to position ourselves well for future growth. I'll provide a detailed overview of our strategic plan as soon as our work is completed. Second, as we reassess our long term strategy, we are examining ways to enhance our cost discipline across organization with a view to improving our overall efficiency. Third, we are making several important changes to our executive team and organization, including implementing a reorganization of of commercial and personal banking into two operating units. I'm pleased to announce that Eric Probeau, Senior Vice President, Commercial Banking and President of LDC Capital has been appointed as Executive Vice President of Commercial Banking effective 01/01/2021. This promotion is a testament to Eric's many successes during his eight plus years apprehension, during which time he played a pivotal role in several recent acquisitions, including the Canadian operations of CIT and Northpoint Commercial Finance. Personal banking will include the Quebec branch network, digital banking and B2B bank under our one retail operating unit. We will be formally launching a search for a new head of personal banking, who will be based in Quebec. I would also like to announce Stephane Perillon's decision to retire from the bank at the December. Stephane has been a valued leader at Laurentian Bank for more than nine years. I want to thank him for his significant contributions to the bank and also to wish him well for the future. Looking forward, I expect 2021 to be a year of challenges and opportunities, both at a macro level with the current pandemic and within our bank. It is a year in which we will be resetting our priorities, refocusing our efforts and renewing the passion and pride of our employees to believe in and serve as one bank to provide long term sustainable value to our customers, our community and our shareholders. These new operating units, commercial and personal banking, will join our capital markets unit as well as our corporate functions as we embark on a renewed strategic direction centered around three pillars. First and foremost will be a customer first culture, focused on how we can simplify our operating processes and improve our overall customer experience across all of our business lines. Second, we will create a more agile organization with an innovative mindset. I believe one of our competitive advantages as an organization is our size relative to the big bang. As a mid sized financial institution, we have a unique opportunity to create an environment characterized by faster decision making and more nimble implementation of changes to the benefit of our customers. And third, we will engage and empower our employees to work collaboratively as one team centered around a customer first mindset. In closing, I want to make a commitment to our shareholders and to the investment community to work with you to ensure you are part of this journey to reset Laurentian Bank for renewal and growth. I'm committed to providing all of you with operational transparency and openness regarding our internal assessments and our future strategic priorities. In the spirit of that transparency, I hope you will share with me any concerns or thoughts you may have that will help drive Laurentian Bank to the next level. I'll now turn the call over to our CFO, Francois Laurin, to provide an overview of our Q4 and full year earnings. Thank you, Rania, and good morning and bonjour, Ratos. I would like to begin by turning to Slide five, which highlights the bank's financial performance for 2020. Adjusted EPS and ROE for the year were $2.93 and 5.5%, a decrease of thirty one percent and two forty basis points respectively compared to 2019. The variation in profitability was mainly due to the higher provision for credit losses, primarily driven by the severe economic conditions resulting from the global pandemic. Financial highlights for the 2020 are presented on Slide six. Adjusted EPS and ROE for the quarter were $0.91 and 6.8%, a decrease of thirteen percent and one hundred basis points respectively compared with the 2019. The higher provision for credit losses was also the most significant factor accounting for the variation in profitability. As well, a reduction in higher margin inventory financing volumes impacted net interest income. This was mostly the result of COVID-nineteen, which caused an increase in demand for boats and other recreational vehicles and disrupted the supply chain. In addition, other income was stronger mostly as a result of the contribution from capital market activities. Compared to the 2020, adjusted EPS and ROE decreased eleven percent and ninety basis points respectively. As outlined on Slide seven, reported earnings for the fourth quarter included adjusting items totaling $5,500,000 after tax or $0.13 per share. For 2020, adjusting items totaled $24,100,000 after tax or $0.56 per share. Restructuring charges mostly related to severance costs and lease terminations. The rest of my remarks will focus on sequential variations as the 2020 were both impacted by COVID-nineteen. Turning to Slide eight, total revenue for the fourth quarter was $243,500,000 or 2% lower than the prior period. Net interest income declined by 2%, largely due to the impact of a decrease in higher yielding loans to business customers. As just mentioned, the pandemic negatively impacted inventory financing volumes. The average utilization rate of the dealers' facilities during the fourth quarter was about 30% compared to the pre pandemic rate a year ago of over 55%. The lower level of higher margin loans to business customer also impacted net interest margin as shown on Slide nine, which stood at 1.82% compared to 1.86% in the third quarter. The diversified revenue streams included in other income as presented on Slide 10 totaled $74,200,000 slightly lower sequentially, mainly as a result of the record contribution of capital markets in the third quarter. Higher commercial lending fees and a net gain of $1,100,000 on the securitization also contributed positively to fourth quarter results. Slide 11 presents adjusted non interest expenses that totaled $170,300,000 in the fourth quarter, 1% higher than the prior period and mainly resulted from increased activities as the economy began to reopen. These increases were partially offset by a decrease in salaries and employee benefits resulting from lower capital markets lower capital markets performance sorry, based compensation and a compensation charge of $2,700,000 related to the bank's former President and CEO retirement in the third quarter. The adjusted efficiency ratio stood at 69.9 in the 2020 compared to 68% in the prior period. Our cost optimization initiative as well as a review of our strategic direction are aimed at improving this key metric. Slide 12 presents our well diversified sources of funding. Personal deposits account for 79% of total deposits and contribute to our healthy liquidity position. We continue to optimize our sources of funding and align deposits with loans. Slide 13 highlights our strong capital ratio position. The CET1 capital ratio, which is presented under the standardized approach, stood at 9.6% at year end. Lower risk weighted assets and higher retained earnings were the main drivers of the 20 basis point sequential increase. CET1 also includes about 10 basis points resulting from Aussies transitional arrangements for the provisioning of expected credit losses in line with the third quarter. Our diversified loan portfolio is shown on Slide 15. The loan mix was relatively similar quarter over quarter. Slide 16 highlights our high quality residential mortgage portfolio. At year end, 57% of the portfolio was insured compared to 55% in the prior period. At 10/31/2020, the Alt A portfolio totaled $1,200,000,000 and represented 8% of the total mortgage book. The residential mortgage portfolio remains well diversified geographically. The loss ratio for this portfolio increased to eight basis points in 2020 and mainly reflects the expected migration of some clients who had benefited from deferral programs as well as the forward looking potential impact of the second wave of the pandemic on the housing markets. The level of insured mortgages is among the highest in the banking industry, which contributes to reducing the overall risk for this portfolio. Slide 17 highlights our commercial loan portfolio, which is pan Canadian with a U. S. Presence. While COVID-nineteen has been impacted our inventory financing activities, the decline in assets slowed during the fourth quarter and we now expect growth to resume in the 2021 based on recent trends. The commercial real estate portfolio continued to grow during the fourth quarter. We have minimal exposure to industries most impacted by COVID-nineteen. As shown on Slide 18, payment deferrals in response to COVID-nineteen decreased significantly during the quarter as the deferral periods are coming to an end and accounted for 0.7% of the loan portfolio at the October compared to 13.3% at the April and 5.5% at the July. We're closely monitoring these accounts. We also continue to work with our customers who may need flexibility in managing their loans. To consider the evolving impact of the pandemic as well as other changes to the bank's environment, we updated our economic scenarios to assess collective provision as at 10/31/2020 to account for the recent second wave. Our three scenarios base, downside and upside were probability weighted as part of our approach to determining the expected credit losses as at 10/31/2020. The probability weighting of our three economic scenarios remains similar to the third quarter, which with higher weights attributed to the base and downside scenarios and a lower weight to the upside. Turning to Slide 19. In the 2020, the provision for credit losses was $24,200,000 compared to $22,300,000 in the third quarter. An increase in the provisions for Stage one and two residential mortgage loans considering the expected migration of some customers at the end of the deferral period, was partially offset by a decrease in provisions for Stage three commercial loans due to a lower level of impaired loans. The PCL ratio was 29 basis points and continues to compare favorably with the banking industry. Slide 20 highlights a small sequential improvement in net and gross impairment impaired loan ratios. Based on our current assessment of the pandemic, the underlying credit quality of the portfolios remains good. Uncertainty remains regarding the future course of the pandemic and the performance of the economy, which makes providing guidance for all of 2021 challenging. However, all things equal, for the 2020, we expect net interest margins to be relatively stable compared to the fourth quarter. While we expect fixed income activities to remain strong in 2021, revenues from capital markets are volatile and thus difficult to predict. Non interest expenses should be slightly higher than in the fourth quarter due to the seasonal factors, including the annual increase in salaries, vesting of share units and the reset of employer payroll taxes, causing the efficiency ratio to be slightly higher than in the fourth quarter. Overall, we expect pre provision pre tax earnings for the 2021 to be slightly lower than in the 2020. As we establish a renewed strategic direction for 2021 and beyond, Our strong capital and liquidity position will provide a solid foundation to build on to improve our efficiency and profitability for moving forward. Thank you for your attention and I will now turn the call back to Susan. Thanks, Francois. At this point, I'd like to turn the call over to the conference call operator for the question and answer session. Munish? Thank you. We'll now take our first question from Meny Grauman of Scotiabank. Just wondering if you could give us some direction in terms of what to expect for the PCL ratio for fiscal twenty twenty one and specifically how you see the interplay between impaired and performing playing out? Thank you. Good morning, Manny. In terms of our expectations for PCL, we expect that impaired loans and write offs will increase and peak in mid-twenty twenty one. Post COVID, we will return to our traditional run rate of PCLs adjusted for the business mix based on our strong credit discipline and underwriting practices. Based on the gross impaired loans, we're seeing a very stable pattern versus last quarter, and we're not seeing new adverse credit formations at this time. In terms of the 29 basis points that you put up this quarter, as you look to 2021, is it likely to be higher than that over the next few quarters? It depends, Manny, how it plays out, how the pandemic plays out with the vaccine. As I said, we expect an uptick in gross impaired loans, but we're very comfortable with our reserves right now. We've taken an appropriately prudent provisioning approach. There may be some timing differences in terms of realization versus release of ACLs, but we feel very comfortable with where we are today. Okay. And just to clarify, do you foresee reserve releases in the performing bucket? Well, if you look at the breakdown of our ATLs this quarter in terms of the increase. Of the ATL increase of $16,000,000 $11,000,000 are due to Stage one and Stage two and $5,000,000 is due to Stage three. Depending on how those Stage two credits evolve, we could see releases. But this is our best estimate given the economic scenarios we have today. Okay. And then if I could just ask more on the strategic direction. I was looking through some of the material. I thought there was a reference to the next phase of the core banking system being evaluated given management change. And I was just wondering, this is one area where I would have thought it would just be something that would go through. Just curious what the considerations are to pause something like that, that seems to be sort of an important systems upgrade and probably also important for future ARB transition? So I'll take that question. What I would say is as part of our thorough review of all the key projects, we are looking we're doing conducting a review of all of the previously announced transformation related activities. We really need to help validate that the foundation we're building upon is strong. As you know, Phase one was completed. And so we need to ensure that we have the right foundation and it's going to support the right strategy going forward. So we'll be providing more details of the overview as soon as that work is completed. Sounds good. Then just the last one on the same vein. So I know the strategic sort of evaluation is ongoing, but are there any sort of sacred cows? Are there any parts of the previous strategy that are clearly not up for discussion? I mean, area specifically that I'm thinking about is the branch strategy. How much sort of the advice only model is that up for debate, guess, is the question. Could there be any change there in terms of the strategy on the branches? So what I would say, everything is currently under review. So there are no sacred cows. When it comes to the retail network though, the advice model is really where most financial institutions are moving towards. So as part of the strategic review and by hiring a new leader to come in and, set the new strategy and direction for the retail bank, it's looking at how well our digital strategy and some of the other support functions support our advice model. Okay. Thank you. Thank We'll now take our next question from Gabriel Dechaine of National Bank. Please go ahead. Hi, good morning. My first question is for Ms. Gulwelin, new CEO. Been in the job, I guess, a couple of months now. What are your first impressions of the organization? You're moving from a big bank to a smaller bank. And what do you like? What What do you like about the new place and what do you think needs work? So it's actually six weeks officially today that I've joined the institution. Some of my early impressions I've had 10 roundtables, met with hundreds of employees, and I would say that the employees and talent in the organization, they're extremely committed, extremely passionate and are excited about a new strategic vision and direction and are craving that rally in crime. I would say the size is definitely an advantage. I've had the pleasure of running midsize operations within the large institution that I came from. And I would say that size is an advantage where we can become a lot more agile and nimble. So I do definitely see opportunities for us to be able to pivot faster, execute more efficiently. The commercial growth is the commercial business is definitely a growth engine, and we have deep relationships with our customers as well as expertise in that business, so both from a talent perspective as well as relationships with our clients and they're highly valued. Our capital markets business has had a really good run this year under Kelsey's leadership. Leadership. And so, I'm optimistic in terms of managing that business. And on the personal side, the personal banking side, as I said, many of the institutions and banking in general, given what's happened, COVID has really been a catalyst to driving digital adoption. And so the advice model is definitely the right model. So I'm looking forward to working with the leadership team on setting ensuring that, that strategy supports that advice model. So those are kind of some of my early impressions at this point. That's very, very thorough overview. I appreciate that. You had, you know, maybe, I don't know, asked if it's the right word what is the right word, but maybe some challenges I see for the the organization is is, you know, relevant in the market. You know, that might might be a wrong way to put it, but along those lines. I'm looking at the deposit line. Branch raise, business deposits, if I combine them and treat those as core deposits, if you will, kind of flat growth year over year. There has also been a declining trajectory over the past few years. This is coming at a time when we're seeing massive increases in deposits at other banks. That tells me that customers are not coming to you to deposit their money and then down the road when things get better, take those deposits and spend on stuff and borrow and things like that. Like how do you the advice model is intended to change that, I guess. How are you planning on approaching that particular challenge? So again, it's early days, but deposits are absolutely core to any financial institution. And so we're going to be looking at ways to optimize it. We definitely currently have a diversified pool of default deposits and we're constantly looking to align deposits and loans to ensure that they're kind of matched up. And so we will be looking at other opportunities, whether it be through the digital or our commercial book of business as well as our retail network, to continue to drive deposits into the institution. If I may add Francois here. I would like to point out that in the past year, despite the merger of some branches, we increased the demand deposits by over 13.5% year over year. And the term deposits, obviously, we always seek to optimize our funding. And in the past quarter, you saw a decrease in term deposits, but we've increased securitization funding. So we're always on the lookout and match the assets and liabilities as Ranga mentioned, but seeking the best source of funding. So those are all the elements that we manage. And the term deposits is basically the the late we we term deposit that we get not play, but we our last not last resort, but the resort we use whenever we need it. Thank you. All right. Thanks. Thank you. We'll now take our next question from Darko Mihelic of RBC Capital Markets. Please go ahead. Hi, good morning. My first question for Rania is, I totally understand the need to take time to reassess, absolutely makes sense. But you've already announced a reorganization and that struck me as a bit odd. I wonder if you can speak to the reorganization. Simplistically, when I think of Laurentian Bank, I think of sort of four businesses, right? I think of commercial banking, maybe equipment financing, stuff like that's in there. Then I think of the retail bank, I think of B2B Bank and I think of capital markets. Now that's just me simplistically thinking. Trying to understand the rationale for the new organization and why you sort of decided to have it reorganized so quickly and why it's organized in the manner that it is. So maybe I can just kind of clarify in terms of what the organization so that's exactly what we're doing. But rather than just have with Stephane's retirement, was just really an opportunity to kind of create more focus on those two units. So we used to have Stephane, used to be prior to being interim CEO, had both the P and C together reporting into the CEO. But to make sure that we have the focus on commercial independent retail, that's why we decided to create two independent operating units. And so it's not a net new strategy. It's just creating two positions of leadership there to ensure that we can set it up for success and focus on growing it going forward. So the business units will continue to be commercial, which includes our equipment financing, our commercial real estate, our, North Capital as well as, then personal will have the B2B and, digital and retail distribution, and then you've got capital markets. So those are the three distinct business units. Okay. Fair enough. And my second question is one of the things that you've inherited with this bank is a relatively high payout ratio. And I look at the dividend payout ratio as one. I measure it against reported. I don't really measure it against adjusted. Is that also up for discussion with the Board over the next three or four months? Francois? Francois, yes. Yes, I'll take that one. Francois, on a reported basis, our policy is 40% to 50%. This quarter on a reported basis, we're 40% to 51%. So we're basically in line with our policy. And this is discussed on a quarterly basis with the Board, not just because of the any review we're doing on strategic review, but every quarter this is being discussed. I guess I can update on an annual basis. We feel comfortable with the level today, Darko. Okay. All right. Fair enough. And then I think I'll save more of my strategic questions for the conference, Eranja, so I'll stop there. Just a quick question, a numbers question. With respect to the net interest margin, my sense is that many banks talk about excess liquidity as something that could help margin going forward. Francois, can you speak to that? Will there be any help? And can you quantify it for us? What we see going forward, Darko, is that for the moment to be relatively stable, but as our mix continues to change and the return of growth in the business services, whether real estate or inventory financing, we see the improvement in the NIM as the mix changes over the next few quarters. In terms of liquidity, we have strong liquidity to where we've always maintained strong liquidity, but we managed very well our cost of funding with different initiatives. And we'll continue to do this on a go forward basis. So we're always seeking opportunities. But the main driver next year to improve the NIM would be the growth in the business services and asset mix change. Okay. Thank you very much. You're welcome. Thank you. We'll now take our next question from Doug Young of Desjardins Capital Markets. Please go ahead. Hi, good morning. Francois, I've always had a lot of problems, both I guess modeling out non adjusted non interest expenses and it bounced around quite a bit over the years. Just trying to get a sense in what you think is reasonable over the next few years. And I know there's a lot of variables that go on and I know there's a lot of reviews that are being done right now. But 170, is that something that's reasonable? What is that something we should be thinking of a growth rate off of? And then severance and restructuring charges have always been a big part here as I look historically. When will we stop seeing that? Okay. First part of the question on your reference to noninterest expenses. We feel that the noninterest expenses level that we have at the moment would be relatively stable in the next quarter or so. And as we mentioned earlier, we're undertaking an exercise of reviewing our cost structure and optimizing our efficiency. So you should see improvement going forward as we evolve in that analysis and move forward over the next quarters, not just one, but over the next quarters. That's the first bit of your question. The second part of the question on restructuring charges. If you take this quarter, for example, we have $5,500,000 of restructuring. Three of them $3,100,000 of them related to restructuring. And most of it basically, a bit half of it is severance related to reduction of workforce that we had already announced earlier in Q2. They were affected in Q4. And EUR 1,400,000.0 is related to termination of lease contracts as we merge a few branches in this quarter. And you have EUR 2,400,000.0, which is related to business combinations. So if I take that first portion, the EUR 3,100,000.0, as we move forward in the strategic review, obviously, we'll always look at what's our best footprint forward. But most likely, going forward, it will be as leases expire. So you will see less you should we should incur less restructuring charges in in that to that effect. In terms of the second part, the $2,400,000 that we have as adjusting items, they relate to business combinations. So they're amortization. So they'll be there for years to come because they're static from previous acquisitions. Does that answer your question, Doug? Yes, it does. It's more around the 3.1% that has been elevated in the past and it feels like that there could be more maybe as part of the strategic review, but that's the number that we would hope eventually, I guess, kind of comes up. Yes. The the idea is that it should be it should be lower going forward for the merger for the merger of branches going in in the future. And so the only thing I would add is obvious I was just what I would add is, again, what Francois was saying, based on our current operations, yes, it will likely not be increasing. But as we had mentioned, we are doing a thorough review. And so we'll be back to the market with what that strategic roadmap means and what impact it has. No. I think Francois as well, I think you've spent $250,000,000 I think in terms of the new core banking system. Correct me if I've got the number wrong. You're reviewing, I guess, the new system as part of the review process. Is there any risk of any of that being written down over the near term? We're at the earliest first, we're at the earliest. Nobody is talking about writing down or stopping or not doing any core banking. And what's been done what's been done is being used. So what we're looking at going forward is the thing for for what's not been done for for products that are not being loaded yet on core banking. That's what's left to be analyzed. The best way to do go forward to do it, not necessarily to revisit what has been done in the past for the products we have in 03/24. Okay. Yes. As I mentioned in my comments, we just need to validate that the foundation we're building upon is strong. And so we just want to take the right actions to really position ourselves for future growth. And so that's part of the detailed review. Okay. Perfect. And then just on the Stage one, Stage two, Stage three loans. And as I look at the percentages across the different buckets, it doesn't feel, it doesn't look like there's been a huge amount of migration from stage one to stage two. You can correct me if I'm wrong. And I'm just trying to get a sense of how we should be thinking about that migration over the next year or so. And have you anticipated a migration in the performing loan ACLs? And how would that flow through both the performing loan ACLs, but even if you can touch on what the implications of migration could be? Well, I'll stop there. So thanks for the question. I think a couple of notes on this. I would note that year on year loans class at Stage two have actually gone down by about 21%, and that's largely driven by better levels in the mortgage and personal sectors. If you recall last quarter, I did talk about setting up our ACLs for migration based on the deferrals. We had taken some increase to ACLs at that time. What I would say overall on our ACL levels and the stage ratings is that our ACL models are very sensitive to the expected increase in risk due to the economic outcomes, whereas our models used to transfer loans in amongst the stages are more reflective of the current risk rating rather than expected increase of risk from the economic scenario. So that drives an ACL that you'll see is very sensitive, but our shifts between stages are less sensitive. It's something that's driven by our modeling approach. But I would I feel very comfortable with where we are on our reserving. We feel our stages reflect where we are right now, and we're looking forward to how the pandemic will play out. Thank you very much for the insight. You're welcome. Thank you. We'll now take our next question from Sobhra Niravam Khedi. Please go ahead. That's my alter ego. And Ronnya, congratulations on your appointment. When I appreciate it's only been six weeks, but when you think about shareholder value creation at Laurentian Bank, is the opportunity more on the revenue side or on the expense side? Thanks, Dongrab, and look forward to meeting you in person and your did you say your alter ego? In terms of I would say, as we all know, there are really two levers and there's revenue and expenses. And so we are going to be examining ways to enhance our cost discipline for sure, and that has to be part of our longer term strategy for improving our efficiency. Efficiency is a key ratio, and it's something that we are going to have heightened focus on, particularly during the pandemic because the pandemic is not over yet. So it's long still road ahead, and there's a lot of uncertainty there. So heightened cost discipline is definitely one of them, but our focus is also on organic growth. And so we need to focus on the businesses that we can grow, being cautiously optimistic depending on the outlook. But we will be looking at growth in all of our various businesses as well. So growth of the top line as you think about your various businesses, is that essentially just going to be an adjustment on the risk appetite or are you looking to add new revenue line items? So I would say for fiscal twenty twenty one, it's really hard to forecast because, as I said, the pandemic is not over yet. So where we can and Liam had mentioned in terms of where our PCLs will be that they'll kind of level off in the first half of the year. And again, all is dependent on how this pandemic and the second wave, mapped out and impacts all of our customers. So the key thing that we can focus on in the meantime is the heightened cost discipline. Now we do know that, for example, in some of our businesses, we're beginning to see an uptick, for example, in our NCS business. And so from an inventory financing perspective, there has been a recent uptick, and we do expect growth. But again, it's all dependent on how things pan out over the next few months with the pandemic. Okay. Thank you. Thank you. At this time, there are no further questions. I would like to turn the call back over to Mrs. Rania Lewellen for any additional or closing remarks. Thank you. So thank you. I wanted to thank Susan, Francois, Liam and Kelsey and all of today's call participants. I want to reemphasize a few key points before we close the call. Number one, we are actively engaged in an effort to strengthen our organization, including a review of current priorities and longer term strategic objectives. I look forward to sharing the details of our strategic plan with you when our work is completed. Number two, our cost optimization initiative will result in near term actions on cost discipline and ongoing expense management with a view to improving our overall efficiency. Number three, we are refocusing our efforts on meeting the needs of our customers and are determined to become much more customer centric in everything we do. The creation of two operating units for commercial and personal banking will help us prioritize these businesses and position them for future growth. Thank you again, and I look forward to meeting as many of you as possible over the next year well as many of our shareholders in our efforts to enhance our outreach to the investment community. Thank you for joining us today. Should you have any further questions, our contact information is included at the end of the investor presentation. Our first quarter twenty twenty one earnings call will be held on March 5, and we look forward to speaking with you then. Wishing you a safe and happy holiday season.