CIBC (CM) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Aug. 27, 2026 at 7:30 a.m. ET

CALL PARTICIPANTS

• Senior Vice President, Investor Relations and Performance Measurement - Geoffrey Weiss
• President and Chief Executive Officer - Harry Culham
• Chief Financial Officer - Robert Sedran
• Chief Risk Officer - Frank Guse
• Capital Markets - Christian Exshaw
• U.S. Region - Kevin Li
• Personal and Business Bank in Canada - Hratch Panossian
• Commercial Banking - Susan Rimmer
• Wealth Management - Eric Belanger

TAKEAWAYS

• Adjusted Net Income -- $2,648 million, representing a 26% increase year over year as reported in SEC filings.
• Total Revenue -- $8,368 million, up 15% year over year driven by broad-based momentum across all business segments and expanding margins.
• Adjusted Diluted EPS -- $2.73, up 26% year over year and marking the ninth consecutive quarter of double-digit growth.
• Common Equity Tier 1 Ratio -- 13.4%, a 19 basis point sequential decrease due to organic capital generation being offset by share repurchases and charges related to Caribbean operations.
• Adjusted Return on Equity -- 16.8%, an increase of 260 basis points compared to the third quarter of the prior year.
• Share Repurchases -- 7.5 million shares, completed during the quarter to return capital to shareholders.
• Total Provision for Credit Losses -- $564 million, compared to $605 million in the second quarter of 2026.
• Provision on Impaired Loans -- $612 million, up $64 million sequentially reflecting specific idiosyncratic events in Canadian Commercial Banking and the Capital Markets portfolio.
• Canadian Personal and Business Banking Net Income -- $948 million, up 17% year over year supported by 3.04% net interest margins and steady loan growth.
• Canadian Personal and Business Banking Net Interest Margin -- 3.04%, a 3 basis point sequential increase driven by higher loan and deposit margins.
• U.S. Commercial Banking and Wealth Management Net Income -- $320 million, up 23% from the prior year primarily due to lower loan loss provisions and higher revenue.
• U.S. Segment Net Interest Margin -- 3.76%, down 14 basis points sequentially due to business mix and loan growth outpacing deposit growth.
• Capital Markets Net Income -- $722 million, representing 34% year-over-year growth driven by equity trading and financing activity.
• Efficiency Ratio -- Improved by 200 basis points year over year, marking the 12th consecutive quarter of positive operating leverage.
• Wealth Management Fee-Based Assets -- Assets under administration and assets under management both increased over 20% year over year.
• Investor's Edge New Account Openings -- Grew 34% year over year as Canadians chose the platform as their digital investing partner.
• Managed Mass Affluent Client Base -- Increased 4% year over year, supporting 12% growth in money-in balances.
• AdvisorAssist AI Efficiency -- Reduces administrative documentation time for advisers by up to 50% by automating meeting notes and summaries.
• CIBC Caribbean Charge -- $269 million ($232 million after-tax), recorded as an item of note related to the announced sale of CIBC Caribbean Bank Limited.
• Credit Fees -- Increased 25% year over year, reflecting strong client activity in corporate lending and financing businesses.
• Gross Impaired Loan Ratio -- 65 basis points, representing a 1 basis point sequential decrease.
• GIC Balances -- Declined 10% year over year as advice-led conversations migrated client funds into managed mutual fund products.
• Canadian Consumer Net Write-Off Ratio -- Declined sequentially despite higher stress levels compared to the prior year.
• Liquidity Coverage Ratio -- Averaged 127% during the quarter, providing meaningful financial flexibility.

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RISKS

• Culham stated, "We recognize that rising trade and geopolitical tensions are having real consequences on the economy," noting that the path forward will not be linear.
• Guse warned that a slower housing market remains a source of pressure on some household cash flows, which is reflected in the higher residential mortgage delinquency trends.

SUMMARY

Management reported a 26% increase in adjusted earnings per share, supported by positive operating leverage and momentum across major business segments. The company stated that organic capital generation was partially offset by share repurchases and charges related to the sale of Caribbean operations. CIBC noted an emphasis on digital transformation and the integration of artificial intelligence to improve advisor efficiency and client engagement. President Harry Culham indicated that the bank remains focused on navigating evolving trade and geopolitical environments while maintaining credit discipline.

• Culham stated, "This enables team members to delegate complex multistep tasks to an AI agent so they can focus more time on strategic work and client relationships," referring to the launch of CIBC AI 2.0.
• Management announced it will host an Investor Day on Dec. 9, 2026, to provide deeper insight into the bank's strategy and priorities for durable growth.
• Hratch Panossian noted that while total deposits were down 1% year over year, the bank is gaining share in everyday deposits as GIC funds migrate into high-margin investment products.
• Christian Exshaw stated that loan growth in the U.S. digital infrastructure sector attracts ancillary business such as "deal-contingent hedges," swaps, and bond takeouts.
• The bank established a new collaboration with Taskrabbit to provide tailored banking offers and financial literacy resources to skilled trades professionals across Canada.
• CIBC Capital Markets was named Canada's Best Investment Bank for financing solutions at the Euromoney Awards for Excellence 2026.

INDUSTRY GLOSSARY

• Agentic AI: A type of artificial intelligence designed to act as an agent that can autonomously perform tasks to achieve specific goals.
• Assets Under Administration (AUA): The total market value of assets for which a financial institution provides administrative services but does not have investment discretion.
• Assets Under Management (AUM): The total market value of investments managed by a financial institution on behalf of its clients.
• CET1 Ratio: Common Equity Tier 1 ratio, a measure of a bank's core equity capital compared with its total risk-weighted assets.
• Efficiency Ratio: A financial metric used to measure a bank's ability to turn resources into revenue, calculated by dividing noninterest expenses by total revenue.
• GIC: Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period.
• Net Interest Margin (NIM): The difference between the interest income generated by a bank and the amount of interest paid out to lenders, relative to the amount of its interest-earning assets.
• Provision for Credit Losses (PCL): An estimation of potential losses a bank might experience due to credit risk, recorded as an expense.

Full Conference Call Transcript

Operator: Good morning. Welcome to the CIBC Q3 Quarterly Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Geoff Weiss, Senior Vice President, Investor Relations and Performance Measurement. Please go ahead, Geoff.

Geoffrey Weiss: Thank you, and good morning, everyone. We will begin this morning's call with opening remarks from Harry Culham, our President and Chief Executive Officer; followed by Rob Sedran, our Chief Financial Officer; and Frank Guse, our Chief Risk Officer. Also on the call today are a number of our executives, including Christian Exshaw, Capital Markets; Kevin Li, U.S. Region; Hratch Panossian, Personal and Business Bank in Canada; Susan Rimmer, Commercial Banking; and Eric Belanger, Wealth Management. They are available to take questions following the prepared remarks. As noted on Slide 1 of our investor presentation, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results may differ materially.

I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. With that, I would like to turn the call over to Harry.

Harry Culham: Thank you, Geoff, and good morning, everyone. Today, we announced strong third quarter results, underscoring disciplined execution against a clear strategy. The connectivity of our platform and deep client relationships are translating into high-quality earnings and broad-based growth. We believe we have meaningful runway ahead to continue to drive outperformance from our purpose-built franchise. I'll start with an overview of our adjusted quarter 3 results and then share highlights of progress against our strategy this quarter. We reported earnings per share of $2.73, a 26% increase from the prior year, marking the ninth consecutive quarter of double-digit earnings per share growth. Revenues of $8 billion were up 15% from the prior year, reflecting broad-based momentum across each of our businesses.

Expenses were up 11% from the prior year, marking our 12th consecutive quarter of positive operating leverage. Pre-provision pretax earnings rose 20% to $4 billion, while our efficiency ratio improved by 200 basis points from the prior year. We remain confident in the strength of our credit portfolios, and we continue to stay close to our clients. We recognize that rising trade and geopolitical tensions are having real consequences on the economy. The developments over the past week are a reminder that the path forward will not be linear, and we plan for a range of outcomes. Through periods like this, our clients can count on CIBC for timely advice and practical solutions to help them navigate what lies ahead.

We have built a diversified franchise to weather uncertainty. With that, our balance sheet is a source of strength and continues to provide meaningful flexibility. We ended the quarter with a CET1 ratio of 13.4% after repurchasing 7.5 million shares and delivered a return on equity of 16.8%, which is up 260 basis points from a year ago. That combination speaks to the underlying durability of our franchise and our disciplined approach to capital deployment. That same strength in capital, liquidity and funding is what enables us to stand alongside our clients through periods of uncertainty and periods of opportunity.

Canada's renewed focus on sovereignty and economic resiliency is creating one of the most significant capital mobilization efforts and opportunities our country has seen in decades. The implementation of Canada's defense industrial strategy represents a substantial opportunity for our commercial clients. Earlier this quarter, we hosted our inaugural Defense and Resiliency Summit at our headquarters here in Toronto, bringing together senior government leaders, investors and clients from across the ecosystem. This summit reflects how CIBC leverages our convening power and sector expertise to help clients and key leaders navigate complex, rapidly emerging opportunities, and we intend to be the bank our clients turn to as these investments mobilize. Let me now turn to an update on our strategy.

We have been clear on the 4 priorities shaping how we allocate capital, invest in our franchise and position our bank for durable growth. This quarter, we saw progress across each of them. Our first strategic priority is to grow our mass affluent and private wealth franchise. We continue to differentiate through high-touch personalized advice, a broad wealth platform and product innovation velocity. In our managed mass affluent offering, our client base grew by 4%, supporting money-in balance growth of 12% from the prior year. That combination underpins our momentum in scaling long-term growth with mass affluent clients. This quarter, CIBC Private Wealth was named Best Alternative Asset Manager by Family Wealth Report.

That recognition speaks to the depth of our wealth franchise and our ability to bring differentiated capabilities to high net worth clients. Our second strategic priority is to expand our digital-first personal banking capabilities. Technology is not only equipping our advisers with greater capacity to serve clients more effectively but also giving clients more control and personalization. Our momentum is evident in Investor's Edge, our self-directed investing platform. This year, we achieved 34% year-over-year growth in new account openings as Canadians are choosing CIBC as their digital investing partner of choice. That trust is translating into scale with AUA on Investor's Edge up 27% from the prior year. Together, these results tell a clear story.

Our investments in digital capabilities are resonating with our clients. We also expanded our reach with skilled trades professionals across Canada through a new collaboration with Taskrabbit, which includes tailored banking offers, financial literacy resources and advice. This is a strong example of how we are building relationships earlier, serving clients in growing segments and supporting them as their personal and business needs evolve. Our third strategic priority is to deliver connectivity and differentiation to our clients. This remains a defining strength of our culture and is contributing to stronger performance across our bank. In our Canadian Commercial Banking business, 95% of our lending clients also maintained a deposit relationship with our bank.

We prioritize clients who bank and borrow with us because it gives us a clearer understanding of their business and ambitions, enabling us to deliver the tailored advice that sets us apart. That same client-focused execution across the enterprise is also being recognized externally. During the quarter, CIBC Capital Markets was named Canada's Best Investment Bank for financing solutions at the Euromoney Awards for Excellence 2026, while Global Finance recognized CIBC as the Best Overall Cash Management Bank in Canada for 2026. Together, these distinctions reinforce the strength of our capabilities and the differentiated value we continue to deliver for clients across our platform. Our fourth strategic priority is to enable, simplify and protect our bank.

AI is helping us execute faster, strengthen operational excellence and compete from a position of strength. We are scaling governed repeatable capabilities that enhance client experience, improve colleague efficiency and support risk management. This quarter, CIBC received 2 digital banker awards for AI innovation and digital transformation, strong external validation of our approach and the progress we are making. We also announced 2 important proprietary AI advancements. First, we introduced CIBC AI 2.0, the first enterprise-wide agentic AI workspace in Canadian banking. This enables team members to delegate complex multistep tasks to an AI agent so they can focus more time on strategic work and client relationships.

Second, we launched CIBC AdvisorAssist, an AI-enabled platform that helps advisers spend more time with clients. The system automates meeting notes, summaries and follow-up documentation while supporting regulatory compliance, and this reduces administrative time for advisers by up to 50%. Together, these solutions demonstrate how we are actively innovating and deploying AI in practical, governed and scalable ways to improve client experience and increase employee efficiency. The progress across all 4 of our strategic priorities and momentum we are experiencing reinforces our confidence in our approach, the strength of our franchise and the meaningful runway of opportunities ahead. Against that backdrop, I'm pleased to announce that we will host our next Investor Day on December 9.

This will be an opportunity to take investors and analysts deeper into our strategy, the strength of our business mix and the priorities driving durable growth and long-term value creation across our platform, and we look forward to sharing how we are positioning CIBC to win over the long term. Looking ahead, we approach the balance of fiscal 2026 with measured confidence. The trade environment will continue to evolve, and we are not going to speculate on where it lands. What we can control is how we show up for our clients and how we run our bank with excellence. Regardless of the environment, our playbook does not change.

We stay close to our clients, we maintain credit discipline, we invest strategically in our platform, and we effectively deploy capital to support both profitable growth and shareholder returns. That consistency matters through the cycle. It's the way we operated the Bank of Commerce and it's how we will continue creating value for our stakeholders. And with that, I'll now turn it over to Rob for a review of our financials. Over to you, Rob.

Robert Sedran: Thank you, Harry, and good morning, everyone. So let's start with 3 takeaways. First, we delivered another strong quarter led by balanced revenue growth and positive operating leverage driven by the focused execution of our strategy. Second, healthy client activity and engagement continues to drive solid loan and deposit growth across our bank despite an unsettled macroeconomic environment. And third, our client businesses are supported by both excess capital and liquidity while delivering premium returns and enabling capital return to shareholders. Please turn to Slide 7.

For the third quarter of 2026, we reported earnings per share of $2.47, which included the previously announced, albeit smaller, charge related to our Caribbean operations of $232 million after tax that was treated as an item of note in our Corporate and Other business unit. On an adjusted basis, EPS was $2.73, up 26% from a year ago. Adjusted ROE was 16.8%, up 260 basis points from the same quarter last year. Let's move on to a detailed review of our performance. I'm on Slide 8. Adjusted net income increased to $2.6 billion and pre-provision earnings reached $4 billion in Q3.

Revenues were up 15% with broad-based momentum benefiting from balance sheet growth, improving net interest margins, higher fee-based revenues and robust trading. The loan loss provisions were modestly higher. Our strong and building earnings power allowed us to earn through them and report a 26% increase in adjusted net income. Frank will address credit in his remarks. Please turn to Slide 9. Excluding trading, net interest income was up 14%, supported by continued balance sheet growth and expanding margins. All bank margin ex trading increased 13 basis points year-over-year and 2 basis points sequentially.

In Canadian P&C, NIM was 304 basis points, up 3 basis points sequentially due to higher loan and deposit margins driven by the continued execution of our client-focused strategy. In the U.S. segment, NIM was 376 basis points, down 14 basis points from the prior quarter, primarily reflecting business mix as loan growth outpaced deposit growth along with lower product margins. Despite this, net interest income increased 9% in that segment, supported by strong growth in our client business on both sides of the balance sheet. At the total bank level, we reiterate our expectation of a stable to gradual positive bias on our net interest margin over time. Slide 10 highlights the revenue trends.

Noninterest income was $3.9 billion, up 20%, supported by constructive markets and strong trading. Market-related fees were up 25%, driven by particularly strong growth in investment management, custodial and mutual fund fees. Transaction fees increased 6%, mainly reflecting a 25% increase in credit fees supported by strong client activity in our corporate lending and financing businesses. Slide 11 highlights our expense performance. Expenses were up 11%, driven by revenue-linked compensation, increased business activity and continued investments in our franchise, our brand, our people and technology, including AI-enabled productivity across our bank. Looking forward, we expect adjusted noninterest expenses to be up quarter-over-quarter in Q4. Slide 12 highlights the consistent strength of our balance sheet.

Our CET1 ratio at the end of the quarter was 13.4%, down 19 basis points from the prior quarter as the strong organic capital generation was offset by the charge related to the Caribbean, the closing of a minority stake in &Partners that we announced last quarter and share repurchases. This quarter, we bought back 7.5 million shares. Our liquidity coverage ratio averaged 127% this quarter. Starting on Slide 13, with Canadian Personal & Business Banking, we highlight our strategic business unit results. Adjusted net income growth of 17% and pre-provision earnings growth of 10% were driven by strong revenue growth.

Revenues were up 9% year-over-year, supported by 25 basis points of net interest margin expansion and loan growth, tangible results from our focus on deep and profitable client relationships. Expenses were up 8%, mainly due to higher investment in technology and other strategic initiatives as well as higher employee-related costs. On Slide 14, we show Canadian Commercial Banking & Wealth Management where net income and pre-provision pretax earnings were up 4% and 18%, respectively, from a year ago. Revenues were up 18% from last year. Commercial Banking revenues were up 11%, driven by higher margins and volume growth. Commercial loan and deposit volumes were up 7% and 8%, respectively, from a year ago.

Strong Wealth Management revenue growth of 23% was driven by higher average fee-based assets and increased client activity driving higher commissions. AUA and AUM were both up over 20% compared with the year ago quarter. CIBC Asset Management was ranked second among the big 6 banks in year-to-date retail mutual fund long-term net sales and first in long-term net sales as a percentage of AUM. Expenses also increased 18% from a year ago due to higher performance-based and employee-related compensation and higher investments and strategic initiatives. Turning to U.S. Commercial Banking & Wealth Management on Slide 15. Net income increased 22% (sic) [ 23% ] from a 10% increase in pre-provision pretax earnings and lower loan loss provisions.

Revenues were up 7% from last year, driven by loan and deposit volume growth and continued broad-based fee income growth. Expenses were up 6% due to higher employee compensation. Turning to Slide 16 and our Capital Markets segment. Net income was up 34% from the same quarter last year and revenues were up 22%. Global Markets revenue was supported by strong equity trading and financing activity. Corporate and Transaction Banking revenues were up, driven by volume growth and higher fees. These were partially offset by lower advisory and equity underwriting activity and investment banking. Expenses were up 19% as we continue to invest for long-term growth. Employee-related and performance-based compensation also contributed to the higher costs.

Slide 17 reflects the results of Corporate & Other, which was a net gain of $32 million compared with a net loss of $107 million in the prior year. So in closing, our results this quarter reflect the combination of a relentless focus on our clients, disciplined execution and investments we're making to build for the future, and they reinforce our confidence in the long-term earnings power and profitability of our bank. With that, I'll turn it over to Frank.

Frank Guse: Thank you, Rob, and good morning. Overall, our credit performance remained resilient this quarter even as the macro backdrop continues to evolve. Our broader credit fundamentals are performing within the range we would expect in this environment, supported by our strong allowance levels. We have built additional reserves for tariff-related risks through expert credit judgment overlay since the beginning of fiscal '25 and continue to build our allowance this quarter. Our most sensitive business lending exposures to the tariff impacts represent less than 1% of the bank's total loan portfolio. We've also run a variety of stress testing on the portfolios to ensure we remain well prepared for a range of outcomes.

Our impaired losses were elevated this quarter as a result of a few specific events in the Canadian Commercial Bank and Capital Markets portfolio. The strength of our total portfolio continues to position us well to manage through ongoing macroeconomic uncertainty, supported by diversified portfolios, prudent reserves and proactive client outreach. Turning to Slide 20. Our total provision for credit losses was $564 million in Q3 compared with $605 million last quarter. From a performing perspective, we continue to build our allowance in our Canadian Consumer and Commercial Banking portfolios to maintain the meaningful buffer we have against the current macroeconomic headwinds.

These increases were offset by releases in the performing allowance of our U.S. and Capital Markets businesses, mainly driven by the sale of a portfolio of U.S. commercial real estate loans as well as accounts migrations. Overall, our performing allowance declined by $48 million this quarter. Our provision on impaired loans was $612 million, up $64 million quarter-over-quarter, mainly driven by higher provisions in our Canadian Commercial Banking and Capital Markets portfolios. We ended the quarter with allowance coverage of 81 basis points, up from 80 basis points last quarter, which reflects our disciplined approach to maintaining reserves through the cycle. Turning to Slide 21. We've highlighted impaired trends across our business units.

In Canadian Personal & Business Banking, impaired provisions were down this quarter. The impairments in Canadian Commercial Banking were limited to a small number of files and are not reflective of a broader trend. We continue to remain comfortable with the overall performance of our Canadian commercial book, which remains well diversified. While impaired provisions in Capital Markets were up, this was largely driven by one new impairment this quarter and a top-up on a previously impaired loan. The overall credit risk portfolio -- sorry, the overall credit risk profile of this portfolio remains stable and well managed. In U.S. Commercial Banking, performance remained strong this quarter with lower impaired losses reported.

At the bank level, impaired losses are 37 basis points year-to-date as the losses remain consistent with the elevated stress in the macroeconomic cycle. We expect impaired losses in and around this range for the remainder of the year. We remain confident in the underlying credit quality of the portfolio. Slide 22 summarizes our gross impaired loans and formations. Our gross impaired loan ratio was 65 basis points, down 1 basis point quarter-over-quarter. New formations were up in Q3, reflecting an increase mainly in business and government and mortgages.

While mortgages continue to experience an increase in impairments this quarter, we do not expect a material increase in losses given the prudent loan-to-value ratio of our uninsured mortgage book, which also has low historical net write-off rates. Slide 23 outlines the 90-plus day delinquency rates and net write-offs of our Canadian consumer portfolios. While unemployment has begun to show signs of improvement, a slower housing market remains a source of pressure on some household cash flows, which is reflected in the higher residential mortgage delinquency trends. Actual mortgage losses remain very low and continue to track in line with historical performance. We did see improved performance in credit card delinquencies sequentially this quarter.

Personal lending delinquencies also improved and our overall Canadian consumer net write-off ratio declined from last quarter. So while consumer stress is higher than it was a year ago, the portfolio performance remains consistent with the environment and well within our expectations. In closing, our credit portfolios continue to perform within the range we would expect despite ongoing macroeconomic pressure. Our reserves remain sound, and our teams are working closely with our clients actively managing exposures and maintaining a disciplined approach to credit risk. Overall, we remain confident in the quality of our portfolio and are focused on managing it closely through the uncertainty that remains ahead.

And I will now ask the operator to open the line as we welcome your questions.

Operator: [Operator Instructions] Our first question comes from Ebrahim Poonawala from Bank of America Merrill Lynch.

Ebrahim Poonawala: The first question, I guess, if we can talk about just Canadian Personal and Business Banking. What's striking to me when we look at sort of from a year-over-year standpoint, there's been very little in terms of loan and deposit growth. Fees have been strong. You had operating leverage. Just talk to us when we think about that segment, looking forward, what do you see as the drivers of growth if you were to repeat high single digits or even low double-digit kind of net income growth from here into next year, understanding all the tariff-related uncertainty, which who knows when we get clarity on. But if you could start there, it would be helpful.

Hratch Panossian: Ebrahim, it's Hratch. Nice to hear from you. So happy to take that question, and I'll keep this brief because we'll have more opportunity as we get into Q4 and Investor Day to talk about longer-term outlook. But I think the key answer to your question is we've got a good strategy. We're executing it, and you're seeing the results as a basis of that. As a reminder, our goal overall in the Personal Bank and the Business Bank is to continue gaining share in the areas we want to gain share in the products where we can add value for our clients and create profitability.

And by doing that, continue to outperform market in terms of revenue growth, overall profitability and growth in net income. And I think we're doing all of that. Look at the results again this quarter, we continue to have best-in-class revenue growth. We've grown our revenues, as you suggested, in that high single digit to low double digits for the last couple of years on a quarterly basis. And while things are slowing down a bit in market, we continue to outperform on revenue growth, and I think we can continue to do that. We continue to manage the expenses prudently, continue to have operating leverage. I think we've had positive operating leverage 12 out of the last 13 quarters.

And again, we will continue to manage the business so that we can deliver that. And if you do those 2 things, you continue to see the increase in profitability and the net income trajectory. What's driving that? And why are we getting that despite the balance sheet being a bit slower? It's the strategy. As we said before, number one, we're trying to win an everyday banking with all Canadians. We're doing that. We grew our demand deposits mid-single digits, while we've seen some outflows about 10% year-over-year in GIC.

So while deposit number overall has been down 1%, the profitability and the core relationship value it does represent is actually increasing, and we're gaining share again in those everyday deposits. We're gaining share in credit cards, and we're growing in that mid-single-digit range. We're being more careful on mortgages and the margins on the mortgages. We're also winning in the mass affluent space. We said in addition to everyday banking for all Canadians, we want to be the bank of choice for those Canadians that have some wealth and prefer to work with an adviser. We've been trying to double the size of that business over the next 5 years.

And this year, we've increased 10% in terms of number of clients we've added to that platform. And we continue to see 50% to 60% improvement in funds managed with the bank as those clients get in there. About 3/4 of them are getting a solid investment plan done. And based on that plan, they're consolidating more assets with us. And so all of that will continue and all of that should drive outperformance to market. We'll talk more about what we expect out of market and specific numbers on guidance in Q4.

Ebrahim Poonawala: Got it. And I guess maybe one for you, Frank. Last quarter, we saw some credit increase on -- in consumer unsecured. We've seen -- you talked about the commercial and a couple of files there. Just summarize for us your view on credit outlook. I think 3, 4 -- start of the year, it felt like we would see improvement back half of the year with some plateauing in impaired PCLs. Do you feel good about that, not just based on what you see today?

Frank Guse: Yes. And of course, there is a lot of uncertainty and some fluidity in the environment right now. But as I said in the prepared remarks, we do feel good about the credit outlook. We do feel very good about the resilience of the portfolios. And a lot of what we are seeing in the results, I would call in line with expectations against the macroeconomic backdrop. And now you've mentioned on the consumer side, and we have seen sequential improvement there quarter-over-quarter. There is always some seasonality in those numbers. So that is certainly a driver. But we've also seen unemployment coming down a little bit. And of course that is helping the consumer base as well.

From an outlook perspective, on the consumer side, I would say unemployment will be a main driver, and that's what we are watching closely even from an economic outlook perspective. And then switching a little bit to the commercial side, as you heard, we have seen a little bit higher losses in our Canadian commercial portfolio. But those are very isolated to a few specific events, and we are working on those events, but they don't give us any concern for a broad-based portfolio deterioration. And to a certain extent, we do not expect them to reoccur.

Operator: Our next question comes from Matthew Lee from Canaccord Genuity.

Matthew Lee: On the capital market side, really nice growth there. Just how much of that improvement that you've been seeing is kind of structural versus cyclical? And is there another leg of growth that you can achieve without materially increasing the capital allocated to that business? And then kind of on a broader question, like what do you see as the floor of that business, just given the cyclicality that we know exists there?

Christian Exshaw: Matthew, it's Christian. We've had, I would say, 3 quarters of exceptional constructive markets. And the business that we've built at CIBC is very well diversified. It reads, I would say, the results of that client-led strategy that we've had for nearly, I would say, 20 years. So in terms of answering the question, everything really when you look at our financials is centered around our clients and very difficult for us, obviously, to speculate on what the environment will be. What I can tell you, though, is that whenever the markets are constructive, we do capture a lot of that upside. Look at the PPPT growth over the last 7 quarters. We've invested heavily in people.

So year-to-date, for instance, we've hired 250 people. Roughly half of that is in the U.S., 40% of that is in Canada. We continue building product suites that fit our clients, for instance, in the AI space, whether it's around project finance, infrastructure and energy. We continue to invest in the overall infrastructure of our business and technology. That's one of our big differentiators, if you think of our ASG business, if you think about our Canadian depository business, both businesses are fee-based businesses and very much, I would say, foundational to what it is we do and kind of like neutral to what the environment would be.

We do see, I would say, as we've said in the past, continued growth in our business. We look at high single growth of our earnings through the cycle. And when I look at Q4, I would tell you that year-over-year, we do expect some growth, but some moderation quarter-over-quarter given the uncertainties in the macro side.

Operator: Our next question comes from Gabriel Dechaine from National Bank Financial.

Gabriel Dechaine: I want to drill down into the margin discussion a little bit. And Rob, I think you said this reiterated stable to positive all-bank NIM outlook. Is that for Canadian Banking as well?

Robert Sedran: Gabe, it's Rob. So yes, listen, generally speaking, the all-bank margin and the Canadian P&B margin tend to move in the same direction. And so yes, it is an expectation of same in Canada, and you heard Hratch's initial answer to an earlier question, get into a lot of the reasons why we're comfortable with that. We do see the hedging strategy continue to play, the tractoring strategy continue to play out and add a bit of a tailwind. And over time, we think product mix and strategy is going to continue to be constructive there as well. So stable to gradually higher, and we remain comfortable with that at the all-bank level.

Gabriel Dechaine: Okay. So the securities reinvestment rates are still a tailwind in Canada. I guess, looking at Canada and the U.S., I see Canada, the loan growth is still positive and deposit growth has been kind of flat to down a bit for the last 4, 5 quarters. And just wondering if you expect a turnaround there? Or does deposit growth dynamic, is that going to remain unfavorable and maybe present more of a challenge going forward? And then in the U.S., the double-digit compression we saw this quarter, your flow chart, which is very helpful. It highlights pricing as the issue. Is that just the deposits are getting more expensive because you're running more of a 100% loans-to-deposits ratio there?

And I guess if you can give some outlook commentary for the U.S. as well, that would be great.

Hratch Panossian: Gabe, it's Hratch. I'll take the first part around the U.S. -- the Canadian margin, and then I'll pass on for the U.S. margin. So listen, I covered some of this in the earlier question. We continue to apply our strategy and our strategy is to serve client needs. You've got to look at deposits a bit in 2 halves. You've got the everyday banking deposits and those are more everyday needs for clients. And there, all of our data shows that we continue to gain share in terms of new account opens as well as in the balances, and we're focused on that.

When you look at the GICs, which is where the runoff has been, as I said earlier, the GICs were down about 10% year-over-year. First, we've actually done well relative to the industry, which is why you're seeing, again, our overall deposit number, while it is down 1% year-over-year, it actually compares well to everything that was reported this quarter. But also, and this is the important part, the GIC is an investment product for clients. And so our goal there is to work with clients as GICs are coming up to maturity, understand what their needs are and put in the right product. We've actually been leading the tables in terms of our growth in mutual funds.

And a lot of those GIC funds have actually been going by client preference and because of the advice we give them into the investment side with managed money. And so overall, the vast majority of the GIC outflows, we do see us retaining those funds. And when we can retain those funds in a product that's better for our clients and their choice, it also works better for the economics of the bank. That's a win-win.

Gabriel Dechaine: All right. Great. I missed some of that, distracted, but that's a lot clearer. Now the U.S.?

Robert Sedran: Yes. So Gabe, it's Rob. Maybe I'll start and then hand it to Kevin. You have to remember in the U.S., we're almost exclusively a commercial bank. And so there is some seasonality in deposit flows. We've called it out before. Q4 and Q1 tends to see deposit inflows. Q2 and Q3, a lot of those deposits get deployed. So the margin tends to have a bit of seasonality to it. And I'd say roughly half the margin in the U.S. decline this quarter, quarter-on-quarter relates to just loans growing faster than deposits, which is more or less as we've guided to in the past.

I think the other half of the margin is a bit more of the business factors underlying it. Maybe for that, I'll pass it to Kevin to give you some color.

Kevin Li: Yes. Thanks, Rob, and thanks, Gabe, for the question. And just for a bit of historical context, right? We were 378 in 2025 and 349 in 2024. But just to go into a little bit more detail about the 14 basis point decline, kind of building on what Rob said, about half of that is mix driven. About half of it is pricing compression. On the mix, it's very strong loan growth. It's $1.5 billion or about 3.5% sequentially, loans outpacing deposit growth, which was about flat. And we do expect to see a seasonal reversion there in the coming quarters as we saw last year. On pricing, I guess, I'd say two things.

As you've seen from a lot of our peers in the U.S. and in Canada, yes, it's competitive for high-quality borrowers. That's for sure. But I think it's really important to note, about half of the difference in pricing actually relates to client situations where credit profile is improving. So loans are getting repriced downward based on moving down the price grid, which implies improving credit quality.

And look, overall, the way we think about it, it's really how are you going to balance the NIM trajectory and loan growth with the ultimate goal of improving NII and revenues and overall return have all within our risk appetite, and we feel very pleased with where all those metrics came in, in the U.S. for the quarter.

Operator: Our next question comes from Mario Mendonca from TD Securities (sic) [ TD Cowen ].

Mario Mendonca: First, Harry, you spent a little extra time in your opening comments talking about CIBC and implementing agentic AI. And as I listen to that and listen to you describe all these complex processes that can be automated, it immediately made me think about what your strategy is around headcount. Do you view AI as an opportunity to take CIBC's headcount lower over the next, say, 5 years? Or is it more a scenario where the revenue growth can remain strong while you keep headcount relatively stable? Which of those two is most likely?

Harry Culham: Well, let me just take a quick step back, Mario, and thank you for that really important question because we actually have AI in production and at enterprise scale. And I was trying to get that across in my prepared remarks and this latest implementation, and we've been at this for a long time, is really the first enterprise-wide agentic AI workspace for Canadian banking, but for us, and it's not a chatbot. It's a coworker. So it makes us much more productive. So when we look forward -- and by the way, we're using it all over the entire organization, and we've got thousands and thousands of people being educated.

And in fact, our Board is actually engaged as well as all of our leadership. And we're seeing this across the Wealth, Commercial, Capital Markets and Personal Banking space. So it's not -- these are not siloed experiments. These things are happening and helping productivity. So it's really about growth. It's about productivity. It's about risk management using AI and creating long-term franchise value. And so what that means from an efficiency perspective, it's all part of our modernization journey, and we're going to talk to you a lot more about that at our Investor Day in December.

But what I would say, to answer your question, we actually see headcount growth over the next 5 years in the organization and when we look forward, but we see significant productivity increase to take our results to the next level and drive outperformance. So it's a tale of 2 things. We are going to invest in people and we're going to invest heavily in technology.

Mario Mendonca: Okay. That's clear. I want to move on to a different question, and this is something that myself and I think others have addressed in the past, and it's the exceptional growth in the wholesale lending platform, $23 billion in new wholesale loans in the last 2 years. And as I look through the supplement, I can see where it's coming from. It looks like it's leveraged to the U.S. It's in financial institutions, business services, commercial real estate. And again, it seems like it's U.S. So the first question is, to what extent is this wholesale lending growth really in support of the broader capital markets business?

By that, I mean growing underwriting and advisory -- growing the underwriting and advisory business, that's the first part. Is this really necessary to drive the other source of revenue growth? And then for Frank, the rule of thumb I've used in the past for when I see growth at this level is to sort of look forward 2 years and say, in 2 years, they're going to pay some kind of price. Now it doesn't have to be a bad price, but they're going to pay some kind of price on the credit front. Is it your view -- is that rule of thumb, 2 years, is an appropriate rule of thumb to use?

So those are the 2 questions on wholesale.

Christian Exshaw: Mario, thank you for the question. It's Christian. So you're right. If you see the loan growth year-over-year, it's up roughly 17%. I would also ask you to focus on deposits. Deposits during that same period of time have grown by 32%. The reason I'm looking at both as we look at the balance sheet. I do look, obviously, when I look at the -- when we look at the business, it's our client-focused business. We look at also -- we look at it from a lens of risk, and we want to make sure that everything in the books is balanced.

At the end of last year, we announced the creation of payments, which was a merger of our transaction business and our ASG payments business. And that has been, I would say, amazing. It has really helped us to focus on our clients. I'll give you an example. We focus on our top 100 clients to look at the market share of deposits about $100 million. And we didn't have that great market share. And that number now is well over, I would say, 20%. So we're very happy in terms of the growth on the deposit side.

Coming back to your question around the loans, it really is a long -- when you look at what it is we're building in the U.S., we're very, very focused on building, what I call, digital infrastructure. And when you think about digital infrastructure, it's an entire ecosystem. It's an ecosystem from -- if you think about data centers, you're thinking about industrials, you're thinking about the [ FIC ] group because you've got to finance this. That includes, I would say, private credit. You've got to think about energy, whether it's renewables or traditional.

That also then links back to what we do in global markets, which is power trading or crude or nat gas trading, for instance, and renewables, where we're a top 5 in the U.S. So is it foundational to what it is we're building in the U.S.? Absolutely. Is it something that we're building on a stand-alone basis just for revenues? No, not at all. If you think about when we bring in those loans, they attract deal-contingent hedges, they bring in swaps. They bring in bond takeouts. There's a lot of ancillary business, and it helps us really, I would say, build this client business that we're building in the U.S. And I hope this answered the question. Frank?

Mario Mendonca: It just sounds like it's integrated throughout the organization. And Frank?

Frank Guse: Yes. Sorry, I'll jump in here as well. So reiterating a little bit what Christian said, that is very well risk-controlled originations. It's actually high-quality businesses. We do look at risk ratings of those underlying counterparts, and those are exceptionally strong. You asked a little bit about the rule of thumb. I think the rule of thumb of about 2 years as it relates to maturing of some of those originations is right. I would say it's probably a tiny bit longer on the business and government side, maybe a little bit shorter on the cards portfolios, but in and around that 2-year range. But we are working very closely with the businesses.

We do understand those businesses that we are originating in very, very well. And we are not compromising from a risk quality perspective. So what that doesn't give me is any concerns that we will see a deterioration in the rates, yes. But you're right. On a larger portfolio, we may see larger loan losses coming up. But I expect the rates essentially to be very consistent with past experiences. That having said, those portfolios can be a little bit lumpy.

But while you will see it in 2 or 3 years from now, we watch very, very closely ongoing migrations and so on, and we have no concerns with those underlying books as to what we are seeing so far.

Operator: Our last question comes from Doug Young from Desjardins Capital Markets.

Doug Young: Frank, maybe I'll keep this quick. But impaired PCL rates slightly above the guidance range you gave earlier this year. It sounds like they're going to be slightly above that for fiscal '26. Just curious like when you look back, like what's different versus maybe what you expected? And then second part is, are we in a period where maybe impaired PCLs continue to go up or deteriorate a little bit, but you are in that range or you're in that pivot point where you start to release PCL as the economic outlook maybe slightly improves. You talked about unemployment improving.

I'm just wondering if we're in that period where the market and we should start to expect steady releases on the performing loan side?

Frank Guse: Thank you for the question, Doug. And impaired losses are certainly a little bit above the range that we anticipated at the start of the year, at least in our base case. But our base case didn't necessarily include a very prolonged trade war. It didn't include the Middle Eastern conflict and some of the oil price shocks we would have seen in between. So when I look more outside of the base case into some of our downside cases, it is certainly well within the range of what we were expecting.

If I then go a little bit deeper into some of the drivers and look at some of the very idiosyncratic events that we've seen in our Canadian commercial business, it does give me some good comfort on our guidance range. Now it's still a little bit too early to give you '27 guidance, and we will have to absorb a little bit of the evolving environment over the past week as well into our guidance, but we'll certainly come back in Q4 with what we see in 2027. As I said before, unemployment will be a big driver. And if the unemployment in Canada continues to trend down, we shouldn't see impaired losses continue to trend down.

And then again, from a releases perspective, yes, we should expect releases at some point once forward-looking indicators trend better. But what that will have to be triggered by is a lot more clarity. And the volatility and uncertainty out there currently doesn't give us that clarity yet. So there will be a lot of uncertainty on a go-forward basis. But once that goes away, there should be and could be ongoing releases for sure.

Doug Young: The release we saw this quarter wasn't indicative of the fact that we've hit that pivot point...

Frank Guse: No, sorry, I should have commented on that a little bit as well. Actually, if you distill that a little bit, our release this quarter is actually a build in our Canadian businesses. It is a build driven by a lot of that uncertainty that we still continue to see. And the releases that we saw in our U.S. business and in our capital markets business is actually largely driven by the sale of a CRE portfolio that I talked about and some portfolio migration that we saw in those businesses. So again, not driven by the economic outlook, much more driven by those 2 specific events.

Operator: I would now like to turn the meeting over to Harry.

Harry Culham: Thank you, operator, and thank you all for joining us this morning. Before we close, I'd like to thank the entire CIBC team for their dedication to serving our clients, our shareholders and the communities in which we operate and each other, of course. Coming up on October 4 is the Canadian Cancer Society CIBC Run for the Cure, marking CIBC's 30th year as the title partner. It's an event I personally look forward to each year and one that reflects the power of coming together in support of those affected by breast cancer. I hope to see many of you there. Thank you again for joining us today and for your continued interest in CIBC.

Operator: This concludes today's conference call. You may now disconnect.

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