First Annual Morgan Stanley U.S. Financials Conference

Feb 1, 2011

Good afternoon. I'm Cheryl Pate. I cover the Canadian banks here at Morgan Stanley. This afternoon, it's my pleasure to welcome Royal Bank of Canada. RBC is Canada's largest company by market cap, and the 12th largest bank globally by market cap. With over 1,200 retail branches in Canada and 426 throughout the Southeastern U.S., RBC is also a leader in both capital markets and wealth management, and we saw several acquisitions over the course of 2010 with things such as BlueBay Asset Management and Fortis out of Hong Kong. RBC ranks number 36 out of the top 100 most valuable global brands. With us here today to present for RBC is Janice Fukakusa, RBC's Chief Financial Officer and Chief Administrative Officer. As a member of RBC's group executive, she is one of nine executives responsible for setting the overall strategy for Royal Bank. Janice joined RBC in 1985 and has held various positions across the bank, including within retail and business banking, corporate banking, account management, corporate finance, treasury, strategic development, and corporate function. Janice, thank you very much for joining us here today. Thanks, Cheryl, for that kind introduction, and good afternoon, everyone. I'm very pleased to be here to speak to you about Royal Bank of Canada. As noted on slide 2, all the remarks, including those during the Q&A session, may contain forward-looking statements which could have inherent risks and uncertainties. Actual results could differ materially from these statements. Also, please note that we will be reporting our first quarter results on March 3rd, and similar to the other Canadian banks presenting tomorrow, we are currently in our quiet period and cannot discuss our financial results. Turning to slide 3. RBC is a diversified financial services company with five business segments and operations in Canada, the U.S., and 50 other countries across the globe, employing approximately 79,000 people serving close to 18 million clients globally. As Cheryl said, we're among the top 15 banks in the world and are Canada's largest company by assets and market cap. In 2010, we produced strong earnings of over CAD 5.2 billion and a return on equity of nearly 15%, reflecting strong performance in all our core businesses. Canada is our core market and where we generate two-thirds of our revenue. We're a leader in all of our key businesses, banking, wealth management, and capital markets, and our market share is growing. By leveraging our leading Canadian-based franchises, we've been able to build strong competitive positions in our capital markets and wealth management businesses outside of Canada that are significant in scale and global reach. We have the most valuable brand in Canada, and our brand value outside Canada is growing. Our strength is built on the diversification of businesses that operate across client segments and across several global markets. We believe we have the right mix of both retail and wholesale businesses that diversify both earnings and risk. This differentiates our performance over time and enables us to generate significant returns through all points of the cycle. This point is clearly demonstrated when you look at total shareholder returns on slide five. RBC has consistently delivered strong shareholder value over the three, five, and 10-year periods relative to global peer averages and major benchmark indices. Now let me take you through our five business segments and show you how each of them contributes to RBC's diversification and how we're winning in the market. Turning to slide six, our Canadian banking segment is our main engine of earnings power, generating more than half of RBC's total earnings. In 2010, Canadian banking had record earnings of over CAD 3 billion, up 14% from the prior year. Our retail banking franchise is a Canadian leader and the only truly national franchise with top three market positions in all regions of Canada. We capture a disproportionate share of industry volume growth. When you look at total balance sheet growth, we have consistently outgrown the industry by 25%. Our tremendous sales power is driven by our distribution network comprised of Canada's largest branch network, the largest mobile sales force, and industry-leading online banking capabilities. We access more clients and sell more products and services, and we have a unique ability to sell across channels and across business segments. For example, we sell more creditor insurance and more mutual funds through our branch network than any of our Canadian peers. As a result, we rank number one or number two in all major personal and business products. As mentioned, 2010 was Canadian Banking's best year with earnings growth of 14%. Our earnings growth has been driven mostly by revenue growth. However, in the past two years, earnings were impacted by elevated levels of credit provisions, and the double-digit volume growth we experienced was masked by spread compression due to unusually low interest rates. For the past few quarters, however, we've seen a shift in this trend, and net interest margins have stabilized and revenue growth more directly correlates with our volume growth. As we enter the new year, we're well-positioned to continue to drive solid earnings momentum as credit provisions decline and spread compression neutralizes, despite softening industry volumes caused by the sluggish Canadian economy. As you are all aware, the Canadian government recently introduced regulations to curb rising consumer debt levels by shortening the maximum amortization periods on mortgages and reducing the amounts Canadians can borrow in refinancing their homes. These changes are expected to have a moderating effect on industry volumes as consumers put off home purchases or buy smaller homes. On a related note, there's been a lot of press lately on whether the Canadian housing market is overheated and likely to follow a similar trend as the U.S. housing market. To address this, let me point out that the Canadian mortgage market is structurally different than the U.S. market. We have more conservative lending practices in Canada and originate loans for the purpose of holding them on our balance sheet. As a result, Canada has a strong history of low delinquencies throughout the economic cycle. For RBC in particular, we are comfortable with our portfolio. We uphold the highest underwriting standards and stress test our portfolios periodically under a number of different scenarios that encompass interest rate rises and declining house prices. The portfolio can withstand dramatic shifts in these market parameters, as most of our mortgages are made up of fixed rate loans, with an average loan-to-value ratio on the uninsured portion of just over 50%. Canadians carry a significantly greater proportion of equity in their homes, and they have a propensity to pay down their debt, notwithstanding homeownership being at very similar levels to what it is here in the U.S. We have included additional details and comparisons in the appendix of this presentation for your reference. Although we do see volume growth moderating, we believe we remain well positioned to outpace our peers by using our extensive distribution capacity, sales power, and by driving greater efficiencies in our network. In 2010, we opened our newly designed retail-focused branch centered around how customers want to shop with the banks, not how banks want to sell to them. We have seen our client base double over the last five years, and online sales have tripled over the same period. More of our clients want to bank online, and to meet growing demand, we have invested heavily in expanding our digital capabilities, which we believe will increase sales by strengthening our customer loyalty and reduce costs. Last year, we had great success with the introduction of myFinanceTracker, the first integrated online financial management tool in Canada, which enables clients to create budgets and track their spending habits. We recently launched Canada's first truly integrated mobile banking application for smartphones, so clients can bank anywhere they literally want, whenever they wish. Early indications of this mobile application shows that it is a market differentiator in Canada. Our size and scale matters and gives us enormous potential to drive further efficiency through our network while improving the client experience and increasing our sales productivity. Our efficiency ratio stood at 47.3% in 2010 and is the lowest among the Canadian banks and amongst the lowest globally. Over the next few years, our target is to bring our efficiency ratio down to the low 40s by simplifying our processes and building end-to-end efficiencies that bring down our costs and in turn, drive bottom-line growth. This is clearly a strong competitive advantage for RBC and gives us the flexibility to combat any potential headwinds. Our leading market positions, unprecedented distribution capabilities, and best-in-class efficiency ratio will allow us to stay on track ahead of our competition and achieve our targeted 25% volume growth premium. Taking a look now at wealth management on slide seven. We are a clear market leader in Canada with strong and growing businesses in the U.S. and internationally. We are the largest and most comprehensive full-service wealth manager in Canada, with 23% of the industry assets and in the industry-leading position in long-term mutual fund net sales. In the U.S., we are the sixth-largest national full-service brokerage firm with over 2,300 financial consultants. Internationally, we are a top 20 global private bank measured by client assets. RBC's strength and stability has allowed us to attract top talent and establish very strong client relationships. Our global asset management business consists of the largest asset manager in Canada with 17% of the market, and we have a strong and growing presence in the U.S. and internationally. Globally, our asset management business has assets under management of nearly CAD 250 billion. Our recent acquisition of U.K.-based BlueBay Asset Management extends our capabilities and is highly complementary to RBC's growing business. BlueBay is a leading fixed income manager with roughly CAD 40 billion in assets under management, and it provides us with additional manufacturing and distribution capabilities both in Europe and emerging markets. The recent acquisition of Fortis Wealth Management that Cheryl referred to in Hong Kong reflects our particular focus on significantly expanding our operations in Asia. Wealth management's key strategic priorities center around expanding our client relationships, particularly with high net worth and ultra-high net worth clients both in Canada and abroad, and building an integrated global asset management business, which complements our wealth distribution capabilities. We see tremendous opportunity in wealth management going forward by leveraging our strengths and expanding our solutions and capabilities to deepen our client relationships. Turning to insurance, we're the largest bank-owned insurer in Canada, and our insurance business continues to make solid contribution to our diversified earnings stream. We offer a full suite of solutions that complement our retail product offering. We're the only Canadian bank insurer with multi-line manufacturing and multi-channel distribution capabilities. Despite our leading position, we're continually looking for ways to improve our financial and operational effectiveness. As a result, we'll reduce our exposure to U.S. long-term annuities when the divestiture of Liberty Life, our U.S.-based life insurance company, is completed. Going forward, we believe we will continue to gain market share to offer new and innovative tailored insurance products, primarily through our Canadian distribution platform. Turning to international banking. Our international banking segment includes our U.S. bank, our Caribbean retail bank, and RBC Dexia Investor Services. Overall, we're very disappointed with the results of international banking. Each of these businesses has been impacted by weakening economic conditions. Our U.S. retail bank results have been the most severely impacted by the prolonged weak economic conditions of the U.S. Southeast. However, asset quality in the U.S. appears to be stabilizing, and credit quality should continue to improve as we feel the worst of the credit cycle is now behind us. Returning this business to profitability is a key priority, and once there, we'll be in a better position to determine the strategy of this business going forward. In English-speaking Caribbean, we have the second-largest banking group and provide solutions to individuals and businesses through a network of 125 branches in 17 countries and territories. We continue to make solid progress in implementing a new operational platform and leveraging the capabilities of RBC's infrastructure, and RBC Dexia Services, our global custody joint venture, remains a top 10 custodian. Turning to slide 8. In capital markets, we have a diversified portfolio spanning different businesses, geographies, and client segments with a track record of consistent profitability. In Canada, we're the largest investment bank with top-tier market share across all of our business, and we're named Canada's Deal Maker of the Year for the ninth consecutive year. We're also Canada's only truly global investment bank, with approximately two-thirds of our staff and revenues coming from outside of Canada. Our clients are well-served by both our Canadian leadership and our global reach. Our global trading businesses are headquartered in Toronto, New York, London, and now Hong Kong, and our fixed income, energy, and mining businesses are very successful on a global scale. We have a disciplined and focused approach to growth, growing in areas of core capabilities where we have demonstrated strength and success. We're making the necessary investments in our risk and control infrastructure to support future business growth. This global expansion has given us unique opportunities to build our product and service offerings and further diversify our capital markets earnings base. Over the cycle, we target a balance between our trading and investment banking businesses with broad geographical coverage in order to produce strong and consistent returns. This balance is important because as you can see on slide 8, in the latter half of 2008 and 2009, when our investment banking businesses were impacted by the weakened economic environment, market volatility caused our trading arm to flourish. In the late half of 2010, we saw the opposite trend. Our trading results were negatively impacted by market conditions, and increased deal flow lifted our investment banking results. This optimal mix of businesses consistently delivers returns on equity of over 19% in the past 5 years. Our continued success in capital markets will come from growing our market share, building client relationships, broadening our investment banking coverage, and prudently using our balance sheet. Before going into my concluding remarks, I want to make a few comments on RBC's strong capital position. We believe the expected growth in risk-weighted assets and related capital requirements from both the Basel III rules and the IFRS transitional adjustments will be well-supported by our current surplus capital and retained earnings growth. With the improved visibility around the new capital rule, we find ourselves in a better position to deploy capital. Our focus remains on investing capital in the business lines that deliver the highest level of risk-adjusted returns. In our view, strong banks like RBC will adjust to the new regulations, and the changing economic landscape will present an unprecedented range of opportunities to grow and invest and continue to earn superior returns. Our leading market position, diversified business model, strong balance sheet, and strong risk management practices will drive this performance and put us in a unique advantage to extend our current position and build our global platforms. Thank you, and I would now be pleased to answer any of your questions. So Cheryl, I'll just come and sit over there. Yes. Thank you, Janice. Maybe I'll just kick it off with one, and then we'll open it up to the group. Staying on the theme of capital management and capital going forward, when you think about Basel III, I know there's been some question on whether RBC may be viewed as systemically important under Basel III. How do you think about your positioning in Basel III relative to the other Canadian banks? I know you've spoken in the past before that you don't think you would be held to different standards within Canada, so maybe a little bit of an update on Basel III. Okay. Thanks, Cheryl. With respect to Basel III and systemically important financial institutions, I think it's our view that is shared with the regulator that there is not one Canadian bank that is systemically important. Our regulator feels that in terms of the global scale, there wouldn't be one Canadian bank to single out. But of course, our regulator is not making the decision around that categorization. The decision will be made by the Financial Stability Board. One of the things that we have is a robust discussion with our regulator around level playing field in Canada, and I think that if you look at the Canadian banks from a Canadian perspective, the five largest banks are all systemically important to Canada. I think that what we're focused on is making sure with our regulators that there is no competitive advantage created by these categorizations. When we look at the Basel III rules and how they tier in from 2013 to 2019, we're very comfortable with asserting that we will be there by 2013 with the 2013 metrics, and our discussions with our regulator center around the 2019 and the phase-in in our capital planning to 2013 and 2019. We think that as the capital rules become clearer, we'll be able to resume more normal capital management planning and activities around everything from share buybacks and dividend increases to looking at acquisitions and issuance and payment for those acquisitions. We're working very closely with our regulators in forming our capital plans and presenting them to them to give them the assurance that we will meet the 2013 guidelines and 2019 very comfortably in the next few years. Great. Any questions in the room? Yes, I have a question. You said your first quarter earnings would be reported on March 3rd? Yes. You are on a 10/31 fiscal year in Canada, right? Yes. Why does it take five weeks at the end? I guess the first quarter ended yesterday. U.S. banks report in two or three weeks. Right. Are those audited statements? Is that why it takes five weeks? No. It's our first quarter of unaudited. The reason that it is taking five weeks is we're having our annual meeting at the same time, so we sync up the first quarter reporting at our bank with the annual meeting. So it is about a one-week period longer than we normally report. But they're not audited. Okay. Thank you. Question? Oh, sure. Sorry. Hi. Just a question on your reserve coverage of non-performing loans, and this is not just specific to you, but it's something across the industry. If we look at the Canadian banks, if we go back to, say, 2005, 2006, you had multiples of your for every dollar of non-performers you had, I think in the case of your bank, nearly $2 of reserves. That stands at 60 cents today, which is not comparable to, say, the U.S. money center banks anymore. And that's not just Royal Bank, but also really across the Canadian banking sector, where you've really bled reserves, where non-performers in the last three years have grown much faster than reserves. Can you explain why that's happening and what kind of the lower bounds of reserve coverage are for you? Thanks. Thanks for that question. I think it reflects where we are in the cycle with respect to building both on a general reserve basis. In Canadian GAAP, we have general reserves and specific reserves, so it is similar but not the same as U.S. loan accounting. What we tend to do is build the general reserves in periods of strength, and then on the reserving basis, as we are going through the cycle, what you see is a takedown of those reserves. The general reserves are the stickiest to come down, but what you see across the board is as credit conditions are improving, more of a reserve reduction and more of a view about what level of general reserve that we need. Remember that all of the Canadian banks are switching over to international financial reporting standards effective next fiscal year. I think that when we do the switchover, there might be a little more similarity to U.S. GAAP reporting at that basis, because their reserves are more tied to specific exposures as opposed to over a portfolio. You have put a fair amount of investment spending into smartphones and mobile banking. Is that more behind us in this past year, or is it going to be a comparable amount going forward? Is that kind of investment, is it expensed or capitalized? That is a great question. We have actually, over the past two years, reconfigured our whole internet banking view that is there and invested in certain pieces of software. That spend will continue, I think at a lesser pace. Some of the spend is capitalized. Some of it is expensed immediately. The broader range of efficiency improvements that we are investing in have to do with simplifying process and automating a lot more of our back office and middle office. We will continue to pace our investment spend and our expenses in line with our revenue growth profile so that it won't get out of line and will still drive earnings growth. But we intend to continue to improve because it is a differentiator. Hi. I have two questions, please. My first one. The perfunctory acquisitions in the U.S. question. It seems like a lot of Canadian banks are looking around below in the U.S., and I was just curious if Royal Bank's come up in several conversations, it sounds like, around some institutions here. Where does that fit in maybe with your strategy for growth? With respect to the U.S., we have a U.S. retail banking platform, and we have our wealth management broker-dealer and our capital markets business. As you heard, we're not happy about where our U.S. retail bank is performing. So our job, one, is to improve that platform, get it back to break-even, to profitability, so that we can actually look at the strategies, any strategic positioning we have around the U.S. platform in terms of growing it or using it as a strategic springboard to get into different capabilities in the U.S. While there is a lot of deal flow, and we get shown a lot of deal flow, we're very focused on improving the operations of the U.S. before entering into any strategic discussions around what we're going to do once that happens. Okay, great. My second question has to do with covered bonds. That's been an interesting area of funding for the Canadian banks. I can't remember. What is the percentage of funding that you're limited in using covered bonds? Regulatorily, are you limited to, say, 4% or some number? There is a percentage, and I'm going to have to get back to you on that, but there is a limit on the funding. For us, they're pretty good funding mechanisms because they represent secured funding for the investors, and we actually opened up the covered bond market about two to three years ago, and we worked with the regulators at looking at the statutory limit because of the issue around, of course, the mortgages and depositors and that sort of thing. But I'll get back to you with the actual limit. Okay. Yeah, because structural subordination can kind of come into play after a while. Yes. Okay. Thank you. Okay. I'd like to go with the U.S., but maybe take another attack. You've been pretty open about the disappointment. What have you done in terms of changing the number of branches or exiting different markets, different products? What have you done to kind of optimize it, if you will? The first leg of our journey was in looking at the cost structure. We took out a lot of additional layers of management and reduced a lot of the headcount there, mostly on the management front, not so much on the front office front. We're in the process of looking at all of the strategic MSAs we operate in and branch density, and what we're finding is that we don't have the right density in certain areas. I'll use Atlanta as an example because we have a lot of branches in Atlanta as a whole, but Atlanta's a pretty big place and we don't have density. We're looking at which areas we need to have that density. We're in the process of, in Raleigh, for example, which is our home market, our headquarters is there, of looking at the branch density there and the branches that we would need to build. So it's both about creating branch density in the areas where we think that they have strong growth prospects, and then taking down branches where we don't have the density, where we think we're not there yet. So it's an iterative process, and we're probably about at the 80% level in sculpting, but we're starting the execution. We started the execution over the past few months. So it's about both of those drivers. Thank you. What was your Basel III Core Tier 1 ratio at the end of last fiscal year? Basel III? If you were to apply Basel III on a pro forma basis, what would the ratio have been at the end of 4Q? We actually haven't put that number out because we're in the process of sizing what exactly is going to stick in terms of the Basel III measurement and what will be there. If you look at our Tier 1 common ratio, which is more of the metric that measures only the common equity component, I think it was about 9.8%. Thank you, Josie. The Basel III ratio, if you did it on the metrics, would be somewhat lower than that because of additional market risk and that sort of thing. But until we can actually come to terms with exactly how we're sizing and what the metrics are, we haven't really put that number up because it's changing around as we have our discussions. Okay. I have a question on slide 14, the policy measures to ensure sustainable house prices. I realize we overdid it in the U.S., and I'm sure the Canadian government wants to prevent that from happening, but it seems like the tightening up of mortgage requirements for individuals, I guess perhaps some businesses too, is really stiff. Wasn't there any opposition to the government, either from individuals or from the banks? It seems like you'll have no growth in the residential mortgage market with these types of requirements going forward. I think that we all shared the concern of the government that the consumer was leveraging up. If you look at the actual impact of those measures, for example, the loan-to-value ratio, it went from 95% to 90% about two years ago. So it's going 90% to 85%. In fact, what that did is it slowed the pipeline, but it didn't stop the pipeline so that people had to wait longer till they could actually buy a house, or they bought a smaller house. So we've seen the impact of a drop in that, and we didn't think that that would be a significant business detractor over the medium term. The insurance of HELOC mortgages basically relates to securitizing those mortgages. I know for us, we never access that market for HELOC, so it's not an issue for us. I think that what it would mean, it's more of a funding mechanism as opposed to cutting off the pipeline. The amortization period went up sharply, and now it's coming back. With respect to the amortization period dropping from 35 to 30 years, what we think logistically is going to happen is the mortgage pipeline is going to actually improve in the short term because people are going to try to get their mortgages in place. That too will be more of a matter of timing as opposed to taking real homeownership and borrowers out of the market. So I think that while it looks quite severe in isolation, given where the market is and where the consumer is, we think it's prudent to get to there. Well, didn't they do anything on the other side for the consumer? Isn't it true that if you own a home in Canada, you can't subtract the interest against your income? It's not an itemized deduction. Yeah. The same with local property taxes as well. Absolutely. That's what we find that is why the mortgage portfolios are so much stronger because Canadian consumers actually pay down their mortgages. It's not deductible. I know you're looking at the flip side of that. But it's actually helped to stabilize the mortgage system. Okay, thank you. I have a couple more questions if we can go there. Okay. You talk about improving the efficiency in Canadian retail down to the low 40% range over the medium term, and certainly have shared with us a lot on simplifying, streamlining, and optimizing your processes. When you think about going forward, and especially over the next couple of years, where I think it's fair to say we're in a slowing retail revenue growth environment, do you see the benefit of that efficiency coming down more from reducing the cost base, or is it sort of a function of revenue growth and expense-based management? I think that the first part of taking the ratio down will be more about efficient cost-based management because we have to actually leverage some of the scale we have, take out productivity. What a lot of the initiatives involve freeing up sales force time on activity they were doing. We found this a couple of years ago as we went into the Canadian recession. We were doing some of the initiatives, then it's a decision around, do you employ that productivity in increasing revenue, or do you take it out and actually take the cost base permanently down? I think that decision we'll make as we see what's happening with respect to the Canadian market and economy and that. I think it's good to have that decision point where you can actually free up productivity, employ it in getting more revenue, or take it out if we're in a bad position and improve the profitability and earnings growth by taking the cost structure down. Okay. Hi, I just wondered if you could comment on one of the slides, that you want to grow the capital markets business in Europe, and just thinking about the increasing capital requirements and the limited growth and high competition there. What do you find so attractive about it to want to grow further there? The attractiveness of Europe from a capital markets perspective for us is that we are not in all of the specific products. For example, primary dealerships, and that would be our recent acquisitions of primary dealerships in Germany and in France, in addition to being in the gilts market in London. We want to make sure that we can actually offer our clients a full suite of products, and we found that that is where we were absent. It is not about increasing trading profitability to go out the risk curve or trading for trading's sake. It is more about matching what our clients are asking us for with our product capability. The growth in capital markets itself is very measured, and capital markets as a platform will not grow disproportionate to the rest of the bank. When we grow any of the streams in capital markets, it is about organic growth or growth of teams that line up with the growth in our retail platforms. Maybe switching gears for a minute over to the wealth management side, which is an area that we saw a couple acquisitions in 2010, and I know Gord spoke recently about looking to bring up wealth management and insurance to about a quarter of the revenue base. When you think about the business going forward, is that a combination of acquisitions and organic growth, or how do we get up to that sort of 25%? For wealth? For wealth. I think that part of it is business growth and the fact that with the markets improving and with the financial strength of RBC, we've been able to attract organically a lot of teams of people and capability on the distribution side. I think that for asset management, the growth will be more through acquisition of niche capabilities where we can see the fit and where it expands some of our distribution. I think that's why you saw BlueBay Asset Management being acquired out of London, and the Fortis acquisition we did was more about acquiring a team for distribution capabilities in Asia. I think that's the two prongs of growth you'll see there. Maybe I'll just wrap it up with a final question. Trading has been clearly volatile with the markets over the last couple of years, and it's an area that you have been able to build out both in the U.S. and Europe and now two-thirds of the capital markets coming outside of Canada. How do you think about the business going forward? We definitely had some third quarter volatility from Europe and regulations coming into the U.S. Have you changed the way you think about the business going forward? I think that for our trading businesses, we look at the whole balance in capital markets, revenue streams between trading and corporate investment banking. You will see the flow of the corporate investment banking, more traditional investment banking revenues that you see a lot more deal flow now, and you saw last quarter that improvement. With respect to trading, definitely trading is on the radar screen from a Basel III perspective, from a capital attribution perspective, and also from our perspective. It is about honing in on the profitable areas of where they are trading and not writing unprofitable trading. The critical piece for us is client flows, and it is supporting our clients. So it is not trading for trading's sake. We know there is a lot of volatility in trading revenue. We know we had super-sized revenues over the course of the financial disruption. We know that that is coming back in, and what we are looking at is more carefully honing in on the sub-businesses and only as we roll into Basel III, focusing on businesses where we get an adequate return for the extra capital we will be putting against them. So I do not know if that will improve the volatility. I do not think so because it is trading businesses, but it will improve the sustainability over a cycle of the individual businesses. Okay. One last question and then. You mentioned that in Canada, the residential mortgage market you do not securitize. On slide 13, it shows about one-third of the residential mortgage market being securitized and has a separate pie chart for non-banks. Who is doing the one-third securitizing? RBC doesn't. We don't securitize the HELOC product alone. The securitization of residential mortgages is done by all the Canadian banks. What happens is that the government insures the mortgages, then they're put into a securitization vehicle, and the product is distributed that way. Then there's, of course, a very small run-of-the-mill securitization that's not government-backed. But the bulk of securitization of residential mortgages is government-backed, so it's insured. Thank you. Great. Well, thank you.