Barclays 2012 Global Financial Services Conference

Sep 11, 2012

Okay, ladies and gentlemen, we're going to get ourselves started with the next session. We have Dave McKay, who's Group Head of Canadian Banking. Dave, we're very pleased to have you here. But I think that we're going to kick off with Royal made an announcement this morning, and there was a bit of a realignment in responsibilities, and I understand that not only Canadian Banking, but they're dumping a couple other operations on you. So if you wouldn't mind expanding as to what was going on this morning. More than you did just fine. Can you hear me with the Is that okay? Thought we were. Is the mic on? Let me come check that. Okay. I need to put Can you hear me? No. We need to turn this on. Yeah. There we go. Is that better? There we go. Thanks, John. It is great to be here. As we announced this morning, I will be taking over responsibility for our U.S. operation and our Caribbean operation. Really, it is a chance, first and foremost in the Caribbean, a chance to hopefully accelerate and look at more synergies and help the Caribbean turn the operations around there. As you have seen in our results, it is a challenging economic environment, but there is lots of opportunity for us on the operations and efficiency side. We have been working closely together, but again, I think further opportunity there to work together and accelerate some of the transformation. On the U.S. side, as you know, this year we sold our retail operations to PNC, but we retained a national banking charter and a small business that largely serves our Canadian customers who either vacation or holiday or work in the U.S. We call them cross-border clients, and it is a very profitable and nice little business. I think that is something that we will look to grow over time. Main message, though, is that it will not divert my time and energy and focus on our core Canadian domestic franchise, which is the engine of the organization right now, and it will not be diverted from that. Well, Dave, along those lines, you and RBC have been very consistent in stating that for the Canadian retail franchise, you want to grow, but grow ahead of the group even Yeah with your size, and it is a market plus 25%. Right. When we look out over the next couple of years in a slowing environment, do you think that you will be able to sustain that growth? I guess the corollary to that question is, after what we saw in Q3, are we actually in a slowing environment? It doesn't feel like that with us right now. We're very proud of our Q3 results. Our trailing four-quarter growth premium has been closer to 50%, 40%-50%, well above the 25%, and it reflects the strength of our breadth of our franchise. We grew our business by over CAD 44 billion in the last four quarters, and we're very proud of that. Our ability to continue that, I think, is enhanced given the scale and the size of our network. We're the number one branch network. We have the largest contact center capability. We have the number one online bank in Canada. We have very strong capabilities in the mobile space. We have the largest commission sales force. The breadth and strength of our network allows us to compete in the market exceptionally well. As you get into potentially a slowing environment, as you referenced, and I'm sure we'll talk about that, the scale that we have, the scale advantage being twice the size of most of our competitors from a revenue and cost structure and profit capability allows us to continue to spend at a relative ratio that's probably two to one to many of our competitors. That's more advertising on the same scale. That's more branch openings as we continue to open 20 to 25 branches a year to drive volume growth at the upper end of what our peer group is doing and continue to add scale on the sales force. All that scale allows you to compete in a slower growth environment, too, and more so actually on a relative basis. You've been actually very successful in reasonably stable margins. Yeah. With the expectations that the low interest rate environment is here to stay at least for the next little while, what is your outlook for margins, and are there any levers that you're able to pull? No, we're very proud of the stability of our margins given the growth that we've had. Performing at a 40% premium to market and volume, yet maintaining stable margins when our peers saw significant deterioration really talks to our value proposition. We compete on advice and convenience and value for money and service. We always start with advice and convenience. For so many of our customers, we don't even get to the price discussion. It doesn't become meaningful if you do a very good job on advice and bringing advice to customers. When we talk convenience, we talk about modern convenience and going to our customers, not making them come to us. We do that exceptionally well, that we're out with our customers. If you're delivering good advice, you're making it convenient, the price discussion becomes tertiary sometimes. We've been able to maintain stable margins because of our value proposition, because of our strength in high margin businesses such as commercial and credit cards. Having said that, a persistent low rate environment puts a lot of stress on the organization. I would expect if we persist in this low rate environment, it'll become increasingly difficult to offset that. I would expect some margin compression over the coming year in our NIMs, not large and probably a couple of basis points a quarter. It's hard to predict, but we'll do our best to offset that. I would've sat here and said the same thing last year and we were able to do it. But I'm sitting here this year and this is a low rate environment. It's really compressing our deposit spread. Is there any questions from the floor before I keep on monopolizing? We have one in front. How well the Canadian economy and how well the Canadian Banking business is slowing. Yeah. Thank you. Is the Canadian Banking business slowing? Is the Canadian economy slowing? Where do you see strength? Where do you see weakness? Thank you. We're forecasting roughly 2.5%-2.6% GDP growth in Canada over the coming year. Modest growth. It should be a lot higher in this cycle. You've seen certainly Governor Carney talk about the commercial and corporate sector not investing sufficiently to drive the economy to the next level and to really create a sustained, confident recovery. We're certainly seeing a little bit of a risk-off environment with our commercial customers, where they're not building inventory and purchasing machinery at this point of the cycle that you'd think, and certainly maintaining strong cash balances, which shows up in our credit loss numbers. It's very much a conservative credit book right now, and it's too much of a risk-off environment almost in our commercial area. You're seeing kind of a very slow growth environment and when you would expect, given the stimulative monetary policy that we have, a more robust recovery. That's what's occurring around the world right now, and we're in this stagnant kind of slow-growth environment that we will expect to continue probably for the coming year. I think with that comes some downward pressure on growth from the regulatory environment and some of the mortgage rules that we've recently seen and being implementing for year-end. The B-20 rules on the Canadian mortgage industry will slow growth. The HELOC caps coming in for new HELOCs at 65%, certainly for insured mortgages, having an amortization no greater than 25 years will cause first-time homebuyers to delay purchases. It will suppress some of the bidding intensity out there as it requires more cash flow to service that new home. Therefore, you won't see the same buildup in price structure. I would expect to see mortgage growth come off at least 100 or maybe a couple hundred points to a mean of 3%-5% from maybe a solid 5% as an industry. And we would expect to outperform that by 25%, which we've been able to do over the last four to five years. So very good loan growth in the HELOC side will probably look like 6% next year, I would think, or around there, versus 7%-8% this year. Is there a question in the back there? I think. I was just curious, many of the banks talking about branching and adding are almost reluctantly saying they need to still add some, and they're obviously trying to find other ways to do that, and yet you proudly stated your growth in branches going forward. Could you further give us some detail on what your thinking is, what your economics are, that you still think that's a very attractive piece of business for you versus what it sounds like the rest, or not the rest, but on the majority of so far what I've heard from the conference? Great question. We have redesigned and rebuilt a branch of the future that we are incredibly excited about. We have got 50 across the country now. It looks a lot more like an Apple store, and it is completely changed the experience within a branch. We call it a retail store, and really focused on interacting with customers in a very different way. We are having enormous success with this. When we open a new branch, it is actually opening a new retail Apple-like store. When we look at the sales and the returns are accelerating our payback period. The second thing I would say, if you want to continue to grow your business, and Canadians change their footprint. If you are creating a new community and new homes in the community, a lot of that will come from Canadians moving from one part of the city or region to another. If you do not have a physical presence in that new development, you will not gain business. You will actually lose business because you have got a customer moving from the west end to the east end to a new development, and if you are not there, you risk losing that, plus you will forgo the growth from other areas. When we open 25 new branches a year on a base of 1,200, roughly 2%, this is not a significant amount, we are doing that to retain business, and we are doing that to capture growth in that community that you will not get without a physical presence. Unfortunately, we are not yet in a world where you can have a virtual presence and grow. It still requires a physical presence, and our customers have told us clearly that if you want our deposit business, you want our investment business in particular, you need to have a physical presence in the community. Our size and our scale allows us to confidently sit here and say that with the size of business we have, making just CAD 1 billion a quarter now compared to some of our peers will make half of that, we can continue to invest with confidence and scale and open those branches in new community and capture that growth where maybe others are having to make trade-offs. I think that is how we are looking at it, and we look at the returns and the payback period very carefully. Also our new concept store is part of the reason we have a lot of confidence. You should come and see it. They are really quite spectacular. Dave, with the redesign of the new retail store. Yeah. I mean, obviously we can see the revenue synergies in terms of the cross-sell and the access to wealth management. Is there any difference in the footprint, either size or cost? Is the cost of opening one of these new stores comparable to an old branch, or is there cost-saving component in with this build-out? Great question. I would say on a square foot per square foot basis, the new store is a little bit more expensive. Having said that, we now have come to a conclusion and have a program where we don't need the same square footage we used to. When we're opening new stores, we are looking at much smaller formats to get the cost structure down. On a same size basis with all the technology and the way we're doing it's a little bit more expensive. We found a way of peeling that back with a smaller footprint store that does exactly what we did before. It's an evolution, and you learn as you launch. We've been in this two years now, and we've learned a lot, and from our original concept to what we have today has changed, including the square footage that's smaller. It's been said that one of the biggest threats to the Canadian economy is the rising consumer debt levels, the percentage of income. How do you see that getting fixed? How does that impact your retail expansion plans? We watch consumer debt very carefully. I think my main comment here is that gross impaired loans are very stable to declining. We have a strong credit book. The reason is that that ratio that gets quoted publicly of 150% is not really indicative of who's borrowing and what their service capability is. It's a mean, and it's very misleading. All it says is in 1.5 years it takes to pay off your debt on average in Canada. No one has to pay off their debt in 1.5 years. That's what 150% means. You have to dig into the distribution, and you have to dig into total debt service, which is how we make decision on a consumer on TDS, total debt service. Where the tail starts to get you in trouble, so you have a mean, and you have to manage the tail. Our policy and most banks' policy cut off at 40% TDS. If you have more than 40% debt service ratio, that's usually a decline, unless there's an exception. It's not sufficient just to say 40%. Where the tail has an exponential default probability increase is when a household or a customer makes less than $60,000 and has a debt service above 40%. That's when you start to see exponential default, where there's not enough cash flow absorption capability from a stress event. The stress events that create consumer default are three, really. Number one, first and foremost, is unemployment. You lose your job, your cash flow stops, you default. Number two, close second, is divorce. That ratio has been stable, and that is a very severe cash flow stress and life stress event. The third one is illness. When you have lower income and you have high debt service ability, you have no ability to absorb those three stress events. So we watch that tail very carefully. If you look in Canada, not just ourselves, but as an industry, we call that near prime subprime. We have not lent as an industry at the tail. The tail, while the mean has shifted, and that 150% indicates the mean has shifted from 22% to 23% to maybe 25%, we're lending to Canadians that have cash flow ability to repay and have an ability to sustain the shocks. Where you get into trouble and where the U.S. got into trouble is they blew out the tail. Through pay option ARMs and not checking income, they actually created a very large, high probability tail distribution that had only one way to correct. In Canada, if you look at the stability of the tail, it has not grown. That's a proportion of our book. I think that's how we lend on a cash flow basis. As an industry, we take these loans on our balance sheet, and we manage that tail very carefully through our risk environment, through triage, and through the proprietary cash flow tools that we've built at RBC. We watch it very carefully. We manage it carefully. I think that's the dialogue that we have internally. The 150 is an index, but it doesn't really lend any insight into who you're lending and what their cash flow repayment capability is. That's how we manage the book. That's why we have such a stable risk environment in Canada, and that's how we look at it going forward. I appreciate that you have very careful underwriting standards, but I wonder if we could drill it down a little bit, if you could talk a little bit more about some of the stuff we hear south of the border. Yeah. Sustained price increases, notably Vancouver- also Toronto. You could talk about how you're approaching those markets. Yeah. My recollection is that your condo exposure's on the low side there. Yeah If you could just confirm that too. Yeah. Our condo exposure is around 9% our total book. A lot of that would be insured as a high ratio mortgage. It's evenly distributed across the country. One of the strengths of RBC is we have a very balanced geographic book of business. We are strong in every province. We get to number one in Canada by being almost number two in every marketplace because we have a balanced strength across the country and less lumpiness in the portfolio. When you specifically look at some of the hotter markets that we have to watch closely, there are some unique drivers in each market. If you look at the Greater Toronto area, we have a supply-demand imbalance that is driving price increases in our single-family home market. There's certainly an urban planning strategy around densification. There is not much land being released for single-family home development. If you want to buy a single-family home in Toronto now, it's in the resale market, and you've got a supply-demand imbalance. You're seeing bidding wars in this low-rate environment and price appreciation from a supply-demand imbalance. Through new immigrants, roughly a third to a half of new immigrants, the 250,000 new immigrants that come into Canada every year find themselves in the Greater Toronto area without any new supply coming in the single-family home. If you want to live in the GTA, you're either going to rent a condo or buy a condo. You're creating demand again for condo development. The condo development financing side is exceptionally strong. It requires a minimum of 65% presale before you can start the build cycle. We have roughly CAD 1 billion of exposure to condo development side, and it's managed exceptionally well. We see strong down payments, we see strong closing capability, and all signals are very good. That's the kind of dynamics that's creating the price appreciation in the single-family home versus condo market in Toronto, and why you see so many cranes when you travel to Toronto. While it might be concerning, it's driven by those factors. Vancouver is a different market. We're seeing a little bit of cooling there. Different drivers in that marketplace. A lot of new immigration into the Vancouver, Lower Mainland Vancouver market. A lot of foreign money coming in and buying at the high end of the single-family home market, creating price appreciation. Again, different drivers, a little bit more potential of an absentee owner in that market as you drive through downtown Vancouver, and you see a lot of lights out in the condos. The drivers of that are long-term investment, and that trend has been persistent for quite a period of time. It's not just a short-term trend that's happened overnight. That investment trend we've seen for a longer period of time, and it's quite stable money. The risk is if there's a large change in sentiment and there's extraction of capital out of that investment by largely the Chinese community, Hong Kong and mainland Chinese base could create some more downward pressure. But that has not happened, and it's a strong market, and the correction that we see, 10%-15%, is good, and the cooling off period is good for the overall stability and strength of that marketplace. So we have different lending standards in that market, and we don't participate as much as others in the stated income and equity mortgage business over time. Our book of business there, which might be the higher risk side, is lower. We're comfortable with our position in both of those marketplaces. When we are thinking about high debt-to-income ratios and property value concerns in certain markets, et cetera. RBC has a higher proportion of their mortgages in uninsured mortgages relative to peers. In that context, and if there were to be some kind of a shock, whether it be interest rates or unemployment spiking, something like that, what gives you comfort that that uninsured portfolio, and what characteristics of that uninsured portfolio give you comfort in an adverse scenario, say? A great question. We analyze it a lot. A lot of the bulk insurance that was written was written for liquidity purposes and funding purposes rather than credit risk mitigation purposes. We didn't need to participate in the covered bond market on an insured basis. We put our uninsured mortgages into our covered bond program. From a funding perspective, we didn't need access to market using insured mortgages. That is one of the principal drivers of the difference between ourselves and the other banks as far as why we have a lower insured book versus others. It was really we didn't need to insure them to access funding markets, and that was a strategic driver. But we sit here today with a lower insured book, so why do I sleep at night? I sleep well at night because, number one, the quality of the borrower that we have on an uninsured basis, very strong borrower with good cash flow. We look at the TDS ratios of those customers closely. More importantly, the amount of equity, on average, the loan-to-value ratios of the uninsured book, we have in the neighborhood of 45%-50% equity value in those homes. The systemic correction that would have to happen is so far out in the tail that the probabilities just don't justify the insurance coverage you'd have to write to cover that. When you talk about 50% equity in a home in a market that doesn't exhibit any of the characteristics that the U.S. market exhibits, you don't have the speculative overbuild, you don't have the deductibility of interest driving demand and price increases. You've got a balanced supply-demand condition. You've got affordability for the most part across almost all markets, with the exception maybe of Lower Mainland Vancouver. It's not even all of Lower Mainland Vancouver. It's two markets, really. Abbotsford, another market. When you look at all of that, plus 50% equity, you derive confidence that we have a balanced market, we have a strong market, we have good cash flow capability and strong customers, and that is how we look at the business. As far as capital markets, investment banking, you said that that's still a growth strategy for you guys going forward. If I remember right, it was really supposed to be more dedicated on organic, at least going forward. I'm wondering if with that strategy, you can kind of spell out more. Do you need to be top 10 in the U.S. or something at a certain period of time in order to stay forward? Is it going to be a North American type of strategy? Is Europe the next step? Can you fill in anything of goals and where you're trying to head with that strategy going forward? I know the idea is that it's supposed to be more organic, but if you could fill in more to that, I'd appreciate it. It's absolutely organic, and I think it comes from back to the basics in capital markets. We've been growing our equity research coverage teams to cover more customers. The next phase is we're putting more of our balance sheet out there. Certainly in the United States, as you saw, our loan growth was very strong. We're putting our balance sheet out there so that we can have more discussions around the fee-based side of the business. We expect that balance sheet usage to generate a two-to-one return as any investment bank does on the fee-based side of the business. So we've capitalized on some players exiting the market and picking up some strong teams. We've capitalized on some equity and balance sheet redeployment of some of our peers, creating opportunities for us to redeploy our business and accelerate that strategy organically in the U.S. and out of our London office. Certainly, I think you've seen the strong growth coming along those lines. I don't think we sit back and say we want to be number one, two, three, 10. We want to grow the business prudently and drive a strong ROE, and wherever that takes us, it takes us. But I think it's really that type of strategy, capitalizing on opportunity and making smart decisions, stepping into relationships where others are exiting, hiring good people, and using your balance sheet smartly in your equity research. After housing, I believe many U.S. investors are concerned about a potential slowdown in commodities in Canada. That could be anything from energy to mining. Could you comment on exposure there and how you might manage that sort of decline? It's certainly a volatility that we've lived with as a country over a number of cycles. Right now, I think we're seeing on the ag side of the business, very strong commodity prices. We're seeing not the same effect that you see in the U.S. with the drought. We have very strong crops in the West with strong prices. We have much lower yields in central Canada with strong prices. So overall, on the commodity ag side, we're, as a country, in good shape, and our book is in good shape. On the energy side of the business, we're seeing strong activity out West right now, particularly in Alberta, and it appears to be a risk-on environment there, where it's risk-off in other sectors. So we're seeing confidence. Some big projects you hear are being questioned, but overall, you're seeing a strong level of activity on the energy side in Alberta and in Saskatchewan on the commodity side. We've managed through this volatility before on the commercial business that we run, and it's part of the cyclical nature of our country and how we structure our business, and we've managed through it before and we'll continue to manage through it. On the other side of the strong commodity prices has led to the loonie being pretty strong Yes and at parity or above versus the USD. Stressed central Canadian manufacturing market. Certainly a risk-off environment in manufacturing in central Canada, and we've not seen the job recovery there or the quality of jobs. The central Canadian manufacturing industry is driven, one, by the U.S. economy and demand of the U.S. economy. Two, by competed historically with a lower dollar to create value in the export market. The good thing that we've seen in central Canada is many of our customers have used the stronger dollar to buy equipment to improve productivity over the last three or four years. The borrowing we have seen, we've seen our leasing book really strengthen, and we've seen a lot of growth on the term lending side as customers have used the dollar to buy foreign equipment and machinery to try to compete with this higher dollar. Having said that, we see economic growth suppressed because of the strong dollar in central Canada, and we see our customers sitting on a lot of cash and not building inventory and not hiring and taking a risk-off view of the world, and that's led to a slower recovery in the unemployment rate than you'd like to see, and certainly more stagnant growth that we've seen in the central part of the country. How about exposure in retail and potentially in tourism? We've certainly read about Canadians driving over the border to shop and price differential of 25%-30%. We have a balanced portfolio across the country. We don't have a large exposure to retail. Have not seen any significant stresses in there. If you look at our credit loss profile and our gross impaired loans that we disclosed in Q3, a very strong credit profile in our commercial book. I forget what the loss rate was, but it was way below the long-term average. It just reflects in general across all segments, with exception maybe of the Western energy segment, a risk-off attitude. Our commercial customers are not taking any chances. They're not hiring people. They're not building inventory excessively. They're not acquiring or are taking any type of risk posture that could put their cash flow at risk. We see it in our deposit business growth and the significant growth in deposits, and it reflected in the comments of Governor Carney around trying to talk up some more activity in our commercial sector. It is a function of the uncertainty around the world and the information flow and the concern about, is the revenue going to be there, and is demand going to be there? We certainly see the conservatism has crept into the mindset of the average business owner. Another question at the back. You mentioned 2 basis points or so of NIM compression next several quarters. Can you clarify, was that the consolidated margin, or is that just in- That is just retail banking side. Just in retail banking. That's right. Can you- Hard to predict. I mean, that would be an estimate, but it's a volatile number when you Can you just talk about what kind of loan yields are rolling off, what kind of new loan yields look like, and same with securities? When we look at the margin compression or expansion, it comes from the roll-off of yields largely in our mortgage book, where when you have five-year term loans from 2008 and 2009 kind of being refinanced. Spreads were very high in 2009. Our yield on mortgages were probably 200 basis points higher, at least 150 higher than the roll-on spread of five-year mortgages going at 309, 299 today. Well below the historic average. So you're looking at 150 points of compression on those term loans that are being refinanced. Only half our book are term mortgages, fixed rate mortgages. The other half are variable rate mortgages that are The spread we earn is a Prime BA spread, and that spread is at well above the long-term average. Prime BA spreads in Canada have averaged about 162 to 165, running about 175 for the last five or six quarters. There's a risk there that corrects in a rising rate environment a little bit, but right now that's offset some of the spread compression we've seen coming out of the mortgage book, that our variable book is enjoying healthy margins right now. So you've got these offsetting factors. The challenge is that we have a very large core checking account business that is getting reinvested in these products at lower and lower spreads. So the returns on our very large core checking business are down about yields are down about 300 basis points since 2007 on a very large book. And there's no chance to lower the cost because you don't pay an interest rate on your core checking business, yet you're able to invest that in a variety of lending instruments. In a rising rate environment, you unlock the potential of that core checking book, but in this persistent low rate environment, the earnings potential of that business is suppressed, to say the least. Looking at the capital markets business, when you look at the Canadian bank's third quarter performance, the quarters don't match up perfectly with the U.S., but the Canadian banks seem to do much better on a quarter-over-quarter and year-over-year basis than the U.S. capital markets-focused banks. Just wondering what was underlying that and what you're seeing out there near term going forward. On the capital markets side. Tough for me sitting here running a retail bank too. I really haven't got into the detail of how our capital markets business compares to the U.S. banks quarter over quarter, so I don't want to give you a misleading answer. I should probably defer that. Because the U.S. banks are on a bit of a lag reporting basis, I think 2 months, right? Invariably we are a leading indicator often to what I think the U.S. banks rather than vice versa. What you see in our numbers at a quarterly basis, you can expect certainly from a fixed income perspective probably the U.S. banks are going through similar type of operating environment. I think you look at that relationship I have observed has been highly correlated over time where we're probably leading indicator of what you might see in their fixed income business going forward. That's the best I can give you now. You're pretty content with your residential book, residential mortgages book. What would you say keeps you awake at night? What keeps me awake at night is the regulatory changes and regulatory pressure. Much of this is coming at us because we remain in a stimulative monetary environment with an inability to raise rates to slow the growth in consumer debt. Therefore, we're seeing some prudential regulation, but prudential regulation that could become permanent regulation in the form of these B-20 rules or whatever other rules we're forced to look at. I think the amount of cost and effort and the fact that some of these changes could become permanent, what will be the long-term drag on the business is unknown. The cost and difficulty of implementing some of these is quite severe. We've got the FATCA regulation in the U.S. cross-border that you probably heard about that is putting a lot of stress on all the bank systems and costs and trying to comply. Regulatory changes certainly are top of my list when I think about what keeps me up at night and trying to manage our business and the changes in our business. Managing in a low rate environment where your revenue growth is running at half to two-thirds of your volume growth. For us, we are very proud of the CAD 44 billion of net new business we did drove around an 8% volume growth, yet our revenue growth is lagging at half to two-thirds of that. That is systemic across all the banks. We're not getting paid what we used to as an industry for that volume growth given the compression in our deposit business and margins. Watching expenses very carefully given that we're doing all this work, we're not making historic margins yet on that business leads to you've got to balance your NIE growth with a suppressed revenue growth environment creates a lot of planning and tactical challenges that as a business we're committed to, and we're committed to driving positive operating leverage, but we have to watch our expense revenue ratios very carefully in this volatile environment where now we know what volume growth we can do. We're just not sure what revenue we're going to get off of it. It creates more of a difficult operating environment to manage it. Okay. Given time constraints, I think we have time for just one last question. Thank you. Maybe a bit out of your area, but could you comment on international competition, particularly from European banks? To what extent have you seen them pulling back from the Canadian market, trade finance, et cetera? I think the most recent example is the sale of ING Canada, which was a significant sale because they had built a strong brand in the country and a sizable business over time. The exit of that received a lot of press and the sale of that to one of our competitors, I guess, a week or two ago. We saw MBNA sold to another competitor, so a large U.S. monoline exiting the marketplace with an established presence. The Canadian market, while many Americans call it, "Oh, it's an oligopoly, it's less competitive," it's an incredibly competitive environment where our margins are a lot lower than the margins in the U.S. So it's efficient competition. We all run national-scale businesses, and we run them at relatively thin margins, but stable margins. We run them with relatively low productivity ratios. So they're very competitive businesses. We deliver exceptional service to customers. If you look at, as an industry, our customer service ratios have improved steadily, and for us, we're extremely proud of our number one branch service and number one in so many categories. We won six industry awards for our customer service, so we're extremely proud of that. So it's a tough market to break into. We're serving customers well. We give them exceptional value. We've got national presence. We've got scale advantage in Canada. We're efficient. It's a tough, competitive marketplace, and we're seeing more exit than we are entry in the marketplace right now. A lot of that's driven by global competitors who have got issues in domestic marketplaces around balance sheet and capital and are looking to obviously extract capital from maybe non-core businesses. There's a number of drivers. I don't expect to see a lot of capital redeployed in that type of competitive environment, in the near term anyway, from foreign banks. Great. Well, Dave, thank you very much. Thank you. It was a wonderful presentation.