Barclays Global Financial Services Conference

Sep 15, 2020

Well, good morning, ladies and gentlemen. I am very pleased to continue on the Canadian contents of our conference today. Very pleased to have Rod Bolger, Chief Financial Officer of Royal Bank. Good morning, Rod. Thank you for joining us. Good morning, John. Before we begin the presentation, just one administrative note. If you do have any questions for Rod, please email me, john.aiken, A-I-K-E-N, @barclays.com. Rod, basically, I wanted to kick us off with a fairly broad question. As we have got some concerns about a second wave of COVID-19 coming through, what is Royal's view of the shape of the recovery, and what is your outlook for 2021 in terms of both the impact on the business and potentially top line and bottom line growth? Sure. Thanks, John. We continue to monitor the COVID-19 cases here in Canada and the U.S., and, of course, globally, and monitor them very closely, as well as the impact from those cases in terms of how people are faring on the recovery as well as the economic impact. Certainly, we have seen increases in many markets. I was looking at the numbers for Spain this morning, and while every death is tragic, the numbers today, the new cases today are higher than they were back in March. But the death rate looks like it has not moved at all from even when the new cases were almost close to zero. The medical community has really made great strides in terms of treating people as well as society keeping the most at-risk people out of harm's way to the extent possible. The impact on the recovery, while there could be a second downturn, we're not forecasting that at this point. We're forecasting that the recovery will continue. We're certainly prepared for that scenario, though. However, from a capital standpoint, from a liquidity standpoint, from a balance sheet standpoint, our capital ratios are back up to pre-COVID-19 pandemic levels. Our liquidity levels are higher than they've ever been. We've built up substantial reserves on our allowance for loan losses, mostly in the second quarter, our fiscal second quarter, but as well, a little bit in the third quarter out of conservativism and prudence. That said, we continue to grow market share. What I'm finding is that a lot of investors are asking questions such as, how does the revenue growth look from here given where interest rates are? Yes, we've gotten through the liquidity issues. The credit issues, hopefully, are behind us in terms of taking large losses. Our capital ratio is strong. What about revenue? Interest rates are down. That's going to take a parallel shift down to our revenue outlook for the foreseeable future as interest rates remain low. As we're gaining market share in our core businesses, that serves us well to grow revenue at a faster clip. Although it will be a little bit lower growth than what we had seen previously because of interest rates, we're still going to be able to grow because we're growing clients one client at a time, and part of that is our investment in technology that we've made and our investment in people and talent. So we're taking market share in most of our core businesses, and we continue to manage expense as well. We're managing them through the cycle extremely well, and so we're prepared to take costs down where we need to take them down. We're not talking, at this point, about a major restructuring or anything like that. We will be able to take costs down on a periodic basis as the markets require that so that we can price our products competitively and effectively for our client base. Rod, you talked about gaining market share, which actually has been very impressive considering where you stand, particularly in the domestic marketplace. Generally, if you can talk about how you're winning that business, and then secondarily, discuss your outlook for the Canadian housing market, because that is, residential mortgages continue to be one of the areas that are fueling growth, not just for you, but for the industry. Yeah. Thanks, John. We are winning clients and market share one client at a time. So it is providing advice and solutions for our clients, and bringing the totality of RBC to our client base. The fact that we have what I believe is a better offering, a more complete offering for our clients enables us to grow market share. What we did do while interest rates were going up and revenues were getting a tailwind, we accelerated our investment in technology. Certain markets where we were kind of had underspent in technology, we caught up and leapfrogged our competitors so that we could bring better solutions to our clients. The mortgage market is an example where we improved our ability to renew mortgages, and it took our retention rate up by several hundred basis points from 87%, 88% to 91%, 92%. When you have, let us call it CAD 70 billion or CAD 80 billion in mortgages renewing every single year, if you could improve that retention rate by 400 basis points through technology, that is a big difference. The other thing that we were doing is investing in distribution and talent so that we could connect with more clients and provide more advice. You look at our U.S. wealth management business, the amount of clients, the percentage of clients who had retirement plans went up by more than 30% over the last four years. That is a significant benefit. Again, we leapfrog technology where we were a little bit behind. We took that investment, made that investment. That was a conscious decision to continue to grow market share in our core markets, whether it be in Canada or also in the U.S. and then in other international regions to hold market share and bring solutions one client at a time there so that we could maintain the offerings that we have. Rob, I am going to stick with the housing market because a lot of my discussions with non-Canadian investors really does center around the perceived risk around that, not necessarily it imploding, but in terms of the strong growth that we have seen. It is very difficult for investors outside of Canada to see the dynamic that is happening there. But with Royal's platform and the ability that you have to see customer spending habits and all that in terms of the flow or the data that is coming in, can you give us what you look at in terms of the housing market and what gives you comfort that there is not an impending cliff that some people out there may have as a perceived risk? Thanks, John. I moved to Canada a little under 10 years ago from a U.S. market that had had a significant downturn in the housing economy. One of the things I was looking at was how has Canada been able to accomplish this. It gets back to your first year of university in economics and supply and demand. Canada the housing market has a lower supply. The zoning regulations are very different than they are, say, in the United States. The housing starts are lower, and the demand has been higher. Until recently, pre-COVID, the immigration rate in Canada was almost three times what it was in the United States. A lot of these individuals are educated and come with money, so they're actually increasing the housing demand out there. Now you look at a post-COVID world or the pandemic that we're currently in. While immigration's come down, the value of the home has only gone up. People are spending more time in their homes. They need more space than they previously needed when those families with children, kids were out doing activities all the time. Now they've been in the home, schooling in the home. The value of those homes have gone up. What we're seeing is that the activity in single-family homes has continued to go up. The supply is down of homes for resale. The activity is very high. I just saw the numbers this morning. The expectation was 8% growth. It came in at 6% growth. Still very strong. When you look at our deferral programs, the vast majority of our loans that are deferred are in the mortgage book of business. You look at the strength of that book, and you look at the cash flows, as you cited, of the customer, as well as the security that we have. Our average loan to value is in the mid-50s for those mortgages under the deferral program. The average FICO score for those clients is over 750. These are clients who have a lot of other assets besides the on average 44% of equity they have in their homes. 75% of those on deferral are dual-income families. Don't forget, in Canada, in the vast majority of our portfolio, we have recourse against the borrower for assets other than the house itself, whereas you don't have that in other markets such as the United States. So we're not looking at seeing a big spike in foreclosures. We don't expect that to happen. We expect these mortgages, as they come off the deferral program, to remain the homes of our clients for the vast majority of those clients. We don't expect a major decrease or even a moderate decrease at this point in the housing market. Now, our loan losses have been built for such a decrease. We have two scenarios. We have three down scenarios. We have an oil and gas downside scenario, a real estate downside scenario, and a pessimistic scenario. In all three of those scenarios, housing prices are going down. We don't think that's going to happen, but that is built into our allowance for loan losses. The Royal Bank is ready for that should it happen, but we are not projecting that to happen at this point. Rob, I think that there was a lot of discussion in the third quarter around the deferral programs, not just yours, but also your competitors as well. And you guys gave us a lot of granular information, and I think that we, outside the banks, were kind of surprised at the level of drop-off within the deferral programs. We're all scratching our heads. But I guess there's still that concern about those that are still on the program or those that went through extensions. Now, I understand from your commentary and Graeme's commentary that you're not concerned about that. But is there any degree of risk that this is going to lead to inflated impaired loans once this drops off, particularly with the regulator easing the program from the capital standpoint? Well, we do expect impaired loans to go up. We expect that they will go up, and it is a risky item for us, and it is an item of concern for our clients, both on the retail side and the commercial side. I would say that we've been very proactive on our outreach program to these clients, and this is not new for us. We have done this in our Caribbean bank a couple of years ago when major hurricanes went through. Major flooding took place in Alberta and Ontario a few years ago, the Fort McMurray wildfire. So we have these sort of outreach programs, these sort of deferral programs in our repertoire, and we've utilized them before. And it's created a win-win. A win for our clients who have been able to stay in their homes and stay current on their loans. Sometimes we take a credit card loan and put it in a home equity loan, certainly to help the debt burden costs for those clients. But it's also good for our shareholders as our experience in those circumstances in the past has been much better than we would have expected with the absence of those deferral programs. And now with our outreach to our clients the vast majority of these, and I'm talking over 95% on the commercial side of the clients that we've reached out to and have connected with still believe they are in good shape. So the resiliency of the commercial client here and the small businesses and the consumers in Canada is pretty remarkable in light of the economic impact of the pandemic. That is the vast majority. There are those that are going to have impairment as a result of that, and we're going to work with those clients one client at a time as well, and we believe we're adequately reserved for those scenarios. Yeah. On that point, I think that one of the other surprising things coming out of the quarter was the bank's confidence in terms of its outlook. Obviously, the reserving was very stark, particularly in the second quarter. I understand that the bank feels very comfortable with its reserve levels at this stage in the game. But what would it take in order for Royal to need to take another uptick in terms of reserves? I'm not talking Q4, but if this is 2021, what type of change in outlook or change in dynamics would necessitate more stage 1 and stage 2 reserving? Well, we have more than 100 economic indicators that drive our allowance for loan loss reserve modeling. But there are a few that we disclose on a recurring basis, especially this year, that have an outsized impact on that. Items like unemployment rate, GDP growth, oil prices, given our energy sector exposure, housing prices, as you spoke to as well. Actually, the equity markets and how is the TSX doing? How is the S&P 500 doing? That generally can be a forward-looking indicator and has a higher correlation to some of the commercial results than some other economic indicators because it changes by industry, and the markets tends to anticipate downturns. It's not always perfectly correlated to GDP and losses, but there is a correlation. There are a number of these indicators that would need to turn significantly for the worse and that the trends have been better. But if unemployment goes back up above the 13% peaks that we saw, which we're not expecting, but if that were to happen, then you might see another uptick if we go up to 14%, 15%. Also, the duration of the downturn is also a key indicator, and how long before we get back to the economic activity of 2019. What we're seeing in a lot of industries, and you look at manufacturing is up. You look at China, their results were up this past August for the first time this year on a year-over-year basis. So you're starting to see the recoveries happen. You know what? The economic shutdowns are also being much more targeted at the riskier areas instead of what we saw back in March, which was shut everything down. I do not think governments will shut everything down again, which means that the likelihood of such a scenario happening has been reduced significantly. Rod, one of the initial responses that the global governments had was reduction on the overall interest rate environment. You touched on that a lot before, but can you talk about what the outlook is on the impact for margins on a go-forward basis, both low interest rate environment, but also the excess liquidity that you have on the balance sheet? I think the excess liquidity is going to be there for some time. That is another reason why loan impairment has not been as bad as one might have thought back in March, is because there is this incremental liquidity in the marketplace, and a lot of our clients are sitting on much more cash than they had back in February. That is another reason for the debt service, the debt-to-GDP ratio in Canada coming down to levels that you had not seen in a decade. It is another reason why our deposit growth has been so robust and why the vast majority of our commercial and small business clients are saying they are okay because they are sitting on incremental cash. The government programs have certainly helped, but also the companies themselves and the individuals themselves have cut back spending, which was smart for them to do and a safe thing for them to do. What is the impact then on margin? Well, we think NIM will have a little bit of compression this year going forward. It is to be expected. When you look at the largest asset on our balance sheet, it is that five-year fixed rate mortgage in Canada. That is by far the largest asset on our balance sheet. When you look at the end of 2015, that is five years ago for our fourth quarter, and 2016, that is the five-year ago period from next year. So as those loans roll over, the five-year fixed rate mortgage pricing is generally indicated off of that five-year swap curve. Right now in Canada, we're in the mid-70s in terms of basis points. In 2016, we were around 100, 105. So you're 30 basis points lower. That will have a flow-through impact. Mortgage spreads are going to hold fairly steady because the spreads today, when you transfer price, are similar to what they were five years ago. But the benefit that we then pay to our deposit book, which we have the benefit of having a low and mid-beta deposit book, which is fantastic in higher interest rate environments, but with a near zero interest rate curve and a fairly flat interest rate curve. We would love to have some steepening. There will be a few basis points impact over the next six to eight quarters on a sequential basis in our Canadian banking business and likely also in our City National business. Five-year swap rates are lower in the U.S. than they are in Canada. Great. In terms of the stickiness of the deposits where you say that you think that that excess liquidity is going to be on the books for a little bit longer, is there any way that you can actually redeploy this excess liquidity in the near term to help benefit the margins? Or you're looking at this as excess liquidity, and it's still going to be invested in very low margin assets? Yeah. Let me come back to why I think it's going to be with us for a little while. When you think back to the taper tantrum as quantitative easing was being unwound by the Fed coming out of the financial crisis. Any time that happened, the markets tend to seize up and get all agitated. So I don't think the Bank of Canada, the Fed, the Bank of England, the ECB, will be pulling back that liquidity anytime soon as long as the pandemic is hovering above us and there's not a foolproof vaccine, and we haven't kicked this thing. So I think that liquidity is going to be out there. RBC with our strong market share, flight to quality bank safety and soundness. We get our share or more than our fair share of those deposits, especially here in Canada. City National is getting more than its fair share in the U.S. So we have strong deposit growth. Again, these are low-cost deposits. The deposits themselves, if they're in a checking account not getting any interest from us, it's not hurting us from an earnings standpoint that much. What it's doing is lowering our NIM because it's increasing the denominator in terms of our assets. Then the deployment that you cited. We want to keep these, A, in high-quality liquid assets so we're ready if the markets do need that liquidity to go back into the system. When you look at commercial clients, when you look at corporate clients, their utilization rates are below where they were in February. Why? Because they're sitting on excess cash as well. Rather than drawing those lines, they have paid a lot of those lines back. We're at lower levels, whereas we saw a huge spike up in March and early April. That has all come back down. So we're not deploying those deposits there. Where we are deploying it is in our mortgage growth, which has been very strong, and we forecast it to be high single digits for the rest of the year. Then mid-single digits next year. We expect commercial loan growth to continue. Yes, it's come off the double-digit growth here in Canada than it was for a few years, but it's still mid-single digits, which is healthy. Credit card growth on a sequential basis, we'll see some declines. I'm sorry, on a year-over-year basis, we'll see declines, but on a sequential basis, the low point should have been Q2 on a spot basis and Q3 on an average basis. We should see some lift here as consumers get more confidence and utilize credit cards more. So we are deploying this into assets that are organic, that are, again, client-driven, that have good returns, that are good for the client to undertake. But we're not going to put a whole bunch of these deposits into low-quality assets or other assets that are not as liquid because we want to hold those in case the economy does turn for the worse. Rod, we've talked about mortgages, and you expanded on your high single-digit growth expectations. One of the things I wanted to dive into a little bit deeper is on the commercial loan growth side. You do expect commercial lending to grow. Of course, in the last couple of quarters, we have seen that accordion as they drew the lines and paid off last quarter. What are your expectations for commercial growth overall? What's driving that? Is there any difference between expectations Canada and the U.S.? As a third follow on, if I can throw five questions at you at one time, what are the expectations on the energy market? Because of course, that's one of the main concerns, again, for investors outside of Canada. Yeah. I will take the last one first and hopefully I will remember your other questions. The energy market, we did multiple deep dives back in our fiscal second quarter. We did one earlier in the quarter when oil prices fell, and then as the pandemic hit, the economy shut down, and the price remained low, we did a second review. So we have a good knowledge of each of those clients and have a good understanding and believe we are adequately reserved. I do not see a lot of growth happening in that segment in the near term. When you look at what the global oil demand is and natural gas demand and the like, there is not going to be a whole lot of new exploration, I would not expect, given the pricing, especially recently as the pricing has come down again on oil. That is going to further suppress the exploration for new supply. So I would not expect much growth there, and I think that is healthy. On the commercial side in Canada, I mentioned that the growth rate had been double digits for 2 or 3 years, and now it has come back down to mid-single digits. For us, again, that is healthy. We would not want to see our clients borrowing a lot of money in this pandemic. Part of this is the utilization rates are down. But now that I think I saw a statistic this morning that something like 70% of Canadian companies are at basically full operations. As they are at full operations, as consumer demand continues to move up, as supply chains get restarted, the need for working capital, the need for plant and equipment is starting to increase. So that is a healthy sign. This have a little bit of a pause was quite good. Then you move to the U.S. and our City National Bank. There, our commercial loan growth has been strong, and that is through increased market share. We have been moving into new markets. We have been adding a lot of new bankers, and that is where we are taking market share. We are taking market share from competitors as we have been able to attract new clients. You look at the Triple P program. We are up and running on that very quickly. That is going to enable us to attract a lot of new clients that we otherwise would have struggled a few years to try to get. That brings a whole lot of new clients here to us fairly quickly. But again, back in the City National, we are also re-emphasizing and emphasizing the private bank growth and that jumbo mortgage where you have a 40%-50% down payment and you have high-net-worth clients who are basically engaging in that mortgage for liquidity reasons and potentially for tax reasons given the tax deductibility of mortgage interest on the first 1 million in the U.S. So that has been a good growth engine for us. We grew in the mid-20s year-over-year in our most recent quarter on the mortgage book in City National. The commercial loan growth has come down a bit. Our reported numbers were through the roof because of the Triple P program. But a lot of those were government-related. They are not going to be sustained, hopefully, as the economy recovers. But I would expect our commercial growth in City National to remain lower double digits. We've been in kind of the mid-teens since the acquisition 5 years ago. Again, that is not going up the risk curve at all. That is by bringing on new bankers and new clients that we want to bank through the cycle. Fantastic. I actually do think you remembered all the questions. That's great. Rod, one of the things that I think is missed on Royal Bank is the diversification that your platform has. I think one of the things is because the absolute numbers that you have on particularly your domestic lending book, everyone thinks credit, net interest income impact is the same with you guys, but honestly it's not. Can you talk about one of the larger platforms, capital markets? We've seen two exceptionally strong quarters. What is your outlook? How sustainable is this? Are we going to look for a drop off? Or if we see volatility continuing, can we actually see these levels maintained or even grow from here? Sure. I'm going to touch on your diversification comment, because I should have given that in my answer to your first question about our strength going into 2021. I'm going to mention two of our other segments really briefly, if I could. Our insurance segment is a very consistent earner. A slower growth business, but we have a lower market share due to the Bank Act than we do for typical businesses here in Canada. The Bank Act doesn't allow us to sell insurance products through the branch network of RBC Insurance products. So that business is a smaller market share. But 50% of Canadians are under-insured, and so we're trying to help them ensure that they have adequate insurance, and that's been a good steady business for us. In the second and third quarters, they had very strong quarters, and again well run business. Investor & Treasury Services, which you didn't ask about it. The fact that I'm bringing it up just because we had a record quarter in our second quarter when we had a lot of credit losses and then a lower quarter in the third quarter when capital markets had a record quarter. Again, this demonstrates the benefits of our diversified business model. Certain businesses have really good quarters when other business might have a lower quarter. That's a benefit for our shareholders because it reduces our volatility. That brings me to capital markets, where, again, our capital markets earnings, if you compare the volatility of our capital markets earnings over time, so the standard deviation over the average, it is lower than most capital markets businesses. That's because we have more consistent income streams there. We like that business. It's been a good grower for us in terms of earnings growth and disciplined growth. It's not a business that we're looking to make an acquisition and grow double digits. This is not going to be a business that we're going to add a lot of risk-weighted assets to in the medium term. We have been able to leverage the relationships we have, the clients we have, and the bankers that we have, and the trading platforms that we have. You go across the business, again, diversification benefit is there. FICC had a great quarter in the third quarter, strong quarter in the second quarter. Our central funding business, which is our reverse repo business, again, a terrific quarter in second quarter and third quarter. The outlook is not going to be as high in either of those businesses as volatility comes down. Global equities, which is a business that has had its returns challenged across all companies in recent years as that product has gotten more commoditized, has had a good quarter, and the volatility has remained high. The trading businesses have remained strong and have been very strong this year, even as we've taken our risk-weighted assets, our market risk down over the last five years. You get back to the investment banking and the core banking business. Yes, our loan draws were high through Q2 and started coming down in Q3, continue to come down a bit, which is okay. Clients should be putting that money to work if they can use it and giving it back to us if they can't. On the investment banking side, you look at DCM and ECM and M&A and Leveraged Finance. I would say DCM and ECM have been good. DCM especially so, has had a record year so far, both in investment grade and in high yield. The Leveraged Finance market and the M&A markets are a little soft and have been a little soft, and they were soft even during that record third quarter that you mentioned. The business performance has been good. Again, a lot of it is prudent risk management, high quality talents, and strong relationships with our clients. We were there during the pandemic to provide balance sheet for those clients who needed it. That's great. When we talk about capital markets, can you speak to the integration that it has for the other parts of your business, most notably City National, in terms of how the City National acquisition did help to bolster capital markets in the U.S. as long as I haven't misconstrued. Can you talk about the integration and how City National outlook is benefiting? Yeah, the capital markets business certainly here in Canada benefits our wealth management franchise. It benefits the brand. Then we have a strong brand in the U.S. that has been increasing over the last three or four or five years at a very impressive rate. Then we just have more products and more offerings to bring to our clients. City National used to have to work with capital markets businesses of other banks for their clients who needed capital markets activity. Now they can work with RBC, and there is good trust that has been built there. Additionally, capital markets benefits our U.S. wealth management private client business with our financial advisors by having a manufacturing product that can be distributed through that channel that is beneficial to our clients, that our clients might not have access to were it not for our strong capital markets business. These businesses all work well together. Then City National, our U.S. wealth business also have integration points as well. Leveraging the three businesses together has been very beneficial. Each business has benefited from the addition of City National. Even our Canadian commercial business has also benefited from this, as a lot of companies still do activity cross-border. There is not much personal travel cross-border, but there are goods and services transferring cross-border right now in a safe manner, and having City National in the U.S. and RBC in Canada enables us to take care of clients on both sides of the border. Right. Coming out of the third quarter, we are all benefited from what I would characterize as exceptionally strong capital position. Can you talk to how much of the capital is defensive and how much of this is dry powder for growth, be it organic or inorganic, and what your outlook is? Yeah, thanks. We have a 12% CET1 ratio. The current minimum is 9%, and that includes our GSIB buffer as well as our domestic stability buffer. We did decline as far down as 11.7% during the pandemic, so we have a significant buffer. It is about CAD 16.5 billion of extra capital over the 9%, and if the DSB goes back to the 10% that it was pre-pandemic, it is still over CAD 10 billion of surplus capital. So we have a very strong capital position, and we are happy to have surplus capital right now. Given the uncertainties in the economy, given the uncertain outlook, having that powder dry is very important to us. We built that capital ratio as we thought that we were getting to late innings of the economic recovery. We were around 11% in one of the lower ends in our Canadian peer group because of our stewardship of capital. But then as we thought we were coming towards the late inning stages, we increased that capital to 12% out of prudence. We would expect to be at those levels on a go-forward basis as long as the pandemic is out there. You mentioned organic growth. We are supporting our organic growth in our wealth businesses, our Canadian banking on the commercial and retail side. Those don't add a lot of new capital requirements on a quarterly basis. In fact, we have surplus earnings typically coming out of those businesses that we can't redeploy into organic growth. For now, that's a good thing because some of the stage 1 and stage 2 losses right now will turn into stage 3 losses. That will have a capital impact on us on a go-forward basis, given the modifications that OSFI made in the second quarter. So we're ready for that. In terms of inorganic, our messaging continues to be the same. We would be open to something, but we're not really expecting that that would be the case. The likelihood of having something be a good strategic, financial, cultural, operational fit with RBC at this point is something that we're not aggressively seeking. So we would be okay to have the capital levels creep up a little bit here. That'd be a good problem to have. Then sometime next year, perhaps OSFI relaxes the dividend buyback restriction that they put in place at the height of the pandemic, which was a sensible thing to do. But the need for that will lessen, in my opinion, over time, as all the Canadian banks are very well capitalized and have sufficient liquidity. Right. Along that last point, has there been any discussions with the regulator, any thoughts in terms of when the regulator may actually ease that moratorium? Yeah. I don't want to comment on conversations with the regulator. It's something that we have one-on-one with the regulator, and we want to keep it that way. I would point to the public disclosures that when OSFI came out with the guidance, they said that they would reduce the domestic stability buffer from at the time it was going to raise to 225 basis points down to 100 basis points, and that would be in place for 18 months. They said they could lower it again. They didn't need to because of the strength in our system. I don't expect that they will do so going forward. They could release that and relax that in 18 months. We'll see what happens. But they've committed that for 18 months. That was at the same time when they said no increases in dividend and no share buybacks, but they didn't put a timestamp on that. They could relax that in a period earlier than 18 months. But 18 months, you're talking about September timeframe of 2021. Given some of the impaired loans that we would expect to come on the books in 2021, having that much surplus capital would be a good problem to have over the next six to nine months. Right. We're getting close to time. My last line of questioning is going to be along expenses, something that I assume is near and dear to your heart. You talked about the technology spent and leapfrogging the competition. On a go-forward basis, do you think the technology spend is going to continue to grow at the same pace, or should we see that actually start to ease off? Will that help benefit your operating leverage? Yeah. Recall, if you will, that that technology spend, the accounting requirements require you to capitalize a portion of those costs, a meaningful portion of those costs. So it will impact you as you spend. Say, as your spend goes up in 2017, 2018, and 2019, the years, it will impact you for three, four, five years, and you'll have some inflation in the amortization of that. That's something to keep in mind. So as we level off that growth, we did take it down slightly this year, but slightly at the margin this year, just because of executing on a working-from-home basis. We wanted to make sure that we were funding our best projects with our best people and making sure that those were continuing. Some of the other programs kind of got. They basically got shrunk a little bit in terms of timing or extended, if you will. We were able to take it down slightly. We are not going to take a massive decrease. We believe that the investment in technology is essential for meeting client needs, for helping our employees deal with and engage with clients and bring solutions. It is also important from a productivity standpoint. I would expect that technology spend to have been gone up and then kind of come like this, and then kind of stay that way for a year or two. We will see beyond that what happens with the revenue stream. We were able to take down, obviously, costs like travel and business development, things like that. We are able to take those costs down as well. A lot of people ask about commercial real estate, and you see a lot in the press about people looking to shed space, and that likely will happen, but that is going to be a longer-term thing. As most of the buildings have 5, 10-plus year leases, this is not going to be an immediate cliff that is going to impact that industry. It is going to be a little bit slower, but that would be an area where I would expect us to be able to reduce costs as well. We have zero-based budgeting work that has been ongoing for well over a year that is showing some signs of benefit. You saw that in our third quarter. If you take out foreign exchange and variable stock-based comp, which were. Stock-based comp goes up because the Royal Bank share price went up, but that is offset with hedges that we have in revenue. So we backed out a variable comp. We are happy to have a record quarter in capital markets, and we pay the market price for that. Same with wealth management, where you saw a recovery. If you backed all that out, I think our growth rate in Q3 was about 0.4%, and we had over CAD 90 million of COVID-related costs. So, we back that out, we were flat to down. That is the sort of expense discipline we can have. Even as we are growing market share and putting more volume on and through our system, it is a clear indicator of the benefits of scale. The benefits of scale, I think, are going to be even more important as we move forward. Rod, we have bumped up against time. A pleasure as always. Thank you very much for the discussion this morning. Thank you, John. Appreciate it. And thanks for the interest of everyone attending today. Thank you very much.