National Bank of Canada Stock

Okay. Great. Thanks. Welcome back, everyone. This is our last presentation for this -- for today. Joining us is National Bank of Canada. From National Bank of Canada, we have Judith Menard, Head of Commercial and Private Banking. Judith, welcome, and thank you for joining us.

Thank you for inviting me. Very excited to be here.

Great. It's been almost two years since you took on responsibility for Commercial Banking and Private Banking 1859, following the announced acquisition of Canadian Western Bank. Can you give us an overview of these businesses, explain how they fit into National Bank's broader strategy and discuss how your experience prepared you for this role?

Good. So I -- actually, it's 1.5 years now that I'm in the new role. Just to give you a little bit of my background, so 20 years at the bank, actually 28 years with 20 years in the risk function. So I used to be Head of Compliance for Wealth Management, Capital Markets and Retail and Commercial Banking, which -- I know the bank really well. So I think this is the part that really, really helped. So when -- just before having that position, I was leading Private Banking and Commercial Banking outside of Quebec. So basically, the mandate was like how do we grow our bank outside of Quebec. And that really drove it through commercial and private banking with Wealth Management and Capital Market. So that really prepared me just before the acquisition, had a pretty good sense of what was working, what was not working, and how do we adjust our strategy when you actually are not the main player, which we are, as you know, in Quebec. So that experience, I think, really led us to understand more and to really think about it even in the light of the integration. So when I started 1.5 years ago with the integration of CWB, I think these -- all these experience, understanding really deeply the bank, but also understanding the reality of Western Canada and Ontario, and how we grow in these markets were, I think, really priceless.

Excellent. And so the integration of Canadian Western Bank appears to be on track with both revenue and expense synergies running at or above target. Could you provide more detail on the integration process and discuss potential opportunities beyond the current targets of approximately $300 million expense synergies and $200 million to $250 million in revenue synergies?

Yes. So if I just take a step back on the integration like how have been and -- so we took a very bold decision at the beginning to really use our processes, our platform and change of branding, like right away, that decision was made. And it actually allowed us to convert client faster in the time line. So by the end of 2025, I think a lot of things really were rolling. So in the last 6 months, I would say the integration really started. The conversion of data was one big piece and the integration started. So we've been really, really working hard on onboarding employees, onboarding clients in our cash management platform, and that was the grind, like the grind of starting the integration and making it happen with people, for people. And that's -- I insist on that because employees are a big, big part of it. The connectivity with client, of course, was the employee. So we really wanted to get it right. And where we are now, and if I look at what we said to the market that it will come from the fee income of the synergy revenue, that's exactly what's happening right now. That's what we've seen. So we kind of added a toolbox to the Canadian Western Bank employees for them to go to market and bring more to the client. Is it extending our balance sheet? Is it bringing some more products to the client? And that's what we've been really seeing in the last few months. So where we are right now in September, the pipeline is really robust. We're at a very different place we were 6 months ago. And when I look forward, and I look at what's in front of us, so there's two things happening. So again, on the lending side, you've seen it was flattish last quarter. We're already seeing early signs of growing the book, which is very encouraging, but also all the deposit and the cash management, also -- there's also some space where we can continue growing on that space. So it's on both sides. So the revenues are going to come both on the lending and on the cash management side and the deposit side.

Excellent. And then maybe kind of excluding the impact of CWB, we've seen commercial loan growth was very strong in the third quarter. Maybe talk about what's driving that growth. And how sustainable do you believe that trend is?

So if you look at our track record in terms of loan growth, we have always been like #1, #2. So our franchise in Quebec, again, is very, very strong. And from that, like the muscle of lending is very good inside the bank and also kind of our credit risk as well. I would say that in terms of PCL, we have a very disciplined approach in terms of risk, and it materialized in -- when you look at the numbers. So it really comes from everywhere. It comes from our Specialty business. It comes from mid-market, from National Client Group, like larger corporation. So it's all the businesses that are performing on the heritage NBC book. And yes, I can see that it's continuing growing. That's really the part that we have the, I think, the right expertise, but we also have a right deal team around. So that means that we're kind of bringing the full bank in front of clients, and they actually really like that.

And maybe think about the other side of the balance sheet. Deposit growth in the Commercial segment has been very strong. Maybe also talk about the trends that are driving that growth and how sustainable they are as well.

So on the deposit growth, I would say that there's kind of two things. Like in the last quarter, it was really driven by governmental deposit, the taxes are being paid. And it was especially like higher kind of growth on that segment. We're still growing on the commercial kind of diversified business, which we want. We want these cash management account being opened, but also the deposit that comes with the operational deposit with the business. So we're seeing that. But we're still growing faster on the ABGSP, like government deposit than on the commercial deposit side. So where we are with that, we've been investing in the last few years in our cash management platform. We've actually transferred or onboarded 99% of our clients in our new platform. This is an ongoing process. This is something that we will continue investing. It's a tech business, the cash management business. And we will continue investing in that, that we see it very clearly. And on the CWB side, we really, really did a lot of new onboarding. We have some specialty business that the clients were waiting for cash management, and we're executing on that as we speak.

Okay. Great. And then let's just talk about how is the ROE profile and efficiency of commercial banking compared with the rest of the National Bank? And as these businesses continue to scale, where do you see opportunities for further gains?

Good. So next quarter, as you know, we are going to split retail and commercial banking and the ROE side, we're going to show numbers in the next quarter. On the efficiency ratio, this is a business that was actually well managed in terms of efficiency ratio. We are really in a good spot, I would say where we are with the efficiency ratio. We see a lot of growth in commercial banking. And for us, this acquisition is really central of -- it's the biggest acquisition of National Bank. So we know now we have the platform across Canada. So the growth trajectory in terms of grabbing market share, organic growth in every market in Canada, it is a very big accelerator for us, and that's really how we're positioning commercial banking inside the bank. I would say that commercial banking and the proximity with Capital Markets is also very tight. So we're doing a lot of things together. We're using all the risk management solution capabilities to accelerate. We have an M&A private company team is helping us doing the business transfer. We know there's a big opportunity in terms of business transfer. So all this is also an accelerator in our trajectory. And the fact that we're working really well as a team, no silo, clients see the deal team in front of them. So in the bigger picture to answer your question, we think commercial banking is a big lever of growth in the next few years.

On the private banking side, what sets Private Banking 1859 apart from other wealth management competitors?

So private banking is a gem inside the bank, I find. So in terms of the NPS, very, very high NPS, 78. This is a business that is really kind of a bank inside the bank. So when we made the decision to merge private banking and commercial banking, that's a different strategy in the other Canadian banks. So we truly integrated all the employees inside the bank. And the reason for it was we knew that we do want to bring the complexity of our bank in front of client. We knew that most of the entrepreneur clients had a private banker. We knew that. But once we go out as a deal team in front of client, private banker is there, the commercial banker is there. It actually takes out a lot of complexity for a client. The play, and we know that, there's going to be tons of wealth transfer in the next few years. We see $1.3 trillion, 60% of the entrepreneurs are going to -- want to sell or buy a new company, but mostly sell their company. So if you think about the opportunity in terms of being there at the table way in advance of the transaction, way in advance of the liquidity event, I think it's actually a very big accelerator on both sides. When I look at these two businesses, like over the last few years, 2,500 more common clients. So we're really kind of bringing both sides, from commercial banking clients, and we're not private banking client, but also on the other side. So this is a focus. This is part of a pillar that we look at how do we kind of cross-sell the bank on both sides, and it's in the same team. So it's a lot easier to kind of make people work together, having the same objective, the same goals. So I'm very pleased with this strategy. And it took us like a couple of years to get there because these are two different cultures and commercial banking. We have to work at it. But where we are, it's a very big play. And for CWB, they didn't have a private bank. So when we talk about the toolbox, this was like in addition to the toolbox. So they were very, very excited to get to see the product, the card, like the whole kind of white-glove experience.

Okay. The one thing that's been in the news recently is OSFI recently lowered the domestic stability buffer by 50 basis points. Kind of given the resulting reduction in capital requirements, do you see this as an opportunity to deploy incremental capital in the commercial segment?

Yes. So we -- like the way we manage capital, the bank, we're very conservative in deploying capital. So we have a real openness with the Rebuild Canada to use our balance sheet for commercial banking. And actually, the strategy is the same. We're kind of following like the rules have changed, but we're following the same strategy. We like organic growth. We want to push for more organic growth across all segments, but more particularly the commercial banking.

Okay. Great. Also in the news, there is a sense of optimism following the kind of the resolution of the USMCA in July, but trade policy concerns have resurfaced in recent weeks. How is that uncertainty affecting your commercial and private banking clients? How are they preparing for the potential impact?

Yes. So I would say that there's kind of two things. There's other issues that are affecting entrepreneurs in Canada, not just the tariff, immigration is one of them. So if we take a step back, the -- and I've been meeting clients in the recent weeks. There's a sense of tiredness, I would say, of -- again, we have to kind of readjust. So for some entrepreneurs that were maybe not ready to sell their business, it's kind of pushing that discussion forward and saying, am I ready again to reinvent myself and all of that. We know entrepreneurs are very resilient. A lot of them had a plan A, B and C, have already started kind of -- like kind of diversifying their clients, their supply chain. So this kind of discussion has happened, I would say, a year ago. It was a surprise to be very clear, so people were, "Wow, we thought it was done." And -- so that kind of a little bit of uncertainty tiredness. It is a real thing. Like people are talking about it. Are we -- when I look at it, either from a bank perspective, it's less than 1% of our portfolio, like very, very affected by this kind of last round of tariffs. So it's small, I would say. The security around how we have to adjust is real. But on the other side, there's also a lot of kind of positivity around Canada in the kind of Rebuild Canada this week in Toronto. There's a whole week. Everybody is there to how do we kind of grab the opportunity also to get some external investors to reinvest in Canada. So Reinvest Canada is also bringing some good vibes in Canada, I would say.

Excellent. And then maybe beyond the impact of higher tariffs, are you seeing any stress -- are you seeing stress anywhere else in the portfolio or any areas of concern from a credit quality perspective?

So we've said it on the call like repeatedly. So we are, I think, on a very conservative way how we are provisioned for recession, 17 quarters of provision that we've been building. So this is something that is really kind of part of our DNA. And when I look at the portfolio, there's been lumpiness. The reality, it's been lumpiness on the NBC side, on the CWB side, not more one or of the others. At the beginning, we took a big provision. We did CWB portfolio. So I think that was the right thing to do. So where I see right now, it's not a specific industry. Of course, manufacturing in Quebec will be a little bit more impacted. We are very heavy in Quebec, as you know. So these are pockets where we look at it like more closely. On the other side, this is the moment to support client also. This is the moment where -- it's a bit of fragility into the system, and this is where banks have to really be creative and to be there close to client, and we really intend to do so.

Artificial intelligence is top of mind for many investors. How are you using AI today? And how do you expect it to affect the business over the longer term?

Yes. So AI at the bank is not a strategy. So it's actually part of what people do right now. So we really have decided to put AI like in every business, like the way we're structured, technology is like really closer to the business, the way our structure is organized. So AI is on our day-to-day, like I use AI every day. I think all of our employees are really starting to use AI every day. So if I look at it, there's kind of two buckets. There's -- the bucket of front employees and the bucket of like back office or like in the middle. So front office people, I think about the relationship manager and the credit underwriter, their life is changing rapidly right now. So the way you prepare for a meeting, the way you go to market, the way you actually decide which industry and that has kind of on the productivity side has been expanding like at a really faster pace. And it's every week, I'm seeing that. Their job is changing. The credit underwriter, like right now to write a board sheet, what it took them one week to do is not taking one week to be done now. So how do we integrate the financial statements into the board sheet, and how we are doing the ratio, all of that -- all the banks are working on that. And we are working on that to make sure that we become more efficient in the way we're doing it. So the play is really to kind of accelerate our growth through AI with more productivity and actually coming from the employees. So a lot of employees actually have better ideas than someone from the top say, "You should do this." So we really have that kind of bottom-up approach through AI. And it's -- we're seeing it. We quantify it? No. But in every business, I think there's kind of empowerment of using AI to be more productive. So that's more the front office side. If I think about the back office side, all the KYC, all the AML, all the call centers, so now we have an agent that is answering questions from the employees, from the clients. So this is just an acceleration of less people on the call center, less people in the internal call center that supports our employees, all of that is being actually launched as we speak. So the productivity and the way we kind of serve client also in the back end, has also a lot of impact, like AI is really helping us. So I would say that on both sides, I see productivity going really up, and I see a lot of enthusiasm also and people trying things and sharing. So we've built kind of a community also inside of the commercial bank, how do you share ideas, and it's much more powerful when it comes from employees, I find.

Definitely. One thing I saw there's a recent additional bank survey nearly half of Western Canadian mid-market business owners plan to retire within the next decade. Maybe could you provide more detail on the size and characteristics of this market and explain how National Bank is positioned to help facilitate this transition?

Yes. So on the -- I spoke a little bit about it on the toolbox, there's kind of a team, and we have a strategy about business transfer. So private banking is really key around that having the private banker at the beginning because the entrepreneur doesn't split their lives between their business and their personal life. It's the same. So usually, they're cash poor for many, many years and when they're going to sell their business. So I think the integration between the commercial and the private bank is one of the big buckets of our strategy where I think we can differentiate ourselves. So that's the first part. The second part is we've built, 5 years ago, when I was in my former role, an M&A private company. So we know the investment bankers are going to be focused on the bigger transaction. So we actually decided to build a team inside the capital market team, just focused on helping the entrepreneur on the private company side, buy or sell that company. This team is completely integrated with the commercial bank. And we also have a business transfer team for the smaller ticket that is also across Canada that is helping for the lending side, for the advisory side. So these three things are working really closely together to capture all the opportunities. And it is really kind of an advisory play, I would say, with the entrepreneur. There's a lot of emotion in that moment. And there's a moment of -- I don't want to talk about it because I'm not going to get the amount I want at the end. So we really have to be close to the entrepreneur and follow the story. And I think half of it is psychology in that process and all the -- many banks are saying that also. So there's a big part of the proximity we have with our client to be there when the moment of truth is happening. It's not a product play. It is an expertise play, but also it's a psychology play that I find we're playing pretty well. So we're doing that a lot again in Quebec. And we're actually doubling down on that expertise. We just hired a new team in Western Canada with M&A experts for the bigger transaction and the proximity of our investment bankers in this moment of truth where they have the expertise is very important. So you're, I don't know, a specialized team. It is a specialized business in any transportation, but we bring our investment bankers that have that expertise. So that really helps them think about it. And that's part of the service we're offering. So it is bringing -- for me, again, it is bringing the full bank in front of client, it's powerful.

Great. We covered a lot of ground. I'm just asking, is there any kind of areas or message that you want us to take away with today or things that we haven't covered?

I like that question. So I think I just -- I want to finish with the ambition because I think ambition is really important. So we have a very big ambition in the commercial banking side inside the bank. We want to be the destination of choice for entrepreneurs in Canada. And we want to be seen as the place to be because of our proximity, because of our speed and because we're bringing the full bank in front of client. So these are three things that if we do really, really well, I think we can really continue growing. And it's not because we're the smallest bank that it actually matters. In that, we are actually very meaningful. And when you look at P&C and all the space commercial banking is taking inside the bank, it's a very meaningful business, but it's also a business that we have a lot of opportunities to grow. And our DNA is a DNA of entrepreneur. That's how we were built. And CWB was also built with an entrepreneurial DNA. So the mix of that and bringing kind of that whole bank together, keeping the regional mindset is really a lot of opportunities in front of us. So I'm very positive.

Excellent. Well, great. Thank you very much, Judith.

Thank you.

With that, please join me in thanking Judith for the presentation today.

Good morning, and welcome to National Bank of Canada's Third Quarter 2026 Earnings Call. I would now like to turn the meeting over to Marianne Ratte, Senior Vice President and Head of Investor Relations. Please go ahead.

Merci, and welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO; Marie Chantal Gingras, CFO; and Jean-Sebastien Grise, Chief Risk Officer. Our business heads are also present for the Q&A session, including Julie Levesque, Personal Banking; Judith Menard, Commercial and Private Banking; Nancy Paquet, Wealth Management; Etienne Dubuc, Capital Markets; and Bill Bonnell, International.

Before we begin, please refer to Slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted.

I will now pass the call to Laurent.

Merci, Marianne, and thank you, everyone, for joining us. Before turning to our results, let me say a few words about the latest developments affecting Canada. The Canadian economy has demonstrated resilience over the past 18 months, but the unresolved and escalating trade conflict with the U.S. continues to create economic uncertainty and challenges for businesses across the countries. At this point, it is difficult to forecast outcome, but new tariffs on both sides of the border will impact additional industries, business investments and affordability for consumers.

Yesterday's announcement on business and worker support is welcome and should provide relief for those impacted. Alongside government support, National Bank will be there for affected clients. Ongoing discussions with clients and partners point to one conclusion: Canada is taking the right steps to strengthen the foundations of its economy, and it has fiscal room to continue doing so.

While business confidence and investment are difficult in the current context, I am encouraged by the way governments and business leaders are mobilizing around Canada's economic priorities, and significant investments are being made in strategic infrastructure across the country. At National Bank, we are committed to supporting our clients and working with governments and businesses to deploy capital towards reindustrialization, infrastructure, defense and energy. Investments in these sectors are critical to strengthening Canada's productive capacity and supporting durable economic growth across the country.

The retooling of the Canadian economy is creating attractive opportunities to deploy our balance sheet. Energy, power infrastructure and the recent icebreaker contract announcement are great examples of our country moving in the right direction. And OSFI's decision to lower the range for the domestic stability buffer provides additional flexibility to support Canadian businesses as they are dealing with a challenging environment.

Turning now to our financial results. EPS for the third quarter of 2026 was $3.39, up 26% year-over-year. Revenues increased 18%, supported by favorable market conditions across our fee-based businesses and strong balance sheet growth. We generated positive operating leverage of nearly 6%, and our credit performance remained resilient. Return on equity was 16.8%, continuing on the solid performance we have delivered since the beginning of the year.

Our CET1 ratio stood at 13.51%. We maintained a strong capital position while generating strong organic growth and buying back shares. We intend to complete our current NCIB in September and launched a new one at that time, subject to regulatory approvals. Our dividend payout currently stands at 38.8%. As per usual practice, we will review the dividend next quarter.

Finally, on the Laurentian Bank transaction, last quarter, we completed the acquisition of the syndicated loan portfolio, and the Ministry of Finance has since approved the acquisition of Laurentian Bank by Fairstone. We expect our acquisition of the retail and SME banking portfolios to be completed by late 2026 as previously announced.

Turning now to our business segments. P&C Banking generated net income growth of 13% year-over-year. Results reflect strong growth in personal mortgages and fee-based income as well as solid balance sheet growth in Commercial Banking. This was further supported by positive operating leverage of [indiscernible] and strong credit performance. In Personal Banking, mortgages grew 14% year-over-year, continuing the momentum of recent quarters. This was driven by renewal activity, a resilient housing market in Quebec and market share gains. Deposits were stable sequentially, while rising equity markets continue to drive client demand for investment solutions. This contributed to a 7% increase in total personnel savings year-over-year.

In Commercial Banking, deposits were up 12% year-over-year. This reflects the usual seasonal inflows from government clients as well as higher balances in our Commercial business. Commercial loans were up 4% year-over-year. Activity remained solid within the National Bank originated loan portfolio, which grew 10% year-over-year. The CWB legacy book was relatively stable sequentially. Our integration is going well, and our pipeline is strengthening.

In Wealth Management, net income was $299 million, up 22% year-over-year. Results reflect strength across the franchise, including higher fee-based income and transaction volumes. Segment performance was further supported by positive operating leverage above 2%.

Capital Markets generated net income of $442 million, up 32% year-over-year. Global markets revenue were $578 million, consistent with the strong performance of recent quarter and supported by healthy client activity. Rising equity markets continue to support structured products origination, while attractive funding opportunities benefited our securities finance business.

Corporate and Investment Banking revenues increased 13% year-over-year. Corporate Banking loans grew 13% over the same period, reflecting continued opportunities across sectors. Investment Banking maintained its strong performance, supported by M&A activity and continuous investment in our franchise. Favorable market conditions drove solid debt capital market activity across both corporate and government issuers.

Credigy generated net income of $39 million. Revenue growth of 13% year-over-year was primarily driven by a gain on the sale of our portfolio, while credit performance reflected a build in performing loan provisions, and average assets grew 8% year-over-year. Against the competitive market and pricing backdrop, we remain selective in pursuing deals as we continue to benefit from recurring flows from established partnerships.

At ABA Bank, net income was up 1% year-over-year, reflecting slower economic growth in the country. Revenue growth of 6% was partly offset by higher efficiency ratio and PCLs. Loans were up 11% year-over-year and deposits grew 7% over the same period.

I will now pass the call to Marie Chantal.

Thank you, Laurent, and good morning, everyone. We delivered strong results in the third quarter. PTPP increased 24% year-over-year, with positive operating leverage of 5.8%. Revenues grew 18% over the same period with strong performance in Capital Markets, Wealth Management and Personal Banking, along with solid balance sheet growth and higher treasury revenue. Operating leverage was positive across all businesses, supported by solid execution and realized synergies.

Expenses increased 11.7% year-over-year. This was mainly driven by higher variable compensation, consistent with our strong performance. We also continue to invest in talent and technology with IT investments focused on supporting business growth and on strengthening our operational resilience. Q3 also included litigation expenses of $11 million. Excluding variable compensation and litigation costs, expenses rose 7.7%.

Moving to Slide 8. Net interest income, excluding trading, increased 7% sequentially, benefiting from strong volume growth across P&C Banking, Wealth Management and Corporate Banking, while the higher number of days in Q3 accounted for approximately half of the increase. All-bank NIM increased 2 basis points quarter-over-quarter to 2.18%. This reflected a strong contribution from treasury, which added 3 basis points, as well as the realignment of noninterest income to net interest income between Q2 and Q3, which contributed an additional 4 basis points. These benefits were partly offset by a decline in the P&C Banking margin, down 7 basis points sequentially, largely driven by strong growth in personal mortgages and the commercial deposit mix impact reflecting seasonal inflows from government deposits.

As we look forward to Q4 and recognizing an evolving interest rate environment, we expect the P&C margin to remain relatively stable at Q3 levels. Although deposit margins have generally been improving, the benefit is expected to continue to be offset by deposit mix dynamics within Commercial Banking. As always, balance sheet mix remains an important factor to consider. Our focus remains on growing the franchise with the right balance between volume growth, margins and credit quality. The all-bank NIM is also expected to remain relatively stable in Q4.

Turning to Slide 9. We continue to grow both sides of the balance sheet. Loans increased 11% year-over-year and 4% quarter-over-quarter amid record mortgage originations. Deposits increased 11% year-over-year or 1% sequentially. Personal demand deposits were slightly lower quarter-over-quarter as customer appetite for investment solutions remained strong, supported by favorable market performance that continued through Q3. Personal term deposits increased by $1.3 billion, primarily driven by structured note issuances. Non-retail deposits increased by $2.9 billion or 1% quarter-over-quarter, mainly within Commercial Banking.

Now moving to capital on Slide 10. We ended the quarter with a strong CET1 ratio of 13.51%, supported by capital generation of 41 basis points. RWA expansion resulted in a 19 basis point impact on our CET1 ratio this quarter. Strong organic growth in credit risk RWA consumed 35 basis points of capital, led by Corporate Banking. This was partly offset by 15 basis points of benefits from continuous refinements. We repurchased 2.3 million shares in Q3, reducing CET1 by 26 basis points. We remain on track to complete our current NCIB by its September 2026 expiry.

Now let me turn to the capital optimization initiatives currently underway, beginning with AIRB. We continue to make good progress on the transition of the acquired CWB portfolios to the AIRB framework. We have now completed the required 2-quarter regulatory parallel run, which has provided valuable insights into the performance of these portfolios.

More importantly, we have demonstrated regulatory readiness across 3 of the 4 pillars of the CMAP framework, namely, integration, operations and controls. The work completed to date has also validated our ability to effectively integrate and leverage CWB data within our AIRB framework, strengthening risk insights and supporting the successful integration of the acquired portfolio. The remaining work is primarily concentrated on the methodology pillar, where we concluded that additional model refinements are needed before seeking regulatory approval given the current stage of the credit cycle, including higher observed default rates.

Accordingly, we have decided to defer this submission into fiscal 2027, reflecting our disciplined model optimization approach. Based on our updated assessment, we continue to expect a CET1 benefit from the AIRB transition, although the benefit is likely to be more moderate than our previous estimate. Benefits are expected to begin materializing in late 2027 and are now expected to track toward the lower end of our previously communicated range of 35 to 55 basis points.

Looking ahead, additional ongoing refinements are expected to generate approximately 20 basis points of additional CET1 capital in Q4 2026. Additionally, we intend to launch a new NCIB upon the current program expiry in September 2026, subject to regulatory approval. Overall, our capital position remains strong, supported by a robust CET1 ratio. It continues to provide ample flexibility to advance our strategic priorities with disciplined RWA management, ongoing optimization initiatives and sustainable dividend growth. Importantly, it reflects our ongoing focus on disciplined capital deployment as we remain on track to achieve a 17% plus ROE by 2027 and assuming a CET1 ratio converging towards 13% by the end of next year.

Now turning to Slide 11. We are making solid progress on realizing synergies from the acquisition of CWB, having captured $238 million of cost and funding synergies to date. We remain on track to realize $270 million by the end of fiscal 2026, representing about $300 million on an annualized basis.

We have also achieved our fiscal 2026 revenue synergy target of $50 million ahead of schedule. Specifically, $52 million, mostly from fee income, has been realized to date. Further progress on the integration will support incremental synergy capture over time as we continue to target $200 million to $250 million in revenue synergies by the end of fiscal 2028.

Following another strong quarter, our year-to-date EPS grew by 16.8%. This was supported by broad-based revenue growth, strong capital markets and wealth management performance, positive operating leverage and ongoing cost discipline. As well, CWB synergies are being realized, and credit remained within expectations. Accordingly, with our year-to-date ROE of 16.7%, we are well on our way to exceed our 16% ROE target for fiscal 2026. We also continue to expect positive operating leverage for the full year, with expense growth moderating in Q4.

And before I turn it over to Jean-Sebastien, I would like to provide an update on how we plan to enhance our segment disclosure as we continue to execute on our strategy. As we have previously discussed, we are advancing a multiyear plan to strengthen our retail franchise. We intend to provide greater visibility into the strategic plan by year-end 2026.

In that context and to better reflect the CWB revenue synergies, we are introducing select enhancements to our segment reporting beginning in the fourth quarter of 2026, including separate disclosure for Personal Banking and Commercial Banking. We believe this enhanced segmentation will provide investors and analysts with a clearer view of the performance drivers and strategic progress within each business. We look forward to providing an update by year-end.

With that, I will now turn the call over to Jean-Sebastien.

Merci, Marie Chantal, and good morning, everyone. Since our last call, the Canadian economy has demonstrated resilience with GDP growth and signs of improvement in the labor market. However, the current trade conflict negatively impacts business sentiment and investment outlook. Meanwhile, government measures should provide support on impacted sectors and their employees.

More broadly, geopolitical risks remain elevated and have impacts on energy prices, inflation and interest rate. At the same time, trade diversification, growth in key resource sectors and strategic investments in technology and infrastructure should support long-term economic growth. In this complex environment, our resilient portfolio mix, disciplined risk management and prudent provisioning underpinned our strong credit performance.

Now turning to the third quarter results on Slide 13. Total PCL were $246 million or 31 basis points, stable quarter-over-quarter. We added 3 basis points of performing provision in Q3, mainly reflecting portfolio growth and a macroeconomic scenario update at Credigy, including higher long-term interest rates that impacted our longer duration portfolios. These factors were partially offset by model calibration.

PCL on impaired loans were $224 million or 28 basis points, up 2 basis points quarter-over-quarter and within our guidance of 25 to 35 basis points for the full year. Personal Banking provisions were stable sequentially as higher retail losses were offset by lower credit card losses. Commercial Banking provisions were $25 million lower quarter-over-quarter, with Q3 provisions mainly reflecting 2 files. Capital market provisions were $49 million higher than Q2 and related to 1 file in the oil and gas sector.

At Credigy, provisions increased by USD 2 million, resulting from the normal seasoning of residential mortgages and consumer loans. At ABA, impaired provisions were up by USD 4 million sequentially to USD 17 million, reflecting new formations.

Turning to Slide 14. Our total allowances for credit losses were $2.7 billion, representing 5.3x coverage of our net charge-offs. Our performing allowances were $1.7 billion, demonstrating a strong performing ACL coverage ratio of 2x. We have been building allowances for the past 17 quarters and continue to be comfortable with our prudent and defensive provisioning levels.

Turning to Slide 15. Our gross impaired loan ratio was 114 basis points, stable quarter-over-quarter. GILs, excluding USSF&I, were 82 basis points, down 2 basis points sequentially. Net formations were 10 basis points, down 3 basis points from Q2. In Commercial Banking, net formations were down 24 basis points to 4 basis points, mainly reflecting 2 files, partially offset by repayments. In Capital Markets, net formations were driven by 1 file in the oil and gas sector.

In conclusion, we remain pleased with the credit performance in the third quarter and year-to-date. We continue to expect impaired provisions for fiscal 2026 to be within the 25 to 35 basis points range. In the current context of ongoing uncertainty, we expect unemployment levels to continue to drive retail provisions, while wholesale books remain subject to periodic lumpiness. Overall, our defensive qualities, diversified business mix and prudent allowances position us well as we look ahead.

And with that, I will now turn the call back to the operator for the Q&A.

[Operator Instructions] Your first question comes from Matthew Lee with Canaccord Genuity.

Mortgage growth was strong this quarter, and it looks like that contributed to some of the pressure on Personal Banking NIM. Can you maybe just help us understand how much of that compression reflected competition for loan growth versus maybe some of the deposit dynamics we've seen over the past couple of quarters? And then bigger picture, how willing are you to continue trading margin for growth if the competitive environment stays elevated?

Matthew, thank you for the question. You're right. The P&C NIM declined 7 basis points, and it's driven by our continued mortgage growth in our business mix. And it's supporting our revenue growth as well. That is 10% year-over-year. Mortgages are really one of our most effective client acquisition vehicle, so our strategy has always been to view the mortgage as an entry point to a broader banking relationship. And this opportunity is to deepen those relationships over time through deposit, as you mentioned, investment, credit cards and advisory services. So as we see the large cohort of newly acquired mortgage clients mature, we expect stronger primary banking relationship. And this is really a key component of our long-term growth strategy and an important driver of future deposit growth.

Okay. That's helpful. I mean, you've [ seen ] the outperformance in mortgages is primarily just driven by execution and channel strength? Or is there a pricing aspect there as well?

So thank you again for the question. Our mortgage growth continued to be driven primarily by market share gains rather than aggressive pricing. We've maintained a consistent pricing strategy across all of our channels, and we remain focused on profitable sustainable growth. Our growth is being supported really by a strong execution across both of our channels, so distribution network and the broker channel, which really has a strong momentum in Quebec, where we -- where the market has been really resilient. We're also encouraging growth in Ontario and other markets outside of Quebec. Our recent CWB acquisition provides us a good window and a good opportunity to grow that business out with as well.

Your next question comes from the line of John Aiken with Jefferies.

Marie Chantal, I want to talk about the AIRB conversion to the CWB portfolio a little bit further. So now we're expecting -- I think you said the benefit is going to materialize late in 2027. Does this mean that we expect the conversion to happen in late 2027? Or is the conversion going to happen early in 2027 is going to take some time for the benefits to fall through? I'm a little confused because I thought previously it was going to be in the fourth quarter, the conversion and the benefits were going to impact Q4.

Thanks, John, for the question. And yes, I think it requires a little bit of more details in order to clarify what we shared earlier in our remarks. So as you heard, we have completed our 2-quarter regulatory parallel run, and we're happy with the demonstration of the regulatory readiness that we've demonstrated across 3 of our 4 pillars.

Now the next pillar that we'll be focusing again on is the methodology one. And really, what we are trying to achieve there is we want to recalibrate the models to improve their predictive accuracy. And once that work is done, we will proceed with the required 2-quarter regulatory parallel run.

So to answer your question specifically, the conversion will happen late in 2027 once that work is done. So for us, the strategic rationale for transitioning to the acquired CWB portfolio to the AIRB, it remains fully intact. We're very confident that the initiative will support long-term capital efficiency and shareholder returns.

Your next question comes from the line of Stephen Boland with Raymond James.

Yes Sorry, I'm going to follow up with John. And again, maybe this change -- maybe I missed this or just because of my tenure doing this with the banks. But I thought the AIRB benefits were in the 50 to 75 basis points. Is that -- are you just talking about that 35 to 55 just for this 1 portfolio, or that's the total benefit that we should expect now?

It's just for the 1 portfolio because you're right. Yes, the overall target was larger, but our first conversion was 35 to 55.

Okay. I appreciate that. And just -- you kept your guidance or your goal for a 17% ROE by the end of fiscal 2027. When I look at your CET1 waterfall, how are you going to drive a higher ROE when -- unless you just continue to buy back more stock? Because you're obviously very profitable. But is it a combination of higher profit and then accelerated the NCIB that's going to drive that 50 basis points lower over the next year?

So to your question on our -- the main drivers on our ROE target of 17% plus for 2027, it's a combination of many factors as we've disclosed earlier this year. So yes, continued broad-based growth across all of our segments. Revenue synergies, as I disclosed earlier in my remarks, are also expected to contribute to that upside into the ROE. There is obviously some buybacks that we had referred to. And this is something that we continue to converge to with a new NCIB program that we'll be announcing upon expiry of the current one. So we continue to be very confident in achieving that 17% plus ROE.

And we are also maintaining that target while trending the CET1 ratio towards approximately 13% for year-end of 2027. So those are the main drivers behind our target. As per our usual practice, we will be revising the guidance in Q4 for the following year. So stay tuned for that.

Your next question comes from the line of Doug Young with Desjardins Capital Markets.

I apologize. I'm going to follow up on the AIRB. But just -- I get the whole process and how you described, it all makes a ton of sense. What I'm wondering is why the lower end of the target now? Like what changed versus your initial kind of view that's driving that to the lower end of your initial target range? And I know this is for the first conversion. But for the second conversion or for the remainder, should we be thinking something similar?

Thanks, Doug. It's Marie Chantal. I'll answer the first portion of your question, and maybe I'll pass it over to Jean-Sebastien for the follow-up. So we concluded that additional model requirements were needed given the current stage of the credit cycle, including higher observed default rate. So this is an important portion of our update today. So Jean-Sebastien, do you want to give a little bit more of insights?

Sure, Doug. Yes. So great question. When you look at our CWB performance last year and this year, you would have seen that the CWB impaired loan ratio was higher than what we had in our National Bank ratios. So higher observed defaults. What that will mean is when we will redevelop that part of the model, there will be more conservatism. And given the more conservatism, you should expect then, a little bit more capital consumption than what we had originally expected, which explains why the benefit would be lower.

Okay. I kind of get it. But maybe sticking with yourself as well, just thinking on credit. And I get the interplay of NIMs in Canadian banking being down, but your impaired PCL is down, and I think -- thinking about NIMs and credit kind of go hand-in-hand. So -- and then you did release some performing loan allowances in Canada as well. So I'm just trying to understand, like the credit in [indiscernible] P&C Banking was better than expected. Is this also a function of the mix shift that [ top time ]? Or can you provide a little bit more detail on what drove that?

Yes. So a couple of questions in there. So I'll answer your direct one on the leases of provisions in Canadian banking. So first, as a bank, we had 17 consecutive quarters of build. I think you can see our coverage ratio, 5.3x of net charge-off over 2x last 12 months impaired PCL. So very strong coverage ratios.

What happened is for the Canadian banking, specifically for the Commercial Banking, we saw two positive outcomes. First, we saw very positive credit migration. And second, some of the macroeconomic scenarios or specific variables had a positive impact that created a release. So the growth we saw in this portfolio was counterbalanced by good credit migration and favorable macroeconomic scenarios.

On a general more perspective, maybe on credit outlook, we still see the same two stories continuing. So the same story we've been talking about for the past -- over the past year. So in terms of wholesale performance, we still expect them to be lumpy. So not necessarily an increase in rise of defaults, but what we're still observing is lower recuperation rates. And that's being driven by the tariff environment, geopolitical environment, inflation environment and supply chain disruptions.

In terms of retail, you would have seen the unemployment improved significantly this quarter. And I've been calling a specific cohort, which is the 24 to 55 age cohort, and we have seen some strong improvement in unemployment and a reduction in layoff rates. But we're still expecting this to take a little bit of time before it bakes into the PCL results. We've also observed that early-stage delinquencies were improving in most categories in retail, except insured mortgages, but I wouldn't call it a trend yet.

And we're still seeing geographical differences, so Quebec outperforming Ontario. And we're still seeing that homeowners that have unsecured credits are performing better than non-homeowners. And you know our portfolio. So we're continuingly underweight consumer unsecured, overweight insured mortgages. And then when you see our provisioning also on the consumer unsecured, which is always the part that I'm looking, we keep around 8% provisioning levels on our credit card, which is, I think, prudent.

Your next question comes from the line of Paul Holden with CIBC.

I want to drill down a little bit more on the Canadian P&C NIM. So a couple of questions on that. First off, you mentioned consistent pricing strategy. Can you give us a sense of then, the direction of mortgage spreads, how are those trending in Q3 versus the last couple of quarters? And then two, talk to me -- talk to us a little bit more about the treasury benefit of 3 basis points and sort of if there's some kind of interplay there with the transfer pricing mechanics that might have impacted P&C NIM as well?

Thank you, Paul. This is Julie. Our mortgage margins, we continue to see really a competitive environment, particularly around new originations and renewals, which resulted in pressure on our mortgage spreads during this quarter. From a retail perspective, our mortgage [ pose ] economics remain supportive of earnings. We believe that our current pricing and renewal dynamics continues to provide a solid foundation for profitability going forward.

Okay. And then just the second part of the question with respect to the treasury benefit?

Paul, it's Marie Chantal here. So first of all, treasury revenues came in a little bit stronger than what we had expected earlier this year. Those 3 basis points, I'll summarize it in a couple of elements. So first, treasury, as I said, delivered strong results, supported by prudent balance sheet management and robust funding and liquidity activities, discipline and efficient growth in the high-quality liquid asset portfolio. So that's one thing.

The results were also enhanced by contributions from investment gains, public and private market investments. And as we look forward, while certain components remain subject to market-driven volatility, the results highlight the treasury's contribution to the overall bank financial strength through disciplined management of funding liquidity and interest rate risk, as I mentioned.

So to your question, if there's any link between the P&C NIM and the treasury, it's really -- our methodology has been stable through time, and we're making sure that we're -- it's a full pass-through according to our methodology. So it's basically been a strong performance from the treasury group.

Okay, okay. So it's not because of the loan growth versus deposit growth in Canadian P&C and some transfer pricing into treasury that's really putting pressure around Canada and [ benefit ]. Okay. Okay. That's good.

And then I guess the final question I want to ask, and I think what really people are trying to drive to here is, as you're growing mortgages more quickly and as you highlighted, with lower spreads, like to what extent does this weigh on the ROE? Like, is this capital deployment that is something that's going to be dilutive to ROE? I think that's the question people are really trying to solve for.

I think, Paul, there is a couple of things here that we can also highlight on top of the margin that's been -- that you've been asking on. So first of all, NII growth has been really interesting when you look at year-over-year, 10%. And last quarter, I believe it was around 7%. So it is contributing to the overall profitability of the P&C Banking. So we are not seeing that being a drag on the ROE. And if you look 1 level up at the Retail Banking revenue growth, as I mentioned in my remarks, it was 10% this quarter year-over-year. So that's also certainly an interesting contributor to the ROE.

Your next question comes from the line of Ebrahim Poonawala with Bank of America.

Okay. Good morning. So I'm going to ask the 15th question on the P&C NIM. But just what I'm going to understand, so I think what you're telling us is growing mortgages more. Over time, you cross-sell into those customers, it's very profitable. But just big picture, does that mean that the margin -- some stability in the fourth quarter? I think it is the lowest P&C NIM in the industry. Like does the 2.19% continue to go lower as you pursue this strategy?

And I get that it may not impact ROE because maybe you're getting more fee growth over time, et cetera. But I'm just thinking, just as we think about the next year or the next couple of years, is it reasonable for us to assume that the 2.19% NIM is headed towards 2%? Or maybe it stabilizes much -- before that? Or just -- is that line of thinking incorrect?

So thank you, Ebrahim, for your question. This is Julie again. I think that what perhaps we need to step back and look into our current position, our business mix is quite different than our peers. And I think the unsecured aspect of it is underweight, and this is something that is part of our strategy that we'll be discussing in the upcoming months in the retail transformation. So deposit is always part of what we're achieving to do, deposit growth, cost efficiency as well and product diversification. So stay tuned for what we'll be announcing in the next -- and sharing with you on the retail transformation.

Got it. So I guess some version of shift in business mix or strategy going forward may have an impact there is -- I guess, but we'll wait for the next quarter.

And then just -- Laurent for you, just in terms of capital allocation or [ moration ] there. Just talk to us as we think about the journey from the 13.5% to 13%, and I think you mentioned OSFI's change should provide even more flexibility to the industry to capital deployment. I think in that world, how do you see that 13% eventually going, I would imagine, something closer to 12%? Is it buybacks? Do you see a scenario where organic growth would ramp up so much that it would consume that capital? Just give us a sense of how you're thinking about it.

Ebrahim, it's Laurent. Thank you very much for your question. So in terms of capital priorities, nothing has changed. It's organic growth, supporting Canadians, Canadian businesses, major projects. So my comment on this provides more room.

It's our focus. Our focus is to grow the balance sheet. It's potentially strategic tuck-ins as well in P&C and Wealth. They fit the strategy, dividend growth and then buybacks. So the focus is not on buybacks, but obviously, they're an add-on to returning capital to our shareholders.

So I think Marie Chantal mentioned it in her script and some of the questions. So right now, end of 2027, we have not changed our target for CET1, roughly around 13%. We believe we're going to be able to deliver a 17%-plus ROE next year. And now the change that we announced today, this is going to be achieved without AIRB coming into effect this quarter. So you could say that there's even more upside coming because AIRB is down the road, and we believe that we have capital optimization coming up.

And in our plan, there's no acceleration of buybacks also over the next year to achieve these targets. So our focus is really organic growth, as you can see, the growth in our balance sheet. And as we are encouraged also, as I mentioned, by our government's focus on the economy and major projects, we're going to be there to support that. And we're hopeful, and we see a lot of potential, obviously, in the economy to deploy more capital for major projects and for businesses. Does that answer your questions?

Your next question comes from the line of Mike Rizvanovic with Scotiabank.

I had a follow-up for Julie on the mortgage growth. I wanted to look at the insured balances specifically. So when I look at the banks that have reported this quarter, I see one of your peers is minus 1% sequentially on balances and insured. I see your other peer is flat. And I look at National, and you're plus 8%. Which, to me, looks like is much more than just your natural sort of market share gains, normal course market share gains.

So I'm wondering, are you purchasing portfolios? Are you funding mortgage investment corps? Or does this maybe include part of the CMHC-insured multi-res that you fund with the CMB program? There's got to be something more in there than just natural market share gains. I've never seen this level of divergence in any lending category among banks.

So thank you for the question. There's -- it's really the strategy of both of our distribution network and the broker channel. And it's really those two that are driving that growth. There is nothing specific. So I'm sorry to say that there's nothing mysterious about how we come up with how we delivered those results. But it's really banking on into developing client engagement, strengthening the relationship with our customers. We have and maintain a strong relationship with our broker and those two are paying off.

Perhaps a little bit of color. Q3 is historically a quarter that is stronger, being heavy in Quebec. In Quebec, there is a situation where there's a lot of movement on July 1 which -- and moving. So there's a lot of volume coming out of that. So Q3 has been a great and continuum on that front.

Okay. That's helpful. And then I look at just the Ontario insured balances up more than 9% in a single quarter, just really confuses me as to how you could grow that quickly. I guess the other thing is, are you changing anything in that distribution? You mentioned the broker channel. Are you adding maybe more brokers or changing anything on your risk parameters here to fund this growth?

So the broker channel, we have not yet deployed additional broker outside of Quebec. You probably saw the announcement [ First National ] that was done in Q2, whereas the new partnership that we have, and we deploy new brokers across Canada. That being said, we're growing the business outside of Quebec. And as I mentioned earlier, with the acquisition of CWB, it allows us to have more visibility. It allows us to have a sales force that is more present, [ MDMs ] and potentially brokers. So that's where the growth is coming from.

And maybe I'd add -- maybe -- it's JS. So definitely no change in risk parameters. When you look at our new cohorts that we've originated in terms of TDS, in terms of LTI, in terms of credit scores, it's very, very flat.

And also just maybe to help. Typically, one of the barriers for insured mortgages was the size of mortgages. As we have seen the Ontario market correct a little bit, there is going to be a natural more higher number of clients that could qualify for insured mortgages. So it brings it down a little bit like the Quebec market, where you have lower individual mortgages, so higher percentage of insured typically. So I think that's another force at play.

And that concludes our question-and-answer session. I would now like to turn the conference back over to Laurent Ferreira for closing comments.

Thank you. To all our clients affected by the current conflict, I just want to mention that we are there to help you, and we will keep supporting the Canadian economy. And thank you again for joining us today.

And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to National Bank of Canada's Second Quarter Results Conference Call. I would now like to turn the meeting over to Marianne Ratte. Please go ahead, Marianne.

Welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO; Marie Chantal, CFO, and and Jean-Sebastien Grise, Chief Risk Officer. Our business heads are also present for the Q&A session, including Julie Levac, Personal Banking; Judith Menard, Commercial and Private Banking; Nancy Paquet, Wealth Management; Etienne Dubuc, Capital Markets and [ Bill Bane ] International. Before we begin, please refer to Slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted. I will now pass the call to Laurent.

Marianne, and thank you, everyone, for joining us. In the second quarter, we delivered EPS of $3.23, up 13% year-over-year. We generated a return on equity of 16.8% and while in -- while maintaining a strong CET1 ratio of 13.54%. Despite macroeconomic uncertainty, clients remain active throughout the quarter and market conditions were favorable. This was reflected in strong growth in both our balance sheet and our fee-based businesses.

We also benefited from credit performance, the realization of cost and funding synergies and momentum in revenue synergies from as well as share buybacks. On the capital deployment front, we remain active on our NCIB. To date, we have repurchased 8.8 million shares under our program, which was upsized during Q2 to enable the purchase of up to 14.5 million shares. Our strong earnings power and capital position also support an increase in our dividend with today's announcement of an $0.08 or 6% increase -- this brings the quarterly dividend to $1.32 per share.

During the quarter, we completed the syndicated loan transaction with Laurentian Bank -- and earlier this month, we received clearance from the Competition Bureau for the retail and SME portfolio transaction, which remains on track to close by year-end, subject to remaining regulatory approvals. We are committed to operating with strong capital levels and continue to target a CET1 ratio converging towards 13% by year-end of 2027. Turning now to our economic outlook.

Uncertainty has increased significantly with the war in Iran, which has impacted the global and Canadian economies. We expect the complex to drive inflation and higher rates as supply chains for critical goods are disrupted and reconfigured. This uncertainty could further impact business investments, which have slowed down over the past couple of years due to tariff-related uncertainty and excessive regulation.

But if we look beyond the near term, Canada is well positioned to benefit from ongoing efforts to reindustrialize our economy, undertake major projects, make Canada and energy superpower modernize our defense sector and create champions and invest in Arctic infrastructure to support defense, energy and critical mineral development.

On this I want to acknowledge the leadership shown by the federal and provincial governments to rebuild Canada's economic sovereignty. Structural changes are required to adjust to the evolving economic and geopolitical landscape and National Bank will be there to support clients and our country's economic priority.

Turning now to our business segments. P&C Banking generated net income growth of 18% year-over-year, driven by strong growth in lending activity and mutual funds as well as credit performance. Operating leverage was positive in the quarter. Personal Banking mortgage volumes was up 12% year-over-year, supported by a resilient housing market and share gains in Quebec.

Personal deposits were slightly down sequentially as strong equity markets drove increased client flows into investment solutions and generally higher portfolio levels, contributing to an 8% increase in total personal savings year-over-year.

In Commercial Banking, deposits were up 7% and commercial loans were up 5% year-over-year. Despite macro uncertainty, clients were active within the National Bank originated loan portfolio growing by 11% year-over-year. The CWB legacy book declined by $400 million sequentially, primarily driven by commercial real estate.

Our outlook for the year on commercial lending remains positive, while acknowledging that the macro context has shifted with the conflict in the Middle East and with heightened uncertainty around the path of inflation and interest rates. Net income in our Wealth Management segment increased 18% year-over-year to $277 million, supported by growth across the franchise, including strong fee-based and transaction revenues.

Assets under administration grew 14% over the same period to reach nearly $940 billion, benefiting from resilient equity markets and strong net sales. Capital Markets generated net income of $490 million. This notable performance reflects the strength of our business mix and strong execution. Trading conditions were favorable in the quarter.

Our performance in global markets was primarily driven by strong client activity, including in equity structured products originations, commodities and rates as well as higher market-making volumes more broadly. Record results in Corporate & Investment Banking reflected sustained client activity across M&A corporate banking and ECM as well as continued investments in our franchise.

Credigy generated net income of $46 million, up 15% year-over-year. Average assets were up 10% over the same period and 1% sequentially as we continue to benefit from recurring flows from established partnerships. We remain highly disciplined in pursuing new deals given the prevailing competitive market dynamics and pricing conditions.

At ABA Bank, net income increased 10% year-over-year, reflecting balance sheet growth and lower PCLs, partly offset by a higher efficiency ratio. Loans were up 12% year-over-year, while deposits grew 15% and over the same period. I will now pass the call to Marie Chantal.

Thank you, Laurent, and good morning, everyone. We delivered strong results in the second quarter. revenues increased 7% year-over-year, driven by solid performance across our segments and strong balance sheet growth. [ GTPT ] grew 5%, and our businesses generated an all-bank efficiency ratio of 50.4%. Expenses increased 9.5% year-over-year. Of note, Q2 2026 included $15 million of litigation expenses and Q2 2025 reflected a $22 million reversal of a property tax provision. Excluding these 2 items, expense growth was 7.4%, in line with revenue growth.

For the second half of the year, we anticipate expense growth to moderate towards the low single-digit range, positioning us to deliver positive operating leverage.

Moving to Slide 8. Net interest income, excluding trading, grew 7% year-over-year. Sequentially, it was down about 5%, with fewer days in the quarter, accounting for over 2/3 of the decline. Additionally, balance sheet growth was offset by Credigy's prepayment revenue of approximately $12 million recorded in Q1 and higher treasury NII in the prior quarter. NIM in Q2 was 2.16%, down 8 basis points quarter-over-quarter.

As expected, NII from treasury was lower sequentially representing 4 basis points, largely offset by noninterest income. It also reflected higher prepayment activity last quarter, as well as 1 basis point decline in P&C NIM as loan growth outpaced deposit growth.

Looking at next quarter, we expect the P&C NIM to be slightly down from Q2 levels. Deposit margin expansion is expected to be offset by commercial deposit mix. As for the all bank NIM, we expect it should remain relatively stable next quarter.

Turning to Slide 9. We continue to grow both sides of the balance sheet. Loans increased 9% year-over-year and 3% quarter-over-quarter, including the addition of the Laurentian Bank syndicated loans of $657 million. Deposits increased by $9 million or 3% sequentially. Personal demand deposits grew $1.6 billion or 2% and mainly driven by wealth management.

Furthermore, our customers' appetite for investment solutions has been strong, given the favorable market performance that continued in Q2 and resulted in solid growth. Non-retail deposits grew $7.5 billion or 4% quarter-over-quarter, mainly driven by Commercial Banking and Corporate and Investment Banking.

Now moving to capital on Slide 10. We ended the quarter with a strong CET1 ratio of 13.54% supported by capital generation of 41 basis points. RWA growth consumed 38 basis points of capital. Credit risk of 25 basis points primarily reflected balance sheet growth with 5 basis points from the acquisition of the Laurentian Bank syndicated loan portfolio. Market risk, mainly driven by business growth consumed 9 basis points of capital. Share buybacks during the quarter reduced the CET1 ratio by 32 basis points. Since the launch of our current NCIB we have repurchased 8.8 million shares representing approximately 60% of the program.

Now turning to Slide 11. We are making solid progress on realizing synergies from the acquisition of CWB. So far, we have realized $215 million of cost and funding synergies, and we are on track to reach $270 million by the end of fiscal 2026. Moreover, we are increasing our cost and funding synergies target to $300 million on an annualized basis.

We have also realized $33 million of revenue synergies since the beginning of fiscal 2026 and mainly driven by fee income. As previously mentioned, revenue synergies should reach approximately $50 million by the end of this fiscal year. We continue to target $200 million to $250 million in revenue synergies by the end of fiscal 2028. We delivered strong results across both quarters of the first half, supported by solid underlying performance across our businesses, ongoing cost discipline and realization of CWB synergies with credit remaining within expectations.

In addition, we continue to return capital to shareholders through dividend increases and ongoing share repurchase activity. We grew our EPS by 12% year-to-date. While the macroeconomic landscape continues to be uncertain, our outlook for the remainder of the year remains positive. For the second half of 2026, we expect EPS growth to be in line with our performance year-to-date.

We also anticipate expense growth trending towards the low single-digit range, contributing to a positive operating leverage for the remainder of the year, having generated an ROE of 16.7% year-to-date, alongside strong capital markets performance, we remain on track to achieve our ROE target of approximately 16% in fiscal 2026.

With that, I will turn the call over to Jean-Sebastien.

Good morning, everyone. Since our last call, the Canadian economy has grown modestly, while the labor market continued to weaken. The conflict in the Middle East is adding another layer of uncertainty by putting pressure on energy prices, inflation and interest rates. That said, strategic trade diversification and accelerated nation building projects in energy, natural resources and infrastructure should help to support future economic activity.

In this complex environment, our resilient portfolio mix, disciplined risk management and prudent provisioning underpinned our strong credit performance.

Now turning to the second quarter results on Slide 13. The Total PCL were $233 million, including the initial provision on performing loans of $6 million or 1 basis points related to the Laurentian Bank's syndicated loan portfolio.

Adjusted total PCL were $227 million or 30 basis points, down 2 basis points quarter-over-quarter. We added 4 basis points of adjusted performing provisions in Q2 and mainly reflecting portfolio growth and unfavorable macroeconomic scenarios, which included a higher unemployment rate and more pessimistic outlooks for both equity markets and housing prices.

PCL on impaired loans were $192 million or 26 basis points, down 2 basis points quarter-over-quarter and within our guidance of 25 to 35 basis points for the full year. Personal banking provisions were $2 million higher sequentially, mainly driven by consumer credit.

Commercial Banking provisions rose $12 million quarter-over-quarter, mainly driven by the real estate and construction sectors. Capital Markets reported a $1 million recovery related to one file. At Credigy, provisions decreased by USD 3 million resulting from the normal seasoning of residential mortgages and consumer loans.

At ABA, impaired provisions were down by USD 4 million sequentially to USD 13 million reflecting lower formations.

Turning to Slide 14. Our total allowances for granted losses were $2.6 billion, representing 5.1x coverage of our net charge-offs. Our performing allowances were $1.7 billion, demonstrating a strong performing ACL coverage ratio of 2.2x. We have been building allowances for the past 16 quarters, and continue to be comfortable with our prudent and defensive provisioning levels.

Turning to Slide 15. Our gross impaired loan ratio was 114 basis points up 3 basis points quarter-over-quarter. Laurentian Bank syndicated loans accounted for $40 million or 1 basis point. Gils excluding USS F&I were 84 basis points, up 3 basis points sequentially. The Net formations were 13 basis points this quarter. Excluding the Laurentian Bank portfolio, net formations were 12 basis points, up 5 basis points compared to last quarter. In Commercial Banking, net formations were 28 basis points and included 1 file in CRE residential insured.

On Slide 26, we provide additional information on a few sectors of focus. Of note, we have limited exposures to U.S. nonbank financial, NAV lending and software. In conclusion, we are pleased with the credit performance in the second quarter and first half of the year and continue to expect impaired provisions to be within the 25 to 35 basis point range for the 4 fiscal 2026.

In the current context of heightened uncertainty and softer labor market conditions, we expect further gradual increases in PCL while our wholesale book remains subject to periodic lumpiness. However, our defensive qualities, resilient business mix and prudent allowances position us well for the remainder of the year.

And with that, I will now turn the call back to the operator for the Q&A.

[Operator Instructions] Your first question comes from John Aiken with Jefferies.

Laurent, as we look towards you achieving the target of 30% CET1 ratio, can we assume that what we saw in the second quarter is going to be pretty much the blueprint moving forward, where the internally generated capital remains very strong, and -- but it's being fought off by the share repurchase, but also risk-weighted asset growth. I mean is this something that I mean, not definitively, but is this something that we should be expecting moving forward in future quarters?

Thank you for your question. At a high level, yes, you have sometimes period of volatility, which could impact market risk RWA. So that is a factor that we have to take into consideration. But I guess at a very high level, yes, you should expect us to continue executing at these levels.

Great. And then in terms of the risk-weighted asset growth, I don't know if this is for Marie or not. But in terms of the expected growth assuming that Canadian consumer remains a little bit in trouble. I guess the density on the commercial side is going to cause growth on that side. Is that a reasonable outlook?

John, can you please repeat that question?

Sorry. Yes. In terms of risk-weighted asset growth, presumably the outlook is on a bit stronger on commercial and higher density is going to lead to the potentially a risk-weighted asset acceleration.

Yes. In that context, that could be a good assumption.

Your next question comes from Matthew Lee with Canaccord Genuity.

Maybe just 1 on P&C. Loan growth continues to be pretty strong. Deposit trends a little bit more mixed this quarter. Anything about the franchise today, is the pace and mix of core deposit growth is going to economics of new lending or the path of P&C margins? And is that going to be the main source of NIM pressure as you look into Q2 and maybe Q4.

Matthew, it's Chantal. So maybe I can start with a few points on the NIM going forward and what we are seeing this quarter and then Judy can take a moment to speak about more of the the outlook in terms of loans and deposit growth for the for the P&C. So for the NIM, let's take a moment just to look at the Alba NIM and then I'll go a little bit deeper in the P&C limb.

So the Q2 decline of the bank NIM, as I explained in my remarks, is something that we had anticipated for this quarter. So recall that in Q1, we benefited from a particularly strong NII driven by ALM activities. And in Q2, the treasury performance remained solid, although reported NII was lower sequentially, largely offset in noninterest income due to the accounting of some hedges, which happens from time to time.

So on a total revenue basis, that treasury, as I said, had a very strong second quarter. and the overall impact from treasury on the all bank NIM represents approximately 4 basis points sequentially to the all by NIM. Additionally, we had some prepayment activity last quarter from Credigy also impacted the NIM by 1 basis points Q-over-Q, which is something that we had also mentioned.

Now when you look at the P&C NIM decline this quarter, improved deposit margins was offset by volume mix as loan growth outpaced deposit growth. So that's something that we've also shared in the past, and it's something that you're seeing when you look at our loan growth volumes as well as deposit volumes.

Looking ahead, we expect the bank NIM to remain relatively stable in Q3 from Q2 levels and we do expect a slight decline on the P&C NIM in Q3 driven by mix dynamics in commercial deposits, partly offset by continued repricing benefits on our core deposits. Also, we expect the treasury NII to revert towards a midpoint between Q1 and Q2 levels. That's a bit of what happened in terms of the NIM and on the P&C name.

So if I look into -- this is Julie. So if we talk about deposits, specifically for retail, our deposit outlook remains consistent with the current market trends. the continuation of low interest rates through the end of 2026 limits the relative attractiveness of deposits and continues to drive outflows from GICs. While the market returns that are expected to normalize potentially slowing the pace of migration towards funds, the underlying dynamic is not expected to reverse.

As a result, deposit growth is expected to remain flat. Should it on the commercial side. I don't know if you want to end. So thanks for your question. So the deposit growth on the commercial banking side remains a strategic focus. And we're really well positioned to capitalize on a significant opportunity to grow our penetration in cash management product.

And just to give you an idea on our cash management and deposit strategy, we have 3 pillars -- the first one, we've been operating our online banking platform. It's almost done. Second, we're expanding our treasury management team to deepen client engagement and support deposit growth. This is in process.

And third, we're enhancing our deposit solutions through more targeted offerings by client segments and industry. So very positive on the outlook of the deposits on the commercial banking side.

Okay. So if I'm taking that together, in the next couple of quarters, we should continue to see loan growth outpacing deposits? And if so, we should still continue to see P&C banking NIM as in pressure.

That's correct, Matthew.

The next question comes from Ebrahim Poonawala with Bank of America.

I guess maybe first question, Laurent, for you, around -- I think you said that the uncertainty on the macro side has led to a slowdown in investment spend. And then you went on to outline a lot of good things that could happen in the future. Just give us a sense of -- it feels like the Quebec economy has had a delayed impact in terms of the slowdown.

So when you look at just the job picture locally, what's happening just from a credit standpoint, do you think that lagged effect the Quebec maybe feeling, which show up with somewhat higher PCLs over the coming quarters? Like how would you frame the year-end now in terms of just the economic activity and how that could translate into credit trends?

Ebrahim, thank you for your question. So maybe -- so let's start with Canada in general. General delayed reaction, labor market suffering a little bit more now across the country, Quebec as well. And the uncertainty also around Cosma and commercial tensions for our country. Those are all factors, I think, that are impacting growth and investments in businesses. And so we are -- we feel -- it feels like we are a bit in a lull in our country in terms of business investment, and in my prepared remarks, I've said this publicly, we are definitely encouraged by the shift in our government towards a focus on the economy. So to us, that bodes really well going forward.

Now in terms of change, you asked a question about outlook on PCL, it doesn't change your outlook. Maybe I'll ask also Jean Sebastien to comment on our outlook regarding PCLs for.

Yes. So we just -- we confirmed our guidance for total Bank. If you look at the retail book in Quebec versus rest of Canada, so the retail book in Quebec has outperformed for the past several years. So it would be normal to see a little deterioration. I agree with you. You pointed out the higher unemployment. However, I would be cautious in not pointing it as a trend as we've seen a large shift this quarter, but I would wait for a couple of quarters before we see longer lasting trends before having a conclusion.

But the fundamentals of the Quebec markets remain which is a strong saving rate, more double-income families and low housing prices. And to add on top of that, I'd remind you that we have a low unsecured proportion in our total portfolio, which is where typically it would shift the first and the performing of our unsecured portfolio in Quebec is particularly good given the fact that we're overpenetrated and homeowners, which is the place where typically delinquencies and losses are lower.

Got it. And as a follow-up on the capital and the buyback discussion earlier, as you think about just -- I mean, obviously, you have a lot of excess capital, high ROE, so you're generating a lot. When we think about just, is there any level of sensitivity when you look at the stock from price to earnings, price to book your internal return on those. This -- I'm wondering or is it more about you want to do x amount of buybacks and keep capital levels at a steady state and you, as a result, not particularly sensitive to where the stock is fading at any given point in time. Just would love to hear how you think about it.

That's a great question, Ebrahim. We will adjust from time to time. So if we do see opportunities to increase the pace of our buyback because we think our stock is not performing at the same level as others. For instance, like we saw, there's a period of time in January where our stock was not performing at the same level as others, and we did take advantage of that.

So we are a little bit dynamic in the way we manage the buyback. But in terms of change in our strategy because of our stock price, there's no change in strategy. The only thing that would change our strategy is a big shift in macro. If there's a big shift in macro, where inflation is picking up and interest rates are picking up, and we think that the macro environment will deteriorate, we'll revisit. So that's kind of the philosophy. But we'll take advantage of price swings if we can, but our strategy is pretty steady.

Your next question comes from Mike Rizvanovic with Scotiabank.

I had a question for Judith. I guess a 2-part question. So one, just on the CWB loans coming off, I think $400 million is what you flagged -- so it does move the needle on your year-over-year performance. So 11% gets down to 5%. I guess I'm wondering like how much of that is more recent? Like is this just the normal part of the process of getting out of areas where you maybe are not comfortable on the risk side or for whatever other reason. Are you to the point where it's almost done at this point? Or is there more potentially to go there?

Okay. Thanks, Mike, for your questions. So I'll start by saying that as expected, our sequential commercial loan growth was consistent with the previous several quarters. So there's no surprise on that. So and on the -- just I will comment on the legacy National Bank portfolio. So despite macro uncertainty, clients remain very active throughout the quarter, and we're very happy delivered another quarter of double-digit year-over-year growth.

So our core -- it is really as per our strategy. And this, I want to point out our core commercial banking grew more than real estate, and that's really focused on both mid-market and large client segments across all geographical footprint. So that's the first part.

So if we go on the CWB side, so I want to offer 3 things. First, the performance of the CWB portfolio has been as expected, as mentioned in the last few calls, our teams have been focused on supporting the throughout the conversion, no surprise around that. This focus has supported strong level of client retention with payout volumes remaining below pre-acquisition average. So that would be the first point. The second point is integration activities have created short-term headwinds and capacity for new volume, which has not been sufficient to offset regular payment and payout.

This has been particularly pronounced in the commercial real estate portfolio, as Laurence said in his remarks and which contain amortizing commercial mortgages, interim construction financing that pays out a successful project completion.

And the third point I want to offer is now the integration impact has clearly moderated and our teams are well positioned to return to generating new volume with early signs of recovery with a visible improving pipeline, while we maintain pricing discipline, obviously.

So we're positive on the opportunities in front of us to drive growth on portfolio. And what I would like to say also on the -- is it finished the integration. I would say that where we are right now, conversion and integration is finished, and we're going back like to normal state in the next few quarters. That's what I would offer to you.

Okay. So really nothing on the credit side that surprised you more recently, there's nothing related to credit.

No, nothing on the credit side. I'm comfortable with what I see in front of me.

Okay. Perfect. And then just quickly on the 11% growth that's a really robust number. And I'm wondering if you could just sort of delineate between growth in Quebec, your core market and some of the -- maybe the low-hanging fruit that you're getting outside of the Quebec market as you expand I guess, in Western Canada in particular. Any color on that?

Yes. Yes. So on our kind of legacy NBC portfolio, our growth Western Canada has been really high. And Ontario as well, I want to point out Ontario, but Quebec is also growing at a faster pace. So I would say that just to map it out, Western Canada, faster, Ontario and Quebec. That's how I would share that.

Your next question comes from Sohrab Movahedi with BMO Capital Markets.

Okay. I just maybe -- can I just pick up there for a second, this growth? Is it net new clients? Or are you increasing lending with existing clients?

So it's mostly net new client. We're also increasing, but we're seeing some momentum with net new clients, and that's been our focus.

Okay. And [ Jean], you had talked to us about pretax pre-provision. Maybe if I can just get a reminder what you think your segment pretax pre-provision is likely to do this year now that you've got 2 quarters under your belt?

So yes, thanks for the question. So I'd say, overall, we continue to feel good about the outlook, and I feel confident now about our ability to hit the top of the PTPP guidance that we had given for fiscal '26. So we've had obviously, a really strong performance in both Q1 and Q2 with a lot of great deal activity and very supportive market conditions across several businesses. But also, I think -- the franchise is operating from a structurally stronger position today. And you see it in our ability to execute for clients across market cycles with the ability to support increasingly complex financing and capital raising needs and the increasing number of leads and the improving diversification of the revenue mix.

So for the balance of the year, our base case is we'll see some more typical seasonal dynamics through the summer months and a market backdrop that may be a bit less active than what we experienced in the first half, while we still think it is -- it will be positive overall. So maybe a bit of more precise color. So we're seeing in structured products. You're going to see less volatility, we feel.

But overall investors are surprisingly resilient and the continued calling products, and that should mean good issuance volumes -- and the intermediation businesses, it's really our scale and execution capabilities that continue to position us well, support client flow across different market regimes, and that's reinforced by our leadership in ETFs and options and domestic bond trading.

And across our hedging solutions businesses, we think we'll see continued activity tied to financing and infrastructure across rates, FX, commodities, although part of the elevated results in Q2 may have been pulled a bit forward from later periods. And at DCM, I think they could get interesting. I mean, borrowing on both the corporate and the government side, there's good financing conditions. There's resilient investor demand. And that, I think, will translate into robust issuance activity.

And we continue to see good pipeline in the corporate banking and the investment banking. It's well diversified across sectors. So we think M&A remains strong and strong markets and strong investor risk appetite, I think will continue to be a good backdrop for equity in new issues.

Okay. That's very helpful maybe, even is incredibly helpful comprehensive maybe you're going to even surprise yourself and exceed the upper end. Laurent, one last question, maybe just for you. Last -- I think last quarter, when we talked -- when you talked about ROE outlook, you talked about either side of 16% for 2026. And you mentioned 17% or thereabouts in 2027. So I guess, I wanted to confirm that, that 17% still remains the 2027 kind of yardstick. And does it -- can it benefit further based on the work you're doing in the ROE optimization in your P&C Bank? Or did you have some of that benefit incorporated into the 17% type of number you were talking to us about for 2027.

So thank you for your question. So you're correct. Last quarter, we did provide guidance for the -- we upgraded our guidance for the year from 15% to 16% for 2026. And maybe I should correct you, but 2027, we provided a waterfall and it was 17 plus that we guided for 2027. And I think Marie Chantal provided a really good explanation last quarter on the 17-plus and also said that all the work that we're doing right now in terms of the next strategic plan are not included in our guidance for our ROE for 2027. So does that answer your question, Sohrab?

Yes, that's perfect.

Your next question comes from Doug Young with Desjardins Bank.

Just maybe starting on the credit side, 2 things, new gross impaired loan formations, and I look at it on a gross net-net, gross loan formation did jump sequentially and I think even year-over-year. And -- and it looked like write-offs were a little bit elevated. So I'm just -- maybe you can talk a little bit about where you're seeing the pressure like from a product or from a geography perspective on, again, new gross impaired loan formations and write-offs?

Thanks for the question, Doug. It's JS. So pretty simple explanation to that, and we called it on the slide. So I'd say the majority of our formations in commercial were actually driven by 1 file in commercial real estate in Western Canada, and that file is insured. So you've seen us grow in residential insured in the past years. And I think this is one good feature of this growth is when the they go wrong, you have some PCL protection on it. So although there is a large deal associated to it, there is no PCL associated to it.

And have you sized what that was in terms of loan or in terms of formation.

So I can give you a little bit more detail on this. So it's a little bit more than half of the commercial formations were driven by that file.

Okay. And how about the write-offs?

So the write-offs are -- can be lumpy. So there's always 2 sides to write-off. The retail write-offs are more normal driven by credit cards and by end of cycles for the other portfolios. And then we did arrive to the end of workout for a couple of larger files in commercial.

So when you arrive there, what you do is you derecognize the loan and you have the correspondent write-offs, so obviously, you're seeing a little bit more lumpiness on this this quarter.

Okay. So it doesn't sound like in either of these 2 that there's anything overly concerning. Is that from your perspective?

Well, I'm happy that the gross impaired loan was related to an insured file, that's for sure. But no, nothing overly concerning. Like if we had removed this file, our Gils would actually have been down quarter-over-quarter. But as I mentioned in my prepared remarks, I don't think we're in an environment where the level of uncertainty has reduced. So we could expect still ebbs and flows for the GIL ratios going forward.

Okay. That's clear. And then second, just on Credigy, we do our math and we look at the NIM or margin. And I look at the margin this quarter and I look at it relative to what an average would have been over the last 3 years. And it looks like it's down by a decent amount. And I know that you can say from last quarter, there was some prepayment that went through. But even if I look longer term, it looks like it's lower. Is there anything that's changed in the portfolio or that went through this quarter that or there would have been a material kind of impact on NII or NIM for margin for Credigy?

Doug, it's [indiscernible]. So you're right to point out a long-term slight decrease in margin. I think it's a function of -- we continue to prioritize secured assets. And in I think 2/3 of our investment volumes were in mortgage portfolios, first lien and second lien, but a lot of first lien. And so that -- on a risk-reward basis, we really like it. But that's really -- that's where we see value right now. We -- and if you look at other asset classes like MD unsecured space, we continue to see portfolio trading at prices that don't really reflect our view of the potential risks and performance. So conditions are a bit challenging there.

So we'd rather stick to the mortgage space for now and then we'll adapt and as the macro changes or as the situation evolves, we'll pivot as strategy as many times over its history been able to do. But you're right that that margins have been going down a bit, although the risk reward, we're probably in a great position. And the goal is still to deliver strong asset growth, but never jeopardize the long-term to meet short-term guidance in terms of margin or as a group.

I guess what I'm reading and missing, I guess, I should have looked at this, but if I looked at a risk-adjusted margin, it actually probably wouldn't be that different because our PCLs will be coming down as this mix shifts and that speaks to the risk reward. Is that a fair comment?

Yes. I think that's how I would look at it also, Doug.

[Operator Instructions] Your next question comes from Darko Mihelic with RBC Capital Markets.

I wanted to revisit the net interest margin discussion. Your outlook is very helpful for the next quarter or so. My question is, a little bit more longer term, I suppose, in nature, and it really revolves around the high level of liquidity we're currently covering, you're currently carrying. So I understand you have a 13% common equity fund ratio sort of target end of '27.

What would be a more normal LCR level? And is there any kind of a drag here on your margin, how fast would you sort of target to get to more normal liquidity levels?

Darko, maybe I can start, and I'll let [indiscernible] give some -- a bit more insights on -- from a capital markets perspective. So when looking at the LCR before going to the long term, just I think it's worthwhile just giving you a few insights on on the evolution of the ratio over the past couple of quarters. So the decrease in LCR that you saw this quarter, which is effectively a decrease from the previous quarter, but it's it really came back to the usual level that we are used to seeing. And that's what -- where we like to operate at National Bank.

But Nevertheless, the decrease came mainly driven by secured funding and collateral management activity. So it really reflects the transaction mix and timing rather than a change in our strategy, as I mentioned, and how we manage the bank core liquidity positioning. So the level that you're seeing right now is probably where we are -- we like to operate. We like to be in a good position and seize market opportunities when we see good funding opportunities, and that's what we saw earlier in the year. So maybe [indiscernible], would you like to add any

Thanks, Mariana. So you said it very well. So we prefunded a lot over the last couple of quarters, the previous couple of quarters, there were some market opportunities that were interesting, and we and it made sense to fund and to deploy this funding in highly liquid securities within capital markets and treasury portfolios.

Now that the conditions are normalizing you're seeing our LCR drift back towards more of its long-term average. I think over the long term, I expect us to be in the $140 million, $150 million range, but we really like having it among the highest of the big banks that will remain part of the strategy.

And so as I think about that then, it's clear that this is really a cap market, and there's none of this that's actually sort of being pushed out through FTP into P&C Canada. Would that be a correct assumption?

It is mostly in capital markets and treasury portfolios. But you're right, it's really opportunistic positioning in capital markets that are the bulk of this ratio.

Okay. That's very helpful. Another question on ABA. Just wanted to sort of revisit your outlook for ABA. It looks like there's a weaker economy the country itself has sort of lowered its economic outlook. It doesn't seem like you did any on the performing side from PCLs. So what is your outlook for ABA and should we just simply consider that the high level of growth, double-digit loans and so on should continue and we really shouldn't expect any difference in PCL levels either.

Darko, it's Bill. I'll take that, and maybe JS can comment a little later on the PCLs. But yes, for the economic outlook, I described Cambodia has faced a series of challenges over the past years. From the pandemic to the U.S. tariffs, the conflict with Thailand and now the conflict in Iran. It's -- whether those headwinds are relatively well but expected GDP growth has certainly declined.

I think 6% in 2024, 5% 2025 and expect it to be around 4% next year, which remains significantly below its potential growth. And we've talked previously about recovery and tourism being slow. That's certainly the case now. However, the growth in exports is higher than we had expected, particularly to the U.S. Year-to-date, it's up about 39% from last year, and FDI remains strong.

So in the challenging context of headwinds in the economy, we're very happy with ABA's performance. It's continued to evolve its market-leading digital banking services, which has led to great growth in the number of clients and in low-cost deposits, which is helpful. And I'd point out, Darko, that the long-term structural tailwinds in Cambodia remain in place. It's still under banked, young population, FDI remains strong. It's competitive labor cost supports manufacturing sector and exports. And so we remain pretty positive about the long-term growth potential. Does that answer your question? Maybe I'll pass it to JS for.

Yes. So on a credit perspective, recall we had 2 data points on ABA first as we had guided a while back, and that still holds through that 2024 would be at the higher end of what we expected going forward in terms of formations and it's true. And we also repeated that we expected the impaired PCL to remain elevated for this year, which is still what we expect.

And finally, to your last comment on the build, I think it's important to remember that the starting point is important. And although we built 3 bps this quarter, we built 47 bps last quarter, 42, the beeps the quarter prior. So we have been building performing provisions at ABA to make sure we have good downside protection.

Okay. Maybe just 1 last question to wrap up on ABA. If this current pace of growth continues, -- it is completely self-funding. Is that correct?

Yes. It -- as you've seen, deposit growth has been much higher than loan growth. I will caution when I think about what the impacts will be from the Iran crisis, whether you're an conflict, it's mainly impacted the price, not the availability of fuel. -- and it is consuming a greater portion of household budgets than in the past.

So we would expect deposits, saving rates and deposit growth to be lower than in the past, and that will impact it. But in terms of self-funding, yes, it definitely remains to be to have a strong excess liquidity on the balance sheet and continues to grow deposits very, very strongly.

Your next question comes from Paul Holden with CIBC.

Okay. I want to go back to and you've given some helpful commentary on the outlook for the business for second half of the year. I guess I wanted to ask you sort of longer term because this business has become harder to, I think, harder to forecast never easy. But harder to forecast just because you have this underlying growth from your from client initiatives and growing product offerings, et cetera, and then also very favorable market conditions, right, which have obviously benefited benefited all banks.

So trying to figure out a couple of things. One is like, should we actually be assuming continued growth into next year? -- for this business? Or is that just asking too much at this point? And two, if we think this business at some point has to normalize, which it probably does, what specific market conditions do you think we should be tracking to sort of get a sense of what could result in more normal run rate earnings?

Thanks, Paul. It's Etienne. Definitely, we want to keep growing the business, and we want to keep it growing at the same pace as the rest of the bank. That's definitely part of the strategy. and we're putting in place a lot of initiatives both on the global markets. And the corporate and IB divisions to continue our growth. And really to, as we've scaled domestic champions in Canada to slowly part those capabilities in new markets. We've done it successfully both on the C&I and the global market side.

I'm thinking of how we operate in the Delta One space in the structured product space. now in the project finance and renewable energy space, we'll definitely continue to do that as to what to track expect slowdowns. And we've seen that, right? It's when clients get a lot more quiet. I mean, we still are a franchise that depends on client flow client deals, giving clients advice.

And so when the economic cycle reaches a point where there's a lot less activity look for a slowdown. I mean, some of it may be when there are impacts on the markets that are negative, that creates volatility, sometimes so because we have a lot of countercyclical businesses on the trading side, that can be cushioned. But over the long term, we need clients to make money.

We need clients to succeed. And so this is a franchise that will always track client activity and client success.

Okay. So to be clear on that, even though your business is outgrowing the rest of the -- growing the rest of the bank in the last couple of years, you still think going forward, even at the current levels, you can grow in line with with the rest of the bank, that's the messaging here.

That's certainly the goal, yes.

This concludes the question-and-answer session. I'll turn the call to Laurent Ferreira for closing remarks.

Thank you, operator. Our second quarter was on that, I'd like to thank our teams across the country for all their efforts and excellent execution. And while the macroeconomic context remains uncertain, we are really well positioned to support our clients and continue delivering strong earnings growth and ROE on that. Thank you, and I wish everyone a great day.

This concludes today's conference call. Thank you for joining. You may now disconnect.

Good morning. So first of all, I would like to congratulate you for your punctuality. Not all groups are so well behaved as you are. On behalf of the Board of Directors of National Bank of Canada, I would like to welcome everyone joining us today for our annual meeting, whether in person or virtually. To facilitate your participation, the proceedings are being concurrently translated into English and French, both on the webcast and on the phone. You may communicate with us in English or in French.

We are very proud to be holding our annual meeting at National Bank Place for the first time. Our new headquarters have become an iconic landmark at the heart of Montreal City Center, embodying the bank's ambition, spirit of innovation and commitment to sustainable development. Before we continue the meeting, I invite you to watch the following video.

[Presentation]

[Interpreted]

As you know, we have been operating in a challenging geopolitical and macroeconomic environment for some time now. Despite this, the bank has delivered strong financial performance and growth across all of its business segments -- fully assumes its responsibilities in setting the bank's strategic direction and ensuring effective oversight. It upholds rigorous governance and supports the management team so that the bank can continue to provide high-quality service to its clients and deliver competitive returns to shareholders.

One year after its completion, we are proud of the outstanding success of the acquisition of CWB. This transaction, the largest in the bank's history, demonstrate everything we can accomplish together. A stronger organization, enhance value and a positive impact coast to coast.

In December, the bank announced the acquisition of several portfolios from Laurentian Bank, strengthening our presence in Québec and supporting our strategic plan. Laurent will discuss these transactions in greater detail in his opening remarks. In addition to overseeing these transactions very carefully, the Board was also actively involved in reorganizing our banking model. The objective was clear to accelerate our technology and digital strategy.

In 2025, the Board and management team collaborated, closely provided rigorous oversight of the bank's financial and nonfinancial risks and engaging in open dialogue with stakeholders, including shareholders and regulatory authorities. In 2026, the Board of Directors will remain fully committed to supporting the management team and advising them in achieving the bank's growth and competitiveness objectives.

We will maintain disciplined oversight throughout the completion of these important initiatives as well as the development and disciplined implementation of a new 3-year plan. We also pay close attention to the bank's evolving culture accelerating technological transformation and adaptation to a changing regulatory environment.

As directors, we are responsible for promoting exemplary governance, fulfilling our oversight duties and creating sustainable value for all stakeholders. We can count on competent, experienced and fully committed teams to help us achieve our objectives. I would like to acknowledge the exceptional efforts of all of our employees and especially the staff and management team who contributed to the successful completion of two strategic acquisitions or the two strategic acquisitions that I mentioned earlier.

I would like to thank Laurent Ferreira and the management team for their leadership and their diligence and dedication. It was a very busy year. Furthermore, I would like to note that Annick Guérard will not be seeking reappointment as a director. We would like to express our sincere thanks to Annick for her commitment and contributions to the work of the Board of Directors, the Risk Management Committee and the Technology Committee.

Your insightful advice, expertise and kindness have had a real impact on the Board and greatly strengthened our work.

I cannot conclude my introductory remarks without sincerely thanking you, our shareholders, for your continued trust. And I also would like to thank our customers for the long-lasting relationship they have with the bank. Thanks to this trust, we are facing the future with ambition and determination.

With me are Laurent Ferreira, President and CEO; and Marie Brault, Secretary and Vice President, Governance, Legal Affairs and Investments, who will serve as Secretary for this meeting. The members of the Board and management team join me in welcoming you. I will have the pleasure of introducing the directors to you when it's time for their election. In addition, I would like to welcome the representatives from Deloitte, the bank's independent auditor, who are here in the room.

Sophie, Marc and Carl. I can't see you very well, but I know you're here. Thank you. The code of procedure for the meeting can be found on nbc.ca/investors in the Annual Meeting section and copies are also available in the room. All shareholders present in the room and online will be invited to vote at the appropriate time during this meeting.

The Annual Meeting of Common Shareholders will proceed as follows. Laurent Ferreira will first address you, followed by the receipt of financial statements, the election of directors, the proposal on executive compensation, the appointment of the independent auditor and the shareholder proposals submitted for a vote.

This year, we have received nine proposals from the Mouvement d’éducation et de défense des actionnaires, MÉDAC, 7 of which are being put to a vote. Mr. Willie Gagnon. Welcome. I see you. And you will be briefly presenting the seven proposals on behalf of MÉDAC.

On behalf of the United Church of Canada Pension Plan co-filed with IBVM Foundation of Canada. Following discussion, they agreed to withdraw the proposal. It is nevertheless summarized for your information in our circular.

To conclude the meeting, there will be a Q&A session. I will now turn the floor to Marie, who will briefly review the procedure for submitting a question online. The floor is yours. Please proceed.

Thank you, Chairman. Shareholders and proxy holders who have registered online on the Digicast platform can submit questions related to each of the proposals. Questions can be submitted via the chat or by live audio by identifying the concern proposal and by providing your phone number so that we can reach you at the appropriate time. It is also possible to submit questions during the question period by following the same procedure.

We recommend submitting your questions as early as possible and indicating whether you are a shareholder or proxy holder.

Thank you, Marie. I kindly ask all speakers whether in the room or online to identify themselves, state whether they are speaking as a shareholder or a proxy holder and to be brief and respectful of the time allocated for each topic. We kindly ask you to keep your intervention to 3 minutes or less.

Please avoid personal questions to ensure efficiency, we may group similar questions submitted online. And the typical forward-looking statements -- some of the statements made today may contain forward-looking statements. I encourage you to carefully read the cautionary statement regarding the forward-looking statements on the screen as well in our most recent financial reports and the circular to understand the risks to which they are subject.

In addition, we use certain financial measures that are not calculated in accordance with generally accepted accounting principles. For additional information about these measures and an explanation of their composition, please refer to our most recent financial reports. Counsel [indiscernible] satisfied with the statement, thumbs up. Thank you.

I hereby appoint Ms. Martine Gauthier of Computershare Trust Company of Canada to act as the scrutineers of representative for this meeting. She has informed me that a quorum has been reached. Thank you. I have also been informed that the notice of meeting has been sent to the shareholders. I therefore declare the meeting duly called and constituted.

And it was pleasure that I will now invite Laurent Ferreira, President and CEO, to take the floor.

Thank you, Robert. Good morning, and welcome to National Bank's Annual Meeting. I'm joined this morning by members of the -- my team, Marie-Chantal Gingras, Michael Denham, Étienne Dubuc Jean-Sébastien Grisé, Lucie Blanchet, Julie Lévesque, Judith Ménard, Nancy Paquet, and Dominic Paradis, and Sylvie Pichette who has to -- who deals with me every day.

Over the past year, changes have been made to the executive team to support the bank's strategic objectives and accelerate its pan-Canadian growth. In March 2025, Michael Denham was appointed Executive Vice President and Vice Chair to lead CWB's integration.

We also welcomed Judith Menard to the executive team as Executive Vice President, Commercial and Private Banking. And Dominic Paradis as Executive Vice President and General Counsel, Enterprise Technology and Resilience. Since January 1, 2026, Julie Lévesque has served as Executive Vice President, Personal Banking, while Lucie Blanchette has taken on the role of Strategic Adviser to the CEO.

I would like to recognize Lucie's exceptional contribution over the past 20 years, and I'm pleased to continue benefiting from her experience and guidance. I'm proud of our team, and we are excited to begin the next phase of the bank's growth.

We delivered a strong financial results in 2025 while also completing our largest acquisition in history. For the year, we met all of our medium-term financial objectives. This was driven by the strength and diversification of our franchises. We generated a return on equity of 15.3% and grew EPS by 9%.

We increased our common share dividend by 7% during the year. This was backed by resilient credit performance and strong capital ratios. We also had a strong start to the year. For the first quarter in 2026, we generated a return on equity of 16.6% and a CET1 ratio stood at 13.7%, and we intend to continue to operate with strong capital levels.

We also announced the upsizing of our share buyback program. We now have repurchased 8.2 million shares since late 2025. For 2026, we are on track to deliver a return on equity of approximately 16%, and we are on the path of achieving an ROE of 17% in 2027. The acquisition of CWB, Canadian Western Bank in early 2025 marked a major milestone, establishing us as a truly national bank. We thought that was cute, poised for accelerated growth.

We now have a greater presence in Western Canada and are building a strong east-to-west connection. The cultural and strategic fit between our organization was immediate and has only deepened through integration. Our priorities in 2025 started with onboarding 2,300 new colleagues and then successfully migrating more than 65,000 clients to our platforms. And we also re-branded 35 branches, primarily in Western Canada and moved into the National Bank Center in Downtown Edmonton, where we now have a strong leadership and operational presence.

As we continue to grow across Canada, we are further strengthening our presence in Québec, which remains our home base. Following Laurentian Bank of Canada's decision to go private and accelerate its transition into a specialized commercial bank, we finalized the acquisition of its syndicated loan portfolio in February 2026. As for personal banking and commercial banking services to SMEs, the transaction is proceeding as planned and is expected to close later in 2026, subject to regulatory approvals.

We are mindful of the human impacts and job losses resulting from this transaction. We have informed Laurentian Bank employees that they will be able to apply for open positions at National Bank. We look forward to welcoming our new clients from Laurentian Bank. Our success is no mere coincidence, and it is built on two essential elements. First, our entrepreneurial culture, where our people act like true business owners.

Second, leadership, the willingness to help to be authentic and to act with respect and kindness. Culture and leadership require constant effort and a great deal of attention and above all, concrete actions. These are the two most critical pillars of our performance, and they will continue to guide every decision we make. This year, the bank ranked first in Canada and third globally on Forbes list of the best companies for women.

We were also named among the 100 best companies for gender equity in developed markets according to Equileap. Additionally, MoneySense named us the best bank for newcomers to Canada for the third consecutive year. I would like to share a few observations on the current environment. Trade tensions and uncertainty surrounding the renewal of the trade agreement with the United States and a rapidly evolving geopolitical environment continues to weigh or continue to weigh on the Canadian economy and business investment.

Inflation volatility could remain high over the coming quarters as exogenous shocks continue to strain global supply chains. I would encourage the Bank of Canada to exercise caution in managing monetary policy in the event of rising inflation caused by factors beyond our control. Furthermore, I would like to recognize the leadership of our government in Ottawa and the sense of urgency driving its efforts to rebuild Canada's economic sovereignty.

We support the major projects initiatives as well as recent developments to reindustrialize our economy. These include Canada's goal of becoming an energy superpower, Canada's defense industrial strategy, investments in the Arctic infrastructure development for defense, transportation and the extraction of critical minerals. We have a once-in-a-generation opportunity to rebuild our economic sovereignty and become a major player.

But to achieve this, we must accelerate efforts on several fronts. With growing trade and geopolitical tensions, capital is shifting rapidly and decisions are being made quickly. Several provinces have understood this well and are getting organized. Blocks are forming and projects are already moving forward. In British Columbia, mining and liquefied natural gas projects are accelerating and new ones are in development. In Manitoba, the Port of Churchill development project is progressing and Ontario is also moving forward, focusing on major projects such as critical minerals in Northern Ontario as well as the development of this nuclear sector.

Québec must act. Otherwise, we risk falling behind. Québec has enviable competitive advantages, including natural resources to extract and process. Cutting-edge manufacturing expertise, a strategic geographic location with direct access to the Atlantic, recognized hydroelectric power and significant natural gas resources. It is time to capitalize on these advantages and meet our growing need for wealth creation.

Rebuilding our economic sovereignty does not hinder our ability to transition to a more sustainable economy. At the bank, we remain a key player in renewable energy financing in North America. In 2025, our support for this sector reached a record high. And we are in an excellent position to fulfill our commitment to reach $20 billion in renewable energy loans by 2030. We thus support the development of large-scale projects in the wind, solar and hydroelectric sectors by supporting the expansion of Hydro-Québec's production.

However, we -- it is imperative that we meet our energy needs immediately in order to accelerate our reindustrialization and create new markets by increasing our exports. Today, more than half of the natural gas consumed in Québec and Ontario comes from the United States. This makes no sense. Québec holds 20% of Canada's natural gas resources.

Québec should develop its own resources or source natural gas from within Canada to achieve energy sovereignty. There is also strong demand from European countries for Canadian LNG. This is an economic opportunity for Québec and the Atlantic provinces. Our federal government's ambitions to become an energy superpower also depend on electricity.

Ontario and Québec should collaborate on establishing an integrated Northeast grid to combine our strength in hydroelectricity and nuclear energy. This would create an electricity giant, allowing us to optimize and expand our energy capacity while strengthening our bargaining power in the markets. Québec must be a leading player in major national projects, reindustrialization and positioning within the defense sector. We can't afford to miss these wealth-creating opportunities for the provinces and across the country.

This wealth must be reinvested in education, healthcare, infrastructure and technologies that will enable us to transition to a more sustainable economy. With our increased national presence, the bank intends to grow and deploy capital to support our clients and help fuel Canada's economy. As we develop our next strategic plan, our focus is on building upon our strong foundations to evolve and build the bank of tomorrow.

We'll continue to execute on our objectives with discipline, driving organic growth and operational efficiency. Our goal is to be a strong, reliable and innovative banking partner for Canadians from coast to coast. And by doing so, to continue creating long-term value for our shareholders. At National Bank, our success depends above all on our 34,000 employees. Every day, they drive the bank forward through their contributions, their diligence and their dedication.

I would like to thank my executive team for their leadership, the Board of Directors for their support and our shareholders for their trust and support. At National Bank, we want to do more for our country. We want to dedicate a larger portion of our capital to SMEs, large corporations and major projects. Thank you.

Thank you, Laurent, for these well-thought remarks. We will now proceed to the receipt of the financial statements. The bank's consolidated financial statements for the 2025 fiscal year, along with the independent auditor's report approved by the Board and have been provided to shareholders who have requested them and are also available online at nbc.ca. I now declare the consolidated financial statements and the independent auditor's report for the fiscal year ended October 31, 2025, received.

Are there any questions or comments online related to this item?

No questions online, Chairman.

We now move on to proposals submitted by the bank's management team. I would ask Marie Brault to provide a brief reminder of the general rules that apply to the voting process.

Thank you, Mr. Chairman. The preliminary voting results will be shared at the end of the meeting and detailed report -- or the detailed final report will be posted on the bank's website and on SEDAR+ promptly after the meeting. Shareholders who have already voted by proxy do not need to vote again unless they wish to revoke their proxy.

For shareholders present in the room, we will proceed with a secret ballot for each proposal. Shareholders and proxy holders will be invited to vote on each proposal and their ballots will be collected by the scrutineers' representative at the end of the voting period. The ballot must be signed to be valid. Any questions regarding your voting rights should be addressed to one of the scrutineers' representatives.

The voting platform is now open to allow voting on all proposals and will close when the Chair of the meeting declares voting closed. To vote, simply select your voting choice from the options displayed on the screen. A confirmation message will appear. If the voting options do not appear on your screen, please click the ballot icon at the top of your screen. Votes will be tabulated securely and confidentially and forwarded to the scrutineer.

Thank you, Marie. We will now proceed with the election of directors. To facilitate the proceedings of this meeting, we have asked a few of our employees and shareholders of the bank to present the management proposals. I would like to take this opportunity to sincerely thank my fellow directors who put their experience and expertise at the service of the bank.

Pursuant to a resolution adopted by the Board, we will elect 15 directors this year. I now invite Tim Apedaile to move the election of the nominees for directors. Why is it Tim that I have so difficulty with your name...

Hello. I have been an employee of National Bank for more than 7 years, and I'm also a shareholder of the bank. I propose that each of the candidates set out in the circular be elected as a Director of National Bank of Canada to hold office until the close of the next annual meeting or until earlier ceasing to hold office. The nominees are Pierre Blouin, Pierre Boivin, Scott Burrows, Yvon Charest, Patricia Curadeau-Groulx, Laurent Ferreira, Karen Kinsley, Lynn Loewen, Rebecca McKillican, Arielle Meloul-Wechsler, Sarah Morgan-Silvester, Robert Paré, Pierre Pomerleau, Irfhan Rawji, Macky Tall.

Thank you, Tim. Are there any questions or comments online related to this item?

No questions, Mr. Chairman.

Thank you. I will now invite the shareholders to elect the directors.

[Voting]

Thank you. We will now review the second proposal from the bank. The Board and Human Resources Committee conduct an annual review of compensation governance practices, recognizing that best practices are constantly evolving. This year, once again, by requesting an advisory vote on its approach to executive compensation, the Board reaffirms its commitment to the bank's shareholders and acknowledges its responsibility in decisions regarding executive compensation. I will now invite Carine Verlez to present this proposal.

Good morning. I have been an employee of National Bank for 25 years, and I'm also a shareholder of the bank. I move on an advisory basis and not to diminish the role and responsibilities of the Board that the holders of common shares accept the approach to executive compensation disclosed in the bank's circular delivered in advance of the meeting.

Thank you, Carine. Are there any questions or comments online related to this item?

No questions.

Mr. Gagnon, you have a comment?

Good morning, Mr. Chairman, Willie Gagnon. I apologize for having once again to take the floor as I do every year about this issue. I'll spare you the amount that the best paid employee of the bank makes. I'll spare the name of that person as well. I will simply say that the compensation ratio, in other words, the multiples earned by that person compared with the average salary of bank employees, which is 96. This goes -- takes us back to when Claude Béland was our President. We used to have a compensation ratio of around 20 to 30x of the average of bank employees.

So there are two ways to get there. You divide by 3, the compensation of the CEO. I'm sure that somebody can do this calculation or you can choose to multiply by 3 the compensation of employees. I don't know whether there are any employees here who would go along with this, but this is what we would suggest. So we call on shareholders to vote against this proposal. By the way, there is a bank that has managed to do this year, the Laurentian Bank, unfortunately. Unfortunately, I say, because it is disappearing from the stock exchange.

But I suppose that this is not connected to the fact that they've been able to pay their CEO between 20x and 30x the average compensation.

Thank you, Mr. Gagnon. And I give you the same answer every year. This is a very stringent, rigorous and fair process that the HR Committee engages in as reviewed subsequently by the Board. The circular is very detailed about our processes, and we are in constant discussion with our shareholders, and we have very high support level, and this is the most important point for our compensation practices.

I now ask the shareholders to vote on the Board's approach to executive compensation.

[Voting]

We will now proceed with the appointment of the independent auditor. The bank proposes to appoint the chartered accounting firm, Deloitte as its independent auditor for the current fiscal year. I once again invite Carine Verlez to present this proposal. Carine?

Good morning. I move that the chartered accounting firm, Deloitte, be appointed as the independent auditor of the bank for the fiscal year beginning November 1, 2025, and ending October 31, 2026.

Thank you, Carine. Are there any questions or comments online?

No online questions, Mr. Chair.

I now invite shareholders to vote on the appointment of the independent auditor.

[Voting]

All good. We will now review the shareholder proposals the bank has included in the management proxy circular. I invite Mr. Gagnon, representative of the Mouvement d’éducation et de défense des actionnaires, MÉDAC to briefly present the seven proposals submitted to shareholder vote as well as the proposals presented for information. Over to you, Mr. Gagnon.

Thank you once again, Willie Gagnon speaking on behalf of MÉDAC, which is a shareholder of the bank and which has existed for 30 years. I've been working there for 20 years. I'm always very unhappy to have to speak about compensation before I'm able to talk about my shareholder proposals. But anyway, I hope I can make up for this by presenting nine proposals. I'm not going to dwell at length at the old proposals that we're representing except to tell you how many votes we received last year. There are two proposals about which we've agreed I'll give the reasons at the time for why we decided not to submit these to shareholder vote.

But there are four new proposals with respect to measures to strengthen shareholder participation in Annual General Meetings, but in all their relations with the bank, in fact, there's a whole set of measures that we've asked you to implement. The three first were already in place. There's a fourth that asked that you publish a little table, which would give us a complete review of whether the participation rate of shareholders at AGMs is on the way down or on the way up and whether the proportion of institutional investors has been going down or up at AGMs and whether the participation rate of individual shareholders has evolved upwards or downwards.

Broadridge has provided a table of that sort. This data are public. What's problematic for us, it's difficult for shareholders to design this kind of chart because they have to make a distinction between individual and institutional investors, which the bank can easily do. We would have liked to see this little table published. If it had been published, we would not have submitted this to the vote.

So we are asking all shareholders to support this proposal. In a second proposal, we've asked that the bank promote the participation of young people in the bank's governing bodies and invest in civil society measures that train young people to acquire the necessary skills to allow them to take part in Board activities. In its answer, the bank says that it contributes to training young people within the bank's four walls, but it cannot hire members of the Board from within because they would not be independent.

So we would like the bank to contribute to using the civil society initiatives. The Laval University has a program for young people. There are various other initiatives in civil society. So we would have hoped that the bank would invest some money into these sort of initiatives. We're going to continue putting this forward regardless of the results, and we call on all shareholders to vote in favor of our proposal.

Then we had a proposal on compensation, which brings together all the proposals in one single one, all the proposals we've made in the past with respect to compensation. But since I've already talked about compensation, I won't dwell on that. And then we had a proposal with respect to the systemic role of the Board of Directors, formal recognition of the systemic role of the Board of Directors because the banks have a systemic role by and large, in the country across the board.

So we would like an advisory committee to be created that could use experts. The bank does not wish to do this. So we're having to submit this to shareholder vote. We invite shareholders to support this. Then the three proposals from last year that we're putting forward again is on forced labor and child labor that had obtained about 25% of the vote last year. We were close again this year. We would have liked the bank to tell us what are the measures in place.

It has told us, but we would have liked the bank to tell us that when it applies these measures to determine whether yes or no, there has been use of forced labor or child labor by its clients in the course of the past year, whether it has found any such occurrences. And that's where we did not get what we wanted. But we're very close to an agreement. With scores of this type, we hope to be able to achieve an agreement by next year.

Then the disclosure of country-by-country information, we were close to 10% last year and then the advisory vote on environmental policies. There's already a practice that exists elsewhere, and we obtained 14% in favor last year. We have agreed on two proposals. One concerning the diversification of skills within the Board of Directors. We were hoping that the bank would demonstrate that in addition to the usual process of reviewing the competency grid of Board members, that there'd be a process in crisis times.

And if there is an economic crisis, for example, it has been demonstrated that you can review the competency grid or scale of the Board of Directors members, but we would like a process that goes in further depth than the current process. That's what we were looking for. We were hoping to use your example to ask the same of other banks. Then final point, artificial intelligence. We wanted a framework to preserve the human aspect.

And the bank states that it meets requirements of, for example, the voluntary AI code of the federal government. So we're happy with that situation. And therefore, we are not asking that this proposal #9 be submitted to shareholder vote. And I'd like to say some nice words about the departure of Ms. Guérard because we've had many opportunities to discuss things with her here and at another corporation of whom we are shareholders.

So once again, we call on shareholders to support our proposals. I hope I haven't taken up too much of your time, Mr. Chairman, and I thank you very much for giving me speaking time. I will stay at the microphone before I take my seat again in case you have any answers to give me. I know there's a wealth of information, and I would understand if you decided not to answer me.

Well, how very kind of you, Mr. Gagnon. Marianne, are there any questions? So first of all, thank you for having been brief, and thank you for your little touch of humor. As you said, the bank carefully analyzes your proposals. We discuss them in depth with you, and we respond to them thoroughly.

So I invite shareholders to look at the explicit replies that the bank gave to each of these proposals if you haven't already done so. We are certain that when the shareholders express their opinion, their responses will be very closely analyzed and that we will continue the dialogue with respect to most of these proposals. Thank you again, Mr. Gagnon...

Representative of share to present the proposal not submitted to a vote on behalf of the pension plan of the United Church of Canada, co-filed with IBVM Foundation of Canada. I believe that will it be by phone?

Good morning. Welcome Mrs. [indiscernible] you may proceed.

Okay. Thank you for the opportunity to speak to the withdrawn proposal found on Page 160 of the circular. This proposal was filed requesting the disclosure of an energy supply finance ratio. Energy supply finance ratios disclose the financial institution's relative financing of low-carbon energy compared to fossil fuels, including LNG.

These ratios are gaining momentum at Canadian banks, giving investors insight to positioning relative to the energy transition. Three banks have published methodologies and bank released their calculated ratio just last week. National Bank's ESG Committee chaired by the Chief Financial Officer, will oversee a 3-step process on a path to disclosure of National Bank Energy supply finance ratio.

Prior to April 1, 2027, National Bank has committed to disclose an energy supply ratio methodology as well as ongoing engagement on a path to this milestone. These commitments, along with the recent reported progress of the bank's success in reaching $18 billion in lending commitments to renewable energy in 2025 led to the withdrawal of the shareholder proposal. Mercy and thank you.

Thank you, Mrs. [indiscernible] . And thank you also, Mr. Gagnon. Thank you for joining us here today and for the constructive dialogue we have had with you as we always do. We look forward to continuing our discussions with you. And we will obviously continue discussing these important topics in the course of the year.

Are there any questions or comments online related to this item?

No questions, Chairman. Thank you.

So I now invite shareholders to vote on the proposal submitted to our vote.

[Voting]

I don't see anybody asking for the floor. So thank you very much. This concludes the voting period. For shareholders and proxy holders online, the voting platform will be closed from now on. And for shareholders present here, I haven't seen any hands raised. So I assume that everybody has handed in their ballots and the voting period is now closed again.

I will now invite Marie Brault to share the preliminary voting results.

Thank you, Mr. Chairman. The scrutineers have informed me of the following: Shareholders holding common shares of the bank representing at least 58% of the issued and outstanding shares voted by proxy and voting instruction forms. All candidates have been elected and received at least 96.97% of the votes in favor of their election.

The advisory resolution to approve the Board's approach to executive compensation was adopted with more than 95.86% of votes in favor. Deloitte has been appointed as the independent auditor for the financial year ending October 31, 2026, with more than 93.15% of the votes in favor.

Proposals # 1 to 7 have been defeated. Proposal #1 from MÉDAC received approximately 0.46% of votes against -- votes in favor. Proposal #2 from MÉDAC received approximately 2.24% of votes in favor. Proposal #3 from MÉDAC received approximately set 0.5% of votes in favor. Proposal #4 from MÉDAC received approximately 7.40% of votes in favor. Proposal #5 from MÉDAC received approximately 24.3% of votes in favor. Proposal #6 for MÉDAC received approximately 9.08% of votes in favor. Proposal #7 from MÉDAC received approximately 13.81% of votes in favor.

Thank you, Marie. On behalf of the Board of Directors, I take note of the results of votes on the shareholder proposals. And as I mentioned earlier, we will be continuing the dialogue with our shareholders following this meeting. I would like to thank all our shareholders present in person and online, and I hereby declare that the 2026 Annual Meeting of National Bank of Canada is now closed.

We will now move to the question period.

Just a reminder that questions should be relevant to all shareholders. We ask that intervention focus on matters related to the bank's operation. As I mentioned earlier, if you have any personal inquiries, a representative from the bank will gladly connect with you after the meeting. If we do not have the time to answer every question and if you have identified yourself, we commit to reaching out to you to answer your question.

Shareholders and proxy holders registered on Digicast virtual platform can submit questions online via the chat feature using the Ask a Question dialogue box. Or by submitting their telephone number via the same dialogue box so that Digicast can contact them by telephone. Please state your name and specify whether you are a shareholder or proxy holder and the topic of your question. For shareholders and proxy holders present in the room, please approach one of the microphones in the aisles and identify yourselves.

And I now invite you, Laurent, to lead the question period.

24-year veteran of National Bank. I am also a shareholder. I wanted to thank you very much because I see excellent representation of diversity in the Board and the executive at 50-50 on the executive and 44% on Board. I'd like to ask kindly that you drill down a little bit in our section of wealth management, which I know our team has been working very hard. We're stuck at 17% women, merit-based, of course, women as wealth advisers, and it's really hard to generate that. So I'd like to see a little drilling down on that and to have better representation down at the lower end.

Very good point, and thank you for that, and thank you for good words. But I do believe that we are market leading, though, with the 17%, and we're going to keep working. I don't believe that there's another Canadian bank at the same level.

I'm happy to share a research project that we completed. So I'd like to formally thank the management team. Mathieu Roy and Simon Lemay have helped me work with McGill and their JED program. We put together an entire research this past fall, completed in December of 2025, and they've come back with results.

And they've given us indications of what to do. And they've indicated that our representation is not as strong maybe as other banks, and it's a really great sounding board. So I'm really looking forward to that. So I'd like to applaud them and stuff, but I think I'd like to see a little bit more growth there internally, just generated internally.

Absolutely. We'll encourage them.

And also thank you, everyone, for my great-looking portfolio.

So the first question is concerning Canadian Western Bank. I was a shareholder for many years there. Could you just comment on how the integration has gone? And the second question I had is that, I have some questions about the retail banking section. Is there somebody a Vice President or somebody around -- not now, but...

Absolutely. After -- yes. Julie Lévesque is right there. And she will be happy. So going really well. So technology conversion is pretty much done. And to our surprise, that was something that was pretty smooth. We're now in the integration phase. So once you've converted, you have new employees, you have new clients, you have to reach out to them, you have to work with them.

We didn't ask those clients to change bank. We forced them in the transaction. So we're in that right now. We think that, that integration where our employees are going to get accustomed to our systems and our clients as well is going to take about 6 months. So towards the end of the year, we think that what we call the integration phase, getting to know each other and all that should be completed. And then we'll be able to engage even more with our new clients and grow our presence in Western Canada.

Because I found that in Canadian Western Bank, a lot of the bank employees of Canadian Western Bank often went to visit their clients. There was a very close working relationship and...

We do that at National Bank as well.

So it's not an easy thing. Anyway. Thank you very much.

Chairman, Willie Gagnon. Once again, I listened very closely to your presentation earlier, and I found it very interesting. You talked about Arctic defense, speed of move of capital and major projects, hydroelectricity, manufacturing, natural gas and other points. I have two questions. One, first of all, with respect to your presentation. So you focused on renewable energies. I come from the Abitibi. I have two brothers who work in the mining sector.

One is a surveyor, one is an engineer. So I've closely followed the issue of mines and mining in Québec. I think that this is a promising way for the future, but we don't see very much Québec capital flowing towards the mining sector. Most of it comes from Toronto or from foreign powers. What opinion do you have about this? Do you believe that Québec should invest more in the mining sector?

And if so, what role could National Bank play in this? I think it's really unfortunate that we're not more heavily invested in our own mining sector because it's a promising sector. It's going to grow simply with respect to the need for rare earth. Then I have a question identical to that of Mr. [indiscernible] but not with respect to CWB clients, but with respect to Laurentian clients. You've purchased that. I should already be able to answer the questions I have in mind, but I don't have an answer. So are you waiting for regulatory authorizations to integrate that group of people? Or was that entirely separate from the buyout of the bank, which is waiting for regulatory approval?

Has this begun? Has it not begun? When will it begin? How long will it take? How do you think it's going to unfold? Will it happen well? Basically, I'd love you to tell me that it's going to go super well. Thank you very much.

So the only portfolio we've moved is syndicated loans, small business and retail, we're still waiting. We're still waiting for the regulatory approvals before we can integrate them. But everything is going to go smoothly. I can promise that. As far as your question is concerned, the first one, I agree with you. I think it takes industrial policies, much clearer policies in Québec with regard to the mining sector.

But I fully agree with what you said. There should be a higher proportion of Canadian capital, we'll start with that. And then Québec capital being invested in our natural resources, including the mining sector. This is a fabulous opportunity for all of us. And I think that upstream of that, what we need is clearer and specific, more specific industrial policies about how should we be acting with respect to the Plan in Québec. Thank you.

Clayton, I'm a shareholder. I flew in from Calgary to address you this morning on an important issue. I'm the largest nonemployee shareholder in the bank's subsidiary, Flinks. And along with the other minority shareholders, we have serious concerns about the governance and performance of Flinks. Particularly the dilution of our interest with bank debt, the numerous conflicts of interest seemingly ignored by management and the bank's decision to allow the Flinks founders to pursue a side business while running Flinks, which has since led to public litigation.

I do not expect any comment on the litigation. However, I would like to know, as our attempts to address these concerns directly with management have been rebuffed and dismissed, who from the Board can I constructively engage with to share further details on these issues in private? And what specific government mechanisms and oversight practices does the bank apply to ensure Flinks is managed in the best interest of all shareholders. Again, I wish to raise these issues constructively with the Board as robust governance is essential to the bank's reputation.

Well, thank you for your question. So I think raise it with myself, our Chair, Robert Pare. And we can sit down with also Dominic Paradis, our Head of Legal. He'd be more than happy to discuss with you.

I'd like to do that. I've already spoken to Dominic Paradis, but I'd like to raise it with you and Robert. Thank you very much.

We'll do.

I may be the last speaker. Mr. Ferreira, in your introduction, you talked about the 34,000 employees. I'm very impressed by this number. In a few days, we're going to be giving a dividend. And when I get my dividend check, I didn't work to achieve that, but it's 34,000 people who are behind it and who worked to create that and give me my money.

Now you have pointed out how well they have worked, but I would like to congratulate them and thank them for the very great care that they give to protecting our investments, the shareholders' equity. I personally am absolutely convinced that among the 34,000 employees, there isn't a single one who gets too much recognition from shareholders.

Okay. Well, thank you. Thank you so much. Those are very kind words.

So thank you. Thank you, Laurent. Thank you for your answers. And thank you to you, shareholders and proxy holders for all your comments, particularly the positive ones, but we accept any comment -- all our clients and shareholders for the trust you place in National Bank. I would once again like to express my thanks to all our employees, and you've been more eloquent on this score than I have, whose dedication makes a difference every day.

Thank you very much.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the National Bank of Canada First Quarter 2026 Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Marianne Ratte. Please go ahead.

Welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO; Marie Chantal Gingras, CFO; and Jean-Sebastien Grise, Chief Risk Officer. Our business heads are also present for the Q&A session, including Julie Levac, Personal Banking; Judith Menard, Commercial and Private Banking; Nancy Paquet, Wealth Management; Etienne Dubuc, Capital Markets and [indiscernible] International.

Before we begin, please refer to Slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted. I will now pass the call to Laurent.

Marianne, and thank you, everyone, for joining us. For the first quarter of 2026, we generated EPS of $3.25, representing an 11% year-over-year increase. Our results were driven by strong performance across our retail and business segments as well as cost and funding synergies related to the CWB transaction and share buybacks.

We generated a return on equity of 16.6%, and our CET1 ratio is solid at 13.7%. This morning, we announced that we are upsizing our NCIB to repurchase up to 14.5 million shares from 8 million currently pending regulatory approval. To date, we have repurchased 6.4 million shares under our program.

Earlier this month, we closed the syndicated loan transaction with Laurentian Bank. The retail SME portfolios are on track to close by late 2026, subject to regulatory approvals. Our capital deployment priorities are to drive organic business growth and operational efficiency and to grow dividends at sustainable levels. This will be complemented by share buybacks and depending on opportunities, selective tuck-in acquisitions in P&C and wealth.

We want to operate with strong capital levels and continue to target a CET1 ratio converging towards 13% by the end of 2027.

Turning to our economic outlook. The geopolitical and economic backdrop continues to weigh on the economy. We are far from our GDP potential. Trade tensions and uncertainty around CUSMA are affecting our country and business investment has slowed down.

Our economy must take a different strategic direction and go through structural changes. We are encouraged by our government's actions and by momentum across the country to reestablish our economic sovereignty. We are particularly pleased to see concrete actions towards our reindustrialization, including Canada's initiative to welcome the Defense Security and Resilience Bank as well as the announcement of Canada's defense industrial strategy.

Turning now to our business segments. With revenues of more than $1.5 billion and net income of $442 million, P&C Banking delivered strong performance in Q1. We executed on CWB's integration with a focus on client transition and are realizing on cost and funding synergies. And we have also made early gains on revenue synergies from capital market solutions.

Our balance sheet is growing. Personal mortgages grew 3% sequentially, a strong start against a mid-single-digit growth target for 2026. Commercial loans grew 1% sequentially, and we still expect to start growing the CWB portfolio in the second half of the year. Net income in our Wealth Management segment increased 13% year-over-year to $274 million, supported by strong growth in fee-based and transaction revenues. Assets under administration grew 3% sequentially to reach close to $900 billion with resilient equity markets and strong net sales.

Capital Markets generated net income of $443 million, up 6% year-over-year, driven by strong contributions from both our trading and nontrading businesses. In Global Markets, our strong performance in equities was supported by opportunities in securities finance and elevated issuances in structured products.

We continue to see steady opportunities in our rates and credit business as expected.

Meanwhile, corporate activity supported by strong equity and debt issuances and banking revenues in our CIB franchise. Credigy delivered net income of $47 million with average assets up 9% year-over-year and 1% sequentially as we continue to benefit from recurring flows from established partnerships.

We remain highly disciplined in pursuing new deals given the prevailing competitive market dynamics and pricing conditions. At ABA Bank, net income increased 9% year-over-year, reflecting balance sheet growth and a build in performing PCLs. Revenues were up 13% over the same period with deposits and loan up 18% and 11%, respectively.

I will now pass the call to Marie Chantal.

Thank you, Laurent, and good morning, everyone. We delivered strong results in the first quarter. Revenues rose 21% year-over-year and PTPP grew 23%, driven by solid organic performance across all segments and by the CWB transaction. Operating leverage was positive at 2%, supporting through focused execution and synergy realization. Excluding CWB, revenues increased 11% year-over-year and PTPP rose 12%. Expenses were up 10.2%, driven mainly by higher variable compensation. Excluding variable compensation, expenses rose 8.6%, in part driven by salaries and benefits.

Moving to Slide 9. Net interest income, excluding trading, grew 5% sequentially. Prepayment revenues of $12 million were generated in Credigy, contributing 1 basis point to the all-bank margin. The P&C segment benefited from strong balance sheet growth and margin expansion of 2 basis points sequentially, driven by higher margins on both loans and deposits. In Q1, we reclassified $30 million NII from trading to nontrading, which had no impact on the bank's total revenues. Excluding this, nontrading NII grew 4% sequentially, while the margin was up 2 basis points.

Looking at next quarter, we expect the P&C NIM to remain relatively stable from Q1 levels. A better deposit margin is expected to be largely offset by balance sheet mix as loan growth continues to outpace deposit growth.

Turning to Slide 10. We continue to grow both sides of the balance sheet. Loans rose 23% year-over-year or 9%, excluding CWB, reflecting contributions from all segments. Deposits increased $5 billion or 2% sequentially. Personal deposits grew $1.5 billion, mostly driven by Wealth Management and ABA.

Now moving to capital on Slide 11. We ended the quarter with a CET1 ratio of 13.74%, supported by capital generation of 41 basis points. RWA growth consumed 14 basis points of capital. Business growth of approximately 26 basis points, partly offset by a reduction in credit risk RWA from refinements as well as a change in the CAR 2026 methodology for Market Risk.

Share buybacks during the quarter reduced the CET1 ratio by 33 basis points. Since the launch of our current NCIB, we have repurchased 6.4 million shares, representing 80% of the current program.

Now turning to Slide 12. We have realized $176 million of cost and funding synergies to date, exceeding our year 1 target of $135 million. We continue to build strong momentum on synergy realization and remain on track to deliver $270 million by the end of fiscal 2026.

On revenue synergies, we are progressing as planned towards our $50 million target by year-end. We delivered a strong start to the year, supported by solid underlying performance across all business, ongoing cost execution and realization of CWB synergies, all while credit remained aligned with expectations.

In addition, we accelerated share buybacks under our existing share repurchase program. Accordingly, EPS growth in 2026 is now expected to be at the top end of our 5% to 10% outlook. Reflecting these factors, we are raising our 2026 ROE target to around 16% from around 15% previously.

On Slide 13, we outlined a path to our ROE objective of 17% plus in fiscal 2027. We forecast that organic earnings growth over 2026 will add approximately 110 basis points to ROE. We also assume incremental CWB revenue synergies will contribute 20 basis points in 2027.

The previously announced EPS accretion of 1.5% to 2% from the Laurentian transaction will add approximately 30 basis points to ROE. Reaching a CET1 ratio of 13% by the end of fiscal 2027, helped by share buybacks accounts for approximately 40 basis points of the increase.

Finally, ROE will be reduced by approximately 100 basis points, reflecting the capital required to support RWA growth. So together, these drivers are expected to deliver an ROE of 17% plus.

With that, I will now turn the call over to Jean-Sebastien.

Good morning, everyone. Since our last call, Canadian economic growth has remained modest and the labor market continues to be soft. Headwinds persist, including trade tensions and uncertainty around CUSMA. However, a lower interest rate environment, diversification of trading partners and plans to fast track nation building projects should help support economic activity. In this complex environment, our resilient portfolio mix, disciplined risk management and prudent provisioning underpinned our strong credit performance.

Now turning to the first quarter results on Slide 15. Total PCLs were $244 million or 32 basis points, down 1 basis point quarter-over-quarter. We added 3 basis points on performing provisions in Q1, primarily driven by portfolio growth, partially offset by more favorable macroeconomic scenarios. PCL on impaired loans were $215 million or 28 basis points, stable quarter-over-quarter and within our guidance of 25 to 35 basis points for the full year.

At CWB, impaired PCLs were 33 basis points, down 36 basis points quarter-over-quarter. Personal Banking provisions were $3 million higher sequentially, mainly driven by consumer credit. Commercial Banking provisions were primarily driven by 3 files and were down $9 million quarter-over-quarter. Capital markets provision rose by $15 million, largely reflecting one previously impaired file in the mining sector.

At Credigy, provisions increased by USD 6 million, in line with expectations, resulting from the normal seasoning of residential mortgages and consumer loans. At ABA, impaired provisions were down by USD 8 million sequentially to USD 17 million, in line with lower formations.

Turning to Slide 16. Our total allowances for credit losses were $2.5 billion, representing 5.9x coverage of our net charge-off. Our performing allowances were $1.6 billion, demonstrating a strong performing ACL coverage ratio of 2.1x. We have been building allowances for the past 15 quarters and continue to be comfortable with our prudent and defensive provisioning levels.

Turning to Slide 17. Our gross impaired loan ratio was 111 basis points, excluding USSF&I, GILs were 81 basis points and remained flat quarter-over-quarter. Net formations were down 8 basis points compared to last quarter, primarily driven by commercial and capital markets.

In conclusion, we are pleased with the credit performance in the first quarter and continue to expect that impaired provisions will be within the 25 to 35 basis points range for the full year. While we remain cautious as we navigate ongoing uncertainty, our defensive qualities, resilient business mix and prudent allowances position us well for the rest of the year.

And with that, I will now turn the call back to the operator for the Q&A.

[Operator Instructions]

Your first question comes from Matthew Lee with Canaccord Genuity.

Maybe I want to start on the new segmented ROE breakdown you've provided. Canadian P&C looks a little bit lower than some of the peers at 13%. Can you maybe just talk about why that might be and what opportunities you have to get closer to industry levels?

Matt, thank you very much for your question. This is Laurent. Look, it is subpar versus our peers, and we're aware of that, not surprised. But what I think we want to highlight here is there's going to be upside for us. We have started a strategic review of the sector. We plan to do this throughout the year, and we'll be able to provide you update maybe towards the end of the year. But at this point in time, I guess the message is there's upside in terms of our performance in P&C, ROE, but it is too early to provide you with the outcomes and the magnitude that we think we're going to be able to deliver.

Okay. Got it. Yes. And then maybe on the new ROE guidance for 2026, I think the delta is probably about half of it to the buyback. But can you maybe talk about what's changed in the operations from the last 80 days or so that make you comfortable to change '26 and then '27?

Matthew, it's Marie Chantal. I can follow up with your question. So thanks for that. There's a significant amount of information on that slide. So maybe let me break down the key components underlying our path to 17% plus ROE by 2027. And I'll start with 2026. So as you heard us say, we're increasing our target for 2026 from 15% previously to 16% -- approximately 16%. So we did have a very strong start to the year, and we are very pleased with the performance of the first quarter and encouraged also by the trajectory that we're seeing for the rest of the year.

We've had solid underlying performance across all our businesses. We continue to execute with discipline the CWB synergies, credit remains within our guidance. And we, as you saw, continue to be very active on the NCIB program that we just increased. So those are the different drivers that brings us to the 16% for the end of fiscal 2026.

When we move on to 2027, we do plan for organic earnings growth at the midpoint of our 5% to 10% growth in net income to common shareholders. This represents 110 basis points on the increase, and it factors in efficiency improvement at historical level. So anything above that would be upside.

When we look at revenue synergies, we reflected in 2027 $90 million incremental revenues which is in line with the midpoint of our target. So again, anything above that would also be upside. Those revenue synergies when net of applicable expenses, PCL and taxes, they contribute for 20 basis points to our increase in 2027.

Moving on with the Laurentian Bank transaction. So as disclosed last quarter, it's generating EPS accretion of about 1.5% to 2% in the first year, and that's equivalent to 30 basis points of ROE. And that's assuming that we close by the end of 2026, which is still our target.

And then lastly, on capital, we continue to converge to a CET1 ratio of 13% by the end of 2027, and that would generate 40 basis points of ROE. And then the CET1 required to support our RWA growth net of benefit from the AIRB conversion is [ 100 ] basis points. So that brings us to our 17-plus ROE objective for 2027. So let me tell you now what it does not include. It does not include any credit improvement. And as Laurent said earlier, it does not include any potential upside in the P&C segment coming from our strategic plan. So those are the main drivers contributing to our 17% plus ROE for 2027.

Your next question comes from the line of John Aiken with Jefferies.

Apologies about that. Hopefully, a couple of quick questions on Credigy. In one of the prepared comments talked about the market and the pricing conditions. Can we expect then to see possibly lower volume growth because of that similar to what we saw Q4 over Q3? And then secondarily, it looks like there was wider net interest margins for Credigy in the quarter. Was there anything unusual that was driving that?

John, thanks it's Etienne. So to maybe describe the quarter for Credigy and what the outlook looks like. So we had strong deal flow in Q1 with more than $700 billion (sic) [ $700 million ] deployed, and that led to a solid quarter-over-quarter growth in average assets, including the prepayment that we alluded to in the script. So specifically, we had a loan prepayment of close to $300 million, and that impacted sequential growth and that impacted margins.

So if we look at the outlook because you're right. So we -- there's strong deal flow. There was a good momentum, but the current deal pipeline suggests deal activity could be a bit slower in Q2 2026. And that's really a function of the market still being very competitive and not meeting really our pricing thresholds right now in most cases. But for the full year, we expect growth to remain on our long-term target range of 5% to 10%, with margins expected to be fairly stable and to be -- and to continue to be really attractive and accretive for the bank.

Your next question comes from the line of Sohrab Movahedi with BMO Capital Markets.

Thank you very much for the ROE waterfall. Etienne, pretax pre-provision in capital markets in '25 was a very strong, I think, $2.2 billion or thereabouts. Coming into this year, I think you were trying to guide us to $1.8 billion to $2 billion. Having the first quarter under your belt, is there any revisions or updates to the pretax pre-provision for capital markets for the full year?

Sohrab, it's Etienne. Thanks for the question. So maybe I'll walk you through our thinking in terms of the outlook because, yes, quick answer is that we feel increasingly good about our Jan outlook that was calling for, like you said, a PTPP number in the $1.8 billion to $2 billion range. You still have macro uncertainty. You still have geopolitical uncertainty but we see client dialogue remaining active and a really good deal pipeline. There is pent-up demand. There's corporate balance sheets that are strong, and you have attractive funding conditions.

Also, we feel the November 2025 federal budget priorities will catalyze M&A as companies reposition around these strategic areas. And on the market side, the investor interest remains high. Market-making activity in equities and rates continues to be robust. So this bodes well for the next few months in trading. So considering all that with this healthy momentum we see across the businesses, we feel good about our ability to hit the upper part of this range of $1.8 billion to $2 billion. Does that help?

Yes, it's very helpful and comprehensive. And then just one quick one for Jean-Sebastien. I mean, Jean-Sebastien, you've talked about the economic outlook and the sluggish kind of backdrop. Does the -- 2 questions. Do you still feel as skewed, I'll call it, when it comes to credit risk to Quebec post CWB acquisition? And do you still feel that, that Quebec skew is a relative positive for you as you look through the next 12, 18, 24 months?

Thank you for your question, Sohrab. So obviously, very pleased with the results that we've had in our first quarter, so lower part of our guidance. And when you look at our different types of portfolio, I think my answer will be a little bit different for all the different portfolios. Obviously, our retail portfolio and when you look specifically at our residential portfolio, we do see a difference in performance in terms of delinquency between Quebec and between the rest of Canada.

So obviously, when you look at our book there, we're 52%, 53% Quebec, 27% insured. I think we're exactly where we're supposed to be. Then when you look at commercial, obviously, we bought a bank that has a commercial footprint, and we're comfortable with the performance. You saw this quarter also a vast improvement in terms of the PCL performance of CWB. It's a more lumpy portfolio because it's a portfolio that has more commercial side to it. But I would say there, we will follow the strategy we've been talking about before, which was we will grow in general commercial more than in real estate, and we're pleased with where we're going right now.

Your next question comes from the line of Doug Young with Desjardins Capital Markets.

Laurent, your prepared remarks, you talked about CWB revenue synergies, and I think you talked about early gains in capital markets and solutions and then starting to grow the CWB, I think, loan book in maybe the back half of this year. Just hoping you can flesh this out a little bit more?

Judith, do you want to take that one?

Yes, I can take that one.

Judith is going to take the question, Doug.

Thanks, Doug, for your question. So as expected, as Laurent said in his script, we're seeing revenue synergy mostly in noninterest income coming from capital markets. So mostly RMS M&A company, which is a group we formed 2 years ago, but they are active in the market right now. So we expect NII synergy to start materializing in the second half of 2026, and we're still on track to reach the target of $50 million for 2026.

So our key levers include enhanced risk management solution, as I said, balance sheet expansion within existing and new client relationship, which we're seeing right now. We see some good wins around that, deployment of our cash management capabilities and leveraging CWB's equipment financing expertise for National Bank Alliance. So we just formed a group in Quebec to leverage CWB Equipment Finance, which is also a positive in our integration.

Just a follow-up. I mean, relative to the targets that you set when you did the deal, we saw the expense side. But on the revenue side, in particular, how are you feeling about your ability to kind of get this? You were ahead of plan on the cost side. Are you ahead of plan in terms of where you thought you'd be on the revenue synergy side?

Yes, we're slightly ahead of plan for Q1, and I'm feeling very positive for our target, which is like the pipeline is good with CWB. This is -- we're still in the integration phase. And that's why we said that we're going to grow on the last 2 quarters. So conversion is finished. So this is a big milestone that we just achieved last weekend. So conversion is finished. We're still training people. There's a lot of things that we need to train people on processes, platforms, client value proposition as well. How do we -- you pitch National Bank when you're in CWB. So all of that is happening. So for me, I'm very positive, and there's very good momentum in the field right now.

Okay. And then just second question, and I think I've got this right, but you can correct me if I've got it wrong, but it looked like there was a 10% quarter-over-quarter sequential increase in market risk RWA. What would have driven that?

Doug, it's Etienne. So that market risk increase, I don't -- I cannot point you to a specific factor. What I'll say is that FRTB, because it does not take into account the different correlations and optionalities we have in terms of protection, especially on the downside, FRTB tends to move in ways that are less intuitive. We don't get the benefit of our diversification. So for example, we could have more downside protection, but run a slightly longer delta exposure, and that would show up as higher RWAs. So -- and it's also very point in time. So it tends to move. So that's really what I see in terms of explanation for that RWA. I don't think I would make -- I would conclude from that movement.

Okay. So this is an unusual quarter. You wouldn't expect this level of expansion, I would assume, quarter in, quarter out.

I'm sorry, I did not get your question.

No, just like -- it sounds like this is an abnormal increase in market RWA. Is that what you're trying to say? Like there's...

No, I don't think so. I think market RWA moves up and down in that kind of amplitude a lot. It's just that it's very difficult for me to point you to there was a -- it's because of volatilities or because of our different positioning, which is why it's very tough to conclude something really specific.

Okay. Just one maybe last quick one. In your ROE waterfall, you talked about share buybacks. Can you quantify like what -- like I see the impact of buybacks, but like what level of buybacks are you assuming? I don't know if you can quantify it kind of...

Yes. Doug, it's Marie Chantal. So what we've included in our buyback is for 2026, we're planning to execute on our NCIB program that we've just increased this morning, and that's up to September 2026. And then when you look at 2027, what we're expecting to do is really, as I explained earlier, is continue buybacks to converge towards a CET1 ratio of 13% by the end of 2027. So in line with what we had also shared last quarter.

Your next question comes from the line of Paul Holden with CIBC.

First question is with respect to that ROE waterfall guide for 2027. Just want to understand the assumption behind no improvement in PCL. Is that just because you're baking in conservatism? Or are you suggesting that sort of the 25 to 35 basis points should be sort of the good run rate for National long term?

Paul, it's JS. I'll take this one. Obviously, we don't give guidance to 2027. We're keeping our guidance for 2026. We're very comfortable with 25 to 35 basis points. So I think your assumptions are correct. It's somewhere within the guidance that we have this year that we're applying for next year.

Okay. Because I thought I heard an earlier comment that there is no benefit in the ROE waterfall for 2027 from PCLs. So again, just trying to understand why that assumption would be made if it's conservatism or if you're suggesting something else.

Paul, it's Marie Chantal. So just to make sure that I was clear earlier, there are no upside in 2027 included in our waterfall coming from credit improvement. So I guess that's what Jean-Sebastien was explaining that we're keeping our 25 to 35 basis point target similar for next year.

So you could see it's prudent.

Got it. Okay. Okay. Another question for you and maybe going back to one of the original questions on the ROE for Canadian P&C banking. When I think about the different levers, one of them clearly is net interest margins and particularly as it relates to low-cost funding.

So on that point, when I look at the average deposit balances for personal, see it's declined the last couple of quarters, not by a large magnitude, but still sort of 2 quarters in a row, and that's typically where I tend to look for low-cost deposits.

So one, can you kind of address what's driving that decline? It might just be term rolling off? And two, is it right to assume you'd obviously want that to go in the other direction? And if you can give any kind of sense on plans around that. I know Laurent said it's early, but love to hear any thoughts on planned deposit growth.

This is Julie. I will start by giving you the personal deposit view, and then I'll pass it along to Judith and Nancy to provide a holistic view. So on the personal deposit side, we're down about 1% Q-over-Q, and that movement is largely explained by the CWB portfolio. As expected, we saw higher attrition in the CWB deposit book, which was built really around higher rate offerings and therefore, attracts a more noncore monoproduct customer segment. Some runoff is natural, and we -- and it's fully consistent with our expectations at the time of the acquisition.

From an NBC point of view, when you look at deposit and mutual funds together, total client assets continue to grow, which is also a good measure of franchise momentum. With rates expected to remain low, deposit growth will stay neutral. Judith?

Yes. So on the commercial banking side, so deposit growth was strong in Q1, and it made a clear acceleration versus 2025. So I'm very pleased about that. Growth was broad-based across all segments, supported not only by the government and public sector, but also by a stronger contribution from general commercial, confirming solid and sustainable funding momentum. This is something that we wanted to see, and we're starting seeing. So again, I'm really pleased about that.

So Nancy, you want to complement on the Wealth?

Yes. So for Wealth Management, demand deposit growth is consistent with what we see when client base and adviser base expand. More client relationship typically means more operating and investment cash balances, obviously. So the relation of demand deposit to AUA in each business is more stable. So as our AUA grows, our demand deposit grows as well. So we're very happy with the trend that we see and positive.

Okay. Just one follow-up on that. I don't think you break down deposit margins versus loan margins or if you do correct me. But how -- just on the deposit margin, like should we view even though the personal deposits declined, it sounds like it's high cost. Like was that positive for deposit margins? Is that how we should read that?

So Paul, it's Marie Chantal here. So on -- when you look at the P&C NIM for the quarter, we saw a strong balance sheet growth with higher margin on both loans and deposits. So yes, in the quarter, it's something that we've seen.

Your next question comes from the line of Mike Rizvanovic with Scotiabank.

First one for Marie Chantal. I just want to go back to the $270 million. Given that, that guidance was provided a while ago, obviously, you're more in the thick of things in terms of getting to where you want to be. And you're obviously ahead of schedule on that. So I'm wondering, is this a function of maybe that $270 million was potentially a bit conservative or you've just gotten there quicker. You've been able to execute quicker on getting those cost and funding synergies. I think a lot of investors have the same question that I have. And just in terms of -- I'm not trying to pin you on new guidance, but how should we look at the $270 million? Is there a possibility that it could be beyond that beyond 2026?

So thanks, Mike, for the question. So you're right, we are executing more rapidly than what we had expected. And we continue to track ahead of plan in terms of execution that supports our confidence that the full target will be achieved as expected before the end of fiscal 2026. As Judith was saying, we just finalized our fourth and final client migration last weekend. So we are now very confident in achieving that target in 2026.

So no color on potentially going beyond that at this point. Too early maybe?

No, no, not at this point. We're -- as I said, we just finalized the last conversion, and then we'll see what this brings next.

Okay. Fair enough. And then maybe just one for Julie. Just on the mortgage growth in the quarter, I think 3% sequentially. That's actually a very impressive number just in the context of what's happening in the housing market. And I'm just wondering, is this largely the Quebec-focused dynamic? Just Quebec is -- it just happens to be a much better market for growth these days? Or is it more so that you're doing something to win market share and just doing something better than your competitors currently?

So thank you for the question. Obviously, we're doing something better. We delivered 11% year-over-year portfolio growth, which is impressive, driven by market conditions being more favorable. We delivered growth while improving our margins. Thus the business generates strong NII. As always, we maintain a disciplined and stable pricing strategy that supports sustainable penetration. And specifically in Quebec, our market share continues to expand, supported by strong brand positioning and deep long-standing real estate relationship.

Okay. And just one really quick follow-up on that. So what about the Optimum portfolio that was acquired? I'm wondering if that book is growing as well. I'm guessing that's embedded in the overall resi mortgage balance. I don't recall the size of Optimum, I think $3 billion purchase, but is that being expanded as well?

So currently -- thank you for the question. Currently, the Optimum has around 4% part of our -- the real estate book for -- on the personal side. We demonstrate through Optimum strong performance, and it's at the core of our diversified strategy. Short to midterm, it's disciplined growth. So our main objective remains quality over volume.

Okay. So part of that growth is inclusive of Optimum balances as well, correct?

Yes.

Your next question comes from the line of Ebrahim Poonawala with Bank of America.

I guess just a follow-up question, one on the ROEs. I guess one more question on the ROEs. But when we think about the capital markets, the Slide 23, one, do you see the mid-20% ROE as a sustainable ROE actually? This is the other side of the P&C business where you see upside. When we think about the capital markets business and the mid-20% ROE, is that sustainable? Could that get better, worse? Like how should we think about it?

And second, I think, Etienne, you talked about FRTB impact on RWA as we think about the Fed maybe putting out a new Basel end game proposals in the U.S., is there any discussion with the OSFI around FRTB rules or any discussions around whether that could get revisited in Canada?

Yes. Thanks for the question, Ebrahim. So I'll start with the ROE and give you some color because, yes, mid-20% is obviously a very good number. We want to keep it in the 20%. And the way that we think about it, I think the biggest driver is our business mix. We want to continue to focus on scaled businesses in global markets where we generate strong returns through the cycle, including in a more volatile period. And when you get volatile markets, activity usually increases, spread widens, dislocations create opportunities, and those are environments where these franchises can be very resilient.

And also, part of how we think about it is how we've been disciplined about where we deploy capital. We stay nimble and allocate capital dynamically based on client demand and based on risk-adjusted returns rather than trying to do everything. And I think that discipline matters a lot, and we'll continue to do that. There's also an efficiency part. We've maintained a strong focus on cost discipline as we've scaled the franchise. And we've continued to invest in technology, particularly in our trading and issuance businesses.

And on the corporate and investment banking side, there's upside there because we've made focused investments over several years that are paying off. We strengthened connectivity with the markets teams. We've increased our share of wallet, share of leads, and we've been very intentional about prioritizing sectors where we see long-term strategic importance and where we can build real franchise strength.

So it's a consistent strategy. Ideally, we want to maintain it where it is now. I think that trading will not always be that good, but there's upside on the corporate and investment banking side. So we'll continue to stay focused on scaled, high-return activities and maintain cost control and invest in the right client franchises.

I think for your second question, Laurent has more discussions with us than I have. So I think he could give you color on the FRTB.

So Ebrahim, thank you for your question. And you're right on point. I think I talked a bit about FRTB before and that it has certain volatility and it doesn't capture all the risk the way I think we should capture it. With our peers, we have brought it up to OSFI as something that one we think does not capture the risk. So that's one with U.S. banks or European banks, which are not subject to FRTB at this point in time. So we have a healthy discussion with our regulators about FRTB.

Got it. That sounds healthy. And I guess maybe following up on a question I think Paul Holden was trying to ask was, as we think about -- I get that you don't expect PCLs to decline next year versus this year. But maybe there is a mark-to-market as you think about the Canadian economy and your loan book, do you expect PCLs or impaired PCLs to improve as the year moves and as we think about just fundamental credit quality? Or is it still too uncertain, too soon to tell?

I think it's the latter. But when you look, we're starting at a very strong position, right? So we're starting at 28 basis points, so strong credit quarter. We're also very pleased with the lower level of formations, but it's an environment to stay humble. We're still in the credit cycle. We're still seeing recuperation rates in non-retail and the big one is CUSMA. So as long as CUSMA is still in flux, there's still some risks. And it's very aligned to what I said about our 2025, where we could see swings between quarters, 10 basis points between ups and downs, but we are maintaining our 25 to 35 basis points guidance for the year.

Your next question comes from the line of Mario Mendonca with TD Securities.

First a question on the advisory business, the underwriting advisory. It would appear that you've reached an entirely new level. The last 3 quarters, the underwriting advisory revenue is up something like, what is it, 50% to 90% relative to comparable quarters. I figured to some extent, this is what the market has given you, but it seems like there's more going on here. Can you talk about what National has done specifically, either it's bankers, geographies, products, something new you've done over the last 3 quarters that's driving this?

Thanks for the question, Mario. It's Etienne. It's true that in C&IB, you saw broad-based strength across the franchise, and that led to, well, more than 30% increase of revenues from last year. I think where we saw much higher activity year-over-year is in deal flow and advisory mandates across equity capital markets and M&A. These were really slow last year, if you remember, at this time of year, and it's gotten really active this year. And that's across multiple sectors. It's not just metals and mining as some people think it's been very diversified.

And we think really that M&A backdrop remains constructive. We've had our best M&A year ever last year, and that fueled activity across the broader franchise. And I think -- and that's also including ancillary activity like risk management solutions. So that's also very encouraging. We've advised on several mandates, including both public and private companies across infrastructure, power energy, mining, industrials.

We also continue to see activity building with private companies. That's something we're working on. And with the ongoing integration of CWB, I think that positions us to further deepen our penetration in Western Canada.

And in debt capital market, it's been really consistent. The growth has continued as clients took advantage throughout the quarter of very open and attractive funding markets.

So yes, the franchise has evolved. As I was saying in my answer to Ebrahim, we've really increased the number of leads, the number of share of wallets. We've made -- continue to make some investments on that side. And I think this partly explains why we've had a bit of a higher tick in the expenses this quarter. I think we continue to build to accompany the growth, especially in Canada.

So it sounds like your answer is both. Like the market has been super helpful, but you've made a bunch of investments in this business as well. Those are both.

Yes, I think that's accurate, Mario. Yes.

All right. Now going to this ROE disclosure, it raises more questions, frankly, than it answers because the segment ROE domestic is, what, 600, 700, 800 basis points lower than most of the other banks and your capital markets ROE is probably 600 or 700 basis points higher than the other banks. When you present disclosure like this, do you put any effort or thought into whether your capital allocation is different or the same as your peers? Like how can we be comfortable or maybe the answer is we shouldn't be. How can we be comfortable that these ROE calculations are even comparable to the other because they're so wildly different?

So maybe I'll take this one, Mario. I think the scale has something to do with it in terms of our performance in P&C. We knew that for a long time. But we approach this as an opportunity. Part of the reason why we disclosed ROE per segment is because we believe that we could improve it significantly over time. And that's something that we started working on.

Julie has been with the bank for a very long time and has started in her role and is looking at that specifically right now. So they are comparable. I mean all banks are different. And I think it is something that we are going to focus on over the next several years. And we do believe that we are going to be able to deliver more. Again, early days, we're starting a strategic review of our segment. And we'll -- as always, we're going to provide updates on potential outcomes and upside.

So just to be clear, you're suggesting that the 12.7% ROE in P&C Banking at National is comparable to the 20% plus from some of the larger banks and that scale accounts for that difference? Because you don't really see it in the -- well, that's not fair. You do see it in the efficiency ratio. So perhaps that's the answer. It's the efficiency ratio of 51% versus some of these larger ones around 40% to 45% -- that's the point.

You got it.

Your next question comes from the line of Darko Mihelic with RBC Capital Markets.

Maybe before I hit my question, just on that point, I mean, it looks like you're using an 11.5% ratio to allocate capital. So presumably, as you get benefits from CWB on AIRB, that would flow through as well. Would that be fair?

Yes. That's correct, Darko. We are using 11.5% for the capital allocation on the ROE segment that we've started to disclose this quarter.

Okay. And then just maybe just my question really is just for modeling purposes, I just want to sort of visit the other segment. I mean there was help from treasury, some gains in there. How should I think about that help in the quarter and a modest loss? And what should I think about it going forward?

So thanks, Darko, for the question. So I'll answer the best I can do for your modeling. So on the revenue side, we've experienced 2 things this quarter for the other segment. So larger investment gains that we realized compared to prior periods. And we've seen the overall level of performance from treasury also improving.

On the expense side, we expect lower levels in 2026, mainly from variable compensation, which was elevated in 2025. And remember, last quarter, we've given a guidance of a PTPP loss for the other segments ranging between $225 million to $275 million. We're pointing now more towards $225 million.

Okay. Okay. That's helpful. And just with regard to treasury activities, what is it that's helping you there? And how should we think about that for the rest of the year?

Well, as you know, in your other segment, our banking book interest rate risk is centralized into our treasury group. So you can see some variation from quarter-to-quarter in the performance. So volatility is expected, and we're comfortable with what we're seeing so far.

Your next question comes from the line of Jill Shea with UBS.

I just wanted to follow up once more on the ROE waterfall. Just in terms of the RWA growth piece that's impacting the ROE by 100 basis points. Can you just talk about the pace of organic growth embedded in there? Does that embed an acceleration in loan growth relative to what you're pacing currently? Realizing that, that number is actually net of the AIRB conversion benefit. So just trying to think through the balance sheet growth component versus the benefit from AIRB that's embedded in that number? That would be helpful.

Thanks, Jill. It's Matt Chantal. So yes, on the RWA growth, we're expecting 100 basis points there. When you look at our RWA consumption, historically, we've been disclosing approximately 30 basis points on average every quarter. So I guess that assumption would be the right one to think. As we're moving with the synergy revenue on the conversion of CWB, Judith was sharing that we're expecting high single digit in terms of loan growth. Etienne was talking about a good pipeline as well on the corporate side.

On the mortgage side, we expect the portfolio to grow in the mid-single-digit range. So those are some of the assumptions that you can continue to use for understanding our ROE target for 2027.

We have no further questions at this time. I will now turn the conference back over to Laurent Ferreira for closing comments.

Thank you, operator, and everyone on the call. Our Q1 performance was strong, and I'm very happy with our execution, and you should expect us to continue to focus on delivering sustainable earnings growth and a premium ROE. On that, thank you.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

For the next session, I've been asked to tell you that Laurent Ferreira's comments today may include forward-looking statements. Actual results could differ materially from forecasts, projections or conclusions in these statements. Listeners can find additional details in the public filings of the National Bank of Canada. Laurent, welcome to the stage. Thank you for coming.

Yes. Thank you very much for having me. Happy New Year.

Most of the day, I've been just sort of diving directly into bank-specific things and not touching on too macro. But I think in this instance, as I did with the very first meeting, I don't want to touch on macro because you do have a particular vantage point. And now that vantage point sort of expanded into Western Canada. So maybe with you being a dominant player in Quebec and now an emerging player in Western Canada, I thought maybe you could talk on some of the macro, maybe some of the disparities you're seeing and how we should think about 2026 with the trade uncertainty and even political uncertainty? I'll just leave it wide open and ask you to comment, sir, on the macro that you're seeing.

Yes, absolutely. Look, the environment in 2025 brought a lot of uncertainty on the trade war that our friends in the south just started, GDP potential, labor market that's definitely more fragile, consumer confidence. I would say the most concerning thing and the theme across the country is really business investments that are on pause and just this hesitation to invest in Canada. So that's, I think, the biggest concern I have right now with the macro environment. Having said that, it has been resilient, and I just heard Darrel talked about it, and I think we're all surprised at this point in time to see how the Canadian economy has been resilient. But the most important thing that we need to do, and I've said this in the past is with what's going on in the world, geopolitics are at our doorstep, national security is, I think, one of the most important priority of our country.

I think the priorities that are set right now by Ottawa in terms of nation building, reindustrialization, defense spending, those things are so important right now for our country. And I think we need to speed up. I think any kind of opposition, whether it's ideology, whether it's bureaucracy to that is not a good thing for our country. And we are in a state of -- the world is -- economic war is how I would basically summarize what's going on in the world right now, and tied to geopolitics into this. And we're part of this. And if we want to be part of the new world order, we need to speed this up. Now looking at Canada and looking at what we have, I'm betting on Canada. I like the fact that Ottawa has shifted.

We need to work together, the governments, the business sector, the indigenous communities also. And we need to speed up our decisions on what we need to do. And we have so much to offer, right, natural resources, energy, engineering and manufacturing know-how, aerospace, naval, so building supply chain and critical minerals with steel, aluminum. So I think we are in a really good spot with what's going on in the world. And we just need to now speed it up. The events this weekend as well, is just all these things, I think, are -- should play into our decision process. So I like where we're going right now. I like what I'm hearing in Ottawa. I like the direction that the budget is taking. The MOU with Alberta is good. We just need to sit down and all work together.

And what about trade barriers, interprovincial ones?

That's a good one. And...

I was thinking about you specifically in Quebec and now Western Canada, how do you view that...?

We need to do more. We need to do more there. We need to address -- and it takes work. So it's not just -- it's really understanding what could help us and trigger more growth. So there was this spike in May last year where everyone got together and let's work on that. It feels like it's died down a bit, but -- so we need to go there. On trade, we obviously we need an agreement with our greatest ally quickly as well to resolve all that.

Okay. So let's shift back now the focus to your bank specifically. One of the things that you've been a little bit vocal on, I would say, recently last couple of quarters is about your ROE target and sort of getting there. I'd love to hear a little bit more about timing of getting there as well as how you get there. And I had this discussion earlier today, is there a lot of the denominator effect built into that 17% ROE target?

So 15% approximately for 2026. And our target for 2027 is 17% plus. Now at very high level, roughly half-half, denominator and numerator. So on capital deployment, it's -- so CWB, we're going to have the AIRB conversion this year. That's one thing. We have a Laurentian Bank portfolio that's going to cost us 25 basis points. The share buybacks are part of it, but we're not dogmatic about share buybacks. It is part of the solution, but we always will favor organic growth. We will always favor strategic tuck-ins that are accretive like the Laurentian Bank one. On the Q3 call, I was asked about why aren't you buying back more shares. And we have, obviously, the Laurentian Bank transaction in the back of our mind, the 25 basis points.

But having said that, we are -- we have a very strong capital position. Our capital generation is greater than our capital consumption in general. We have the benefits of AIRB coming. So we are active. In our current NCIB, we have bought back approximately 50% of our 8 million shares. So there's a very high probability, and I think it's fair to assume that we are going to renew and increase that before year-end 2026, given all the benefits in our current capital position. But again, the way we view buybacks is they're complement. We want to remain agile, flexible, depending on opportunities, how do we position ourselves, but they are obviously part.

Okay. That's a great answer, I think, to help me understand the sort of denominator effect. Now let's sort of switch our focus to the numerator and think about improving the ROE. Now one of the things that we saw from your bank was sort of PCL guidance in '26, it's more or less the same as '25.

It is the same.

So is there a lot of PCL improvement built into getting to the 2027?

No. So for -- on the P&L side, first, it's CWB, okay? So you have $270 million of cost and funding synergies that are going to be at target in 2027. You have revenue synergies. So 2026, approximately $50 million, but we expect 2027 to be a big year. So there's a CWB component. And then there's organic growth. So it's wealth capital markets that we see tons of opportunity over the next couple of years to keep growing the franchise at superior returns. P&C beyond CWB synergies will contribute as well. And our growth outside of Quebec is going to accelerate starting second half of '26 and into '27. And we're seeing some credit improvement in '26, '27, but it's a bit early. So we're not banking on PCLs being much lower in our ROE target.

Okay. So let's unpack a little bit of that. That's interesting on the PCL side being a very small component, if any, to the improvement. So let's when you...

It's if we go back to our range of 2025, right, we're -- our impaireds were '28. So it's -- going back to our range will be 5 to 8 basis points lower. So it's...

Okay. The revenue synergies at CWB.

Yes.

Very interesting number. They seemed high to me. Can you maybe unpack them a little bit? And what's the more immediate opportunity there?

Seemed high. CWB -- the thesis behind CWB was growth, right? And yes, there are cost synergies and -- but the reason why we acquired CWB is to grow outside of Quebec. And so revenue synergies is a big part of that. So look, 2026, it's mainly going to be fees with commercial clients and second half of the year. And then we see doing -- like CWB has a decent platform now. So a much larger balance sheet, capital funding much more competitive. And so we're able to do a lot more with existing clients. We're able to attract new clients. A lot of products like cash management deposit swaps, foreign exchange, advisory. All these things were not part of the product suite of CWB. So initially, more fees. And then '27, '28 more NII, I would say, and growth of the balance sheet. And that term, 2028, we see about 2/3 coming from commercial clients and 2/3 coming from NII and 1/3 from fees. And in fees, I include fees with commercial clients, growing wealth and retail.

Okay. I got think about that and conceptualize it. I mean I think one of the things that -- I covered CWB for a very long time. And that bank has historically had, I want to say, 10% sort of asset or loan growth aspirations for like as long as I can remember. Now obviously, the environment matters. But is that something that we should -- you say 2/3 of it being NII in 2028. So it's really going to be a lot of growth and maybe a wider spread because of funding. But are you thinking about pushing that region of the country back to like a 10% loan expectation?

My focus is domestic growth, and that's the focus of the teams right now. And whether we go back to exactly that, I -- do I see more growth coming from our Canadian operations going forward? Yes. So do I see more -- deploying more RWA in Canada? Yes. Do I see deploying or growing faster outside of Quebec? Yes. So yes, I mean, we're -- it's hard to predict exactly where the opportunities are going to be. RWA deployment doing good, Credigy right now is a bit on pause because of the credit environment, but we could see if there's a dislocation in the market, that could be an opportunity to grow. Capital markets, volatility comes back, we'll deploy more market risk. But the mindset is to deploy more domestically.

That's -- okay. So maybe we'll touch on that. That's an interesting sort of segue into ABA. But we have seen National Bank and when we published this yesterday, you have the highest rate of RWA growth of the big 6 banks in virtually any time frame I choose pre-pandemic till today. But a big chunk of that came from ABA. There was a lot of RWA growth there. But now you're saying you're switching the focus to domestic. Is it a function of the environment in Cambodia kind of shifting and slowing the growth? Or is it really just we want to go full bore in Canada, and we're going to tighten the growth.

It's both.

Okay.

So there is a credit cycle in Cambodia. There is a slowdown in the economy. The growth perspective for 2026 are around 4% and long term is roughly 7% so -- and you see -- if you look at the past 3 years, we're growing more deposits in Cambodia. So that's part of it. But there's a shift in focus and to grow more in Canada. So that's part of it.

Okay. And so maybe just while we're on ABA, maybe you can touch on credit quality in ABA. And maybe anything else, I mean, there's a little bit of geopolitical issues going on over there, too. So maybe you can just touch on that and let everybody know like is this something we should be thinking about?

Yes. So maybe before I go to ABA, maybe just the economy in general. So we are going through a credit cycle. The economy is trending at lower potential with roughly 4%, like I mentioned, I mean, is it 7% full potential or maybe it should be more 5% or 6%. Now having said that, you have one of the countries that has, I would say, in the region, the greatest perspective in terms of growth. So that's one. Their exports are up 15% this year in the region. We have a trade deal with the U.S. When you go back to Liberation Day, they were front and center with very high tariffs and the approach of the government was to sit down with Washington, what do you need? What do you want? Let's work out a deal. They have one of the lowest tariffs in the region at 19%. And in 2025, trade in the country is up 20% with the U.S. So very, very pro-business execution, get things done.

I sat down with the Deputy Prime Minister in October. I met with the Prime Minister last year, Central Bank regular visit. And they're very serious. You talk about geopolitical and some events. You saw the articles in the New York Times. You saw the articles in the Wall Street about scan centers and the Prince Group. They took things seriously, right? Sanctions right away, yes, we're going to fix the problem. So I have great confidence in the current government in Cambodia. So real estate is a little slow, and that's part of the reason why we're seeing higher PCL. And what gives me confidence is that the market is slower, not trading, but we're seeing deposits go up significantly. People are saving money in Cambodia. Now in terms of ABA and credit, the approach has been to be as prudent as possible, right? So we have increased our Stage 3 allowances.

We're now at 20% in terms of coverage for gross impaired loans. And then you look at resolution, if you look at the past resolution, about 60% of them have been resolved at 0 losses. So we keep on having net charge-offs very, very, very low. Look, it's -- we've seen a bit of a pickup on the resolution process over the past 2 quarters, but it's still early, and it is encouraging, but early. But I have 0 concern on the legal process and the rule of law in Cambodia. So look, given where we are in the cycle, given the growth prospect, we're going to remain conservative. We think that we're going to see gross impaired loans remain elevated. And we're going to keep managing prudently like we've done in the past. And there's a point in time where I think we're going to get out of the cycle. Lower rates will help. And we'll see how things go.

Do you see potential for lower interest rates? Is there any signs that maybe...

Yes. And a lot of it is driven by U.S. monetary policy. So yes.

Okay. And a good segue because the U.S. might be lowering interest rates. And what we saw last year with your business and in particular, with capital markets, there was a lot of -- first of all, it was a great year, but there was some good volatility in there, too. So I think maybe we can -- and what we're hearing and what we've consistently heard from CEOs today is they are expecting a constructive environment for cap markets, but a lot of it out of the U.S. The expectation is for better growth out of the U.S. in cap markets. What's your expectation for your cap markets business? And how should we think about 2026 vis-à-vis 2025?

Yes, markets are constructive, right? The -- I think opportunities are definitely there. Now let's go back to 2025, exceptional year for capital markets, $2.2 billion in PTPP. That's a 58% growth over 2024 and exceptional markets, but also we took advantage of major dislocation in the market, specifically in Q2. Our execution there was very good, and so we took advantage of that. So going into 2026, our base case for PTPP in '26 is a range of $1.8 billion to $2 billion. So down from 2025. Now having said that, and I'll stop my remarks on that with this here is that markets are good, and we are seeing opportunities in the market. So yes, markets are constructive, and it's on trading and also on the investment banking side. Interest rate markets are conducive, credit, DCM is also very active. Pipeline is strong. Everyone has probably talked about mines and metals and mining and metals too, all of that is definitely buoyant.

And geographically, is there anything you'd point out?

Look, it's always the same for us. So we know where to focus. So the Canadian platform, niche in the U.S. So infrastructure in the U.S., investment banking in the U.S., in infrastructure is definitely a place where we can play. We do a lot more, and I've mentioned this before, structured products in the U.S. We do a lot more securities lending in the U.S. So opportunities in North America are there.

It's interesting when you say that you took advantage of some dislocation last year in the markets and you had a very good trading result. Does anything change for you? I mean if we have similar volatility, does anything change for you? Or is that simply -- you know what, we'll wait right in there, and we'll do what we did last year. Is that how we should think about your business?

That's a very good question. It is not that simple.

Okay. I didn't think it was.

It's not that simple.

I got that.

And so you position yourself defensively. But then when chaos happens, you have to manage it. And so there's a lot of decisions that have to be taken on a daily basis and figuring out how to position yourself through a chaotic market. So what I will say, and you can go back to March 2020, April 2020, and you look at our results back then in a time where we saw significant market dislocation. We took advantage of that. Now what I will say about this year, 2025 is that we were well positioned, but our execution was pretty good. And so it's not always perfect our execution, but you have to know when to rebalance, when not to, when to increase position, when to double down on certain -- so experience is a very important part of the result. But look, I think we -- our story on capital markets is, we want good markets and we do well in good markets because we are active with clients. And we position ourselves such that if there's liquidity crunch, volatility, we're going to take advantage of that.

So it's safe to say that even going into '26, you're still positioned defensively. Okay. That's great. Maybe now we can just sort of dovetail back to capital. It doesn't sound -- obviously, you have tons of capital, and there's a lot of capital that could be freed up. But I wanted to go back on what you said earlier, which is Credigy. And for now, there isn't a lot of RWA growth there isn't very much. Can you maybe touch on what your expectations would be for that in 2026? And what opens that up? What makes it better?

So Credigy is under capital markets now. And the person responsible for Credigy is also responsible for all capital allocation and liquidity within capital markets. I wanted it to be part of that decision process. In capital markets, we've got short term to medium term. We've got a little bit more long term in Credigy. And so I do think that there's an opportunity there to optimize that and take advantage of trades that are more profitable. So that's the reason why it's there. And so we're starting that work. And so yes, we're going to see a lot of opportunities to increase margins in our capital allocation in capital markets. Now in terms of what's going on in the market right now, the market is in the U.S. and private credit is too hot right now to deploy capital profitably.

Due diligence, contractual framework out the door, mispricing. So we're going to remain true to our approach, discipline. We have market players that are coming up to us and saying, well, no, you don't need due diligence. Why are you asking for data sets? Your other competitors are not asking for that. Well -- so it's real. It is extremely frothy. There's too much cash out there, and we're going to remain prudent. So where do we see opportunities is -- and I don't know when this happens. But maybe we need equity markets to take a bit of a hit. We need concerns. We need more cockroaches. We need a point in time where there's going to be a bit of a squeeze and then dislocation and then we'll be there. But right now, it's too hot.

Yes. And credit spreads are really tight. And how long have you seen this behavior?

Past 6 months.

Past 6 months.

It really -- it's been gradual, but the past 6 months -- and the deals are getting done. So it's not that we're -- deals are getting done. So longer-term players, they're, yes, closing their eyes on due dil, and we're not going to do that.

Okay. Let's see what we've got here questions from the audience. I want to go to this iPad here. Okay.

You have to dim those lights, by the way. They're very, very bright. Keep looking.

So the question that's been upvoted is, would you be interested in tuck-in wealth acquisitions in Quebec? Or would your focus be on diversifying the wealth footprint elsewhere?

So I would be definitely interested in tuck-in acquisitions. Now wealth is tricky. I always use this example. In 2012, we bought the wealth platform of HSBC. And when we did that, we put an initial price on the platform, $250 million, but we put a condition. We said we're going to meet with every single investment adviser, and we're going to ask them if you want to join us or not and we're going to have to broker a deal with them. And then at close, we will decide -- we will know who's joining us, and then we'll pay for that. It was $250 million initial bid, and we ended up paying only $100 million. So more than half of the people left. So wealth is tricky. You have -- it's -- you have to make sure that there's a strong cultural fit that people want to join you. You're banking advisers so that's what you're banking. You're -- and so yes, we are open to tuck-ins across the country.

And sometimes you don't want to buy the whole business. And the reason for that is you want skin in the game. Our approach with ABA, our approach with Credigy was you buy a portion, you want to make sure that the people who have built the business are going to stay there and they're going to keep building that business, but they have to have skin in the game. So sometimes -- so wealth is trickier. It's -- and you -- and I know everyone wants to buy -- I'm sure everyone is interested in buying wealth. So prices are going to go up, too. So you have to be careful there. So I'm going to be inclined to do a trade much faster when someone knocks on my door than me running after deals.

You started off answering said, yes, I'd be interested in tuck-in, but wealth is tricky. So where would you be interested in?

In wealth?

No, just outside of wealth now. So there's...

It's P&C and wealth. That's definitely where I'm -- technology as well across the bank, could be capital markets as well. Anything that can lower our cost base.

Interesting on technology, you guys had a write-down of software intangibles. And I always found that to be a bit odd because my impression was always that you work with -- like you outsourced a lot of it, a lot of your tech. Unlike some of the bigger banks in Canada that spent in developing their own in-house, I thought you were working with us. I think you work with Flinks now. And so it was interesting that you had that write-down.

We do a lot internally, and we're not perfect. And sometimes we do make mistakes. So that was a decision that we took.

Okay. Another question here from the audience. Okay. So NA avoided restructuring charges and expect CWB cost funding synergies to be realized ahead of plan. Where do you see opportunities for cost control in 2026?

So the whole bank, P&C, we think P&C is going to be a much better year than 2025 in terms of cost control.

Ex CWB?

Yes.

Okay.

Now on costs in general, and this is something that we're working on. We see opportunities in P&C, but mainly in [ T ]. So our retail business is something that we're going to look at carefully over the next couple of months. We have a new Head of Retail now, Julie Lévesque, who ran technology and operations for us. So she has the mandate to look at our retail business. I'm a big believer that we're going to see a lot of disruption in retail over the next 5 years whether it's fintechs, AI, the willingness of our government to increase competition in banking in Canada, which is specifically retail and SME. So it is going to be a big focus for us over the next 3 years on the cost side. And I think we have a lot of opportunities for us for -- to be much more efficient. Yes.

I don't want to put words in your mouth, so I'm going to just ask this as a follow-on to that. I'm assuming that I could be very wrong in this assumption. This has nothing to do with the branch network and everything to do with technology.

It's technology, it's digital onboarding. On the branch network side, it is, to a certain extent, also -- yes, it's part of it. I mean we have been reducing our footprint. We've been -- we have a big portion of our branches in Quebec that are -- we call them cashless, but what it means is that they're not transactional. So it's advice, you can get cash at the ATM. So it is looking at our branch network and evolving with it because people don't use branches as much as they used to. It is another example, we used to do a lot of multichannel and development in all channels, focus on the channels that we know where the growth is going to be, mobile.

Okay. We've hit the stage in the conversation where I get to put my questions down and just hand the floor over to you and ask you, Laurent, for your key messages that you want investors to take away from.

Well, thank you very much for this. And I remember last year, we talked about 2025. It's going to be a very big year for us. So we're very proud of what we are able to execute. Going back, February 3 is when that was a closing date for CWB. And this past November, all the CWB branches are now National Bank branches. So the IT conversion is done. Now we're working with our clients, engaging with them. And so that's going to be part of the work over the next couple of months.

Very happy also with the Laurentian transaction, which was a very complex transaction when we have 3 parties working on it. So very proud of what our teams were able to execute in 2025. So a very big year for us. And '26 is going to be another very big year, and that's consolidation, engaging with our clients, all the synergies that we talked about. So listen, I want to -- a big special thanks to our employees because we're doing, in terms of the execution, incredible. And to our shareholders, thank you very much for your support, and have a happy New Year.

Great. Thank you very much. Appreciate it.

Good morning, and welcome to National Bank of Canada's Fourth Quarter Results Conference Call. I would now like to turn the meeting over to Marianne Ratte, Senior Vice President and Head of Investor Relations. Please go ahead, Marianne.

[Foreign Language] Welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO; Marie Chantal, CFO; and Jean-Sebastien Grise, Chief Risk Officer. Our business heads are also present for the Q&A session, including Lucie Blanchet, Personal Banking; Judith Menard, Commercial and Private Banking; Michael Denham, CWB Integration; Nancy Paquet, Wealth Management; Etienne Dubuc, Capital Markets; and Bill Bonnell International.

Before we begin, please refer to Slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted.

I will now pass the call to Laurent.

[Foreign Language] Marianne, and thank you, everyone, for joining us. This morning, we reported earnings per share of $2.82 for the fourth quarter of 2025 and $11.28 for the year. We delivered strong financial performance in 2025 while also completing the largest acquisition in our history. We met all of our medium-term financial objectives, generating return on equity of 15.3%, EPS growth of 9% and a dividend payout ratio of 40.7%, supporting a 7% increase in our common share dividend in 2025. This was backed by resilient credit performance and strong capital levels amid a complex macro backdrop.

The geopolitical and geoeconomic situation that has defined 2025 will continue to shape business confidence and investments in 2026. Trade tensions with the U.S. are affecting all provinces, causing job losses in certain sectors and a slowdown in the labor market. Meanwhile, inflation is proving sticky with the path of monetary policy and interest rates uncertain. We are nonetheless encouraged by increased government focus on the economy as reflected in the federal budget, which included tax cuts, investment in housing and infrastructure and measures to stimulate business investment. This should support consumer consumption and resilience.

We positively view the latest developments regarding nation building projects to regain our economic sovereignty as an energy superpower. We are also encouraged by government action in support of our steel and softwood lumber industries. The private sector and provincial governments must also play a role in revitalizing our manufacturing sectors, strengthening supply chains and building strategic development projects. With our increased national presence, the bank intends to grow and deploy capital to help fuel Canada's economy.

Our acquisition of Canadian Western Bank in early 2025 marked a historic milestone for the bank, positioning us for accelerated growth. The onboarding of new colleagues was our priority following closing. As a unified team, we have since migrated over 65,000 clients to our platform and rebranded all branches. With these integration steps now behind us, we look forward to what comes next.

Cost and funding synergies are being realized at an accelerated pace, and we expect to meet our target more than a year ahead of plan. This morning, we also introduced a significant target of between $200 million and $250 million in revenue synergies to be realized over the next 3 years. On capital, we plan on converting approximately 2/3 of the CWB loan book to the advanced method in late 2026 with additional portfolios to be converted at a later stage. We expect this to add a total of 50 to 75 basis points to our CET1 ratio, including the benefits already realized in 2025.

Earlier this week, we entered into definitive agreements to acquire Laurentian Bank's retail and SME banking portfolios following their decision to exit the sector. We will also acquire their syndicated loan portfolio. It's a natural fit given our strong presence in Quebec, enabling us to serve even more local customers and communities. This transaction also aligns with our growth and capital deployment strategies. We look forward to welcoming Laurentian's retail, SME and syndicated loan clients. They will benefit from our leading digital capabilities, our broader branch network, products and services offering and financial advisory and business banking teams.

On capital, we ended the year with a CET1 ratio of 13.75%. Our strong earnings power and the anticipated AIRB migration benefits provide ample room to pursue growth. Our commitment to disciplined capital deployment is well illustrated by our superior ROE, and we remain firm in this commitment. We have a clear path to reach the midrange of our medium-term ROE objective of 15% to 20% while maintaining strong capital levels. Our priority is to accelerate organic growth and operational efficiency. We also intend to grow dividends at sustainable levels. In this regard, we announced a 5% quarterly dividend increase this morning effective Q1 2026. This will be completed by share buybacks, which we started in September and select tuck-ins in our P&C and Wealth businesses.

A CET1 ratio converging around 13% represents an optimal capital level to operate at in the current environment and by the end of 2027. For 2026, we are targeting EPS growth within our medium-term objective of 5% to 10% and positive operating leverage. This positions us well to once again achieve an ROE around 15%. By 2027, we are targeting an ROE of 17% plus as we reap the benefits of cost, funding and revenue synergies from CWB, growth in all sectors, continuous efficiency improvements across the bank and returning capital to shareholders.

Turning now to the performance of our business segments. P&C Banking generated net income of $336 million in the fourth quarter after recording a $62 million pretax impairment charge on intangible assets and higher impaired credit losses on the CWB portfolio. Excluding CWB, Q4 P&C revenues were up 5% year-over-year, and we continue to grow our balance sheet. Personal mortgages grew 8% year-over-year with continued momentum in originations. Our commercial loan book grew 12% year-over-year, reflecting broad-based growth across our industries and continued opportunities in insured residential real estate.

Looking forward to 2026 and including CWB, we expect to grow personal mortgages in the mid-single-digit range and commercial loans in the high single-digit range with a gradual ramp-up as we expect to start growing the CWB portfolio in the second half of the year.

Wealth Management generated strong performance in the quarter and for the year. Net income grew 18% and 17%, respectively, driven by growth -- by strong organic growth and rising equity markets. AUA now totals close to $875 billion, and we remain focused on client acquisition.

Capital Markets generated strong quarterly results with revenues of $877 million. Corporate and Investment Banking delivered its second best quarterly performance following a record Q3 with strong corporate activity. Global Markets performance was also strong, supported by securities finance and elevated issuances in equity structured products. The franchise delivered an exceptional performance in 2025 and what were also exceptional market conditions. Net income was up 34% from last year, reaching a record level of $1.7 billion.

As we look to 2026, here are some observations. For Corporate and Investment Banking, we have a strong pipeline and foresee continued growth in client and financing activity. For Global markets, we are expecting normalized contribution from trading with fewer market dislocations in 2025 -- sorry, than in 2025. Having said that, our franchise is growing. We expect steady opportunities in our rates and credit business, and we also expect demand for equity structured products and securities finance to remain solid.

Credigy delivered net income of $42 million in the fourth quarter. Average assets were up 8% with investment volumes picking up in the second half of the year, generating 5% average asset growth for 2025. We will continue to execute new investments with discipline in 2026 in what remains a competitive market.

At ABA Bank, net income increased 8% year-over-year in the fourth quarter, reflecting balance sheet growth and a build in performing PCLs. Revenues were up 16% over the same period as ABA continued to grow its balance sheet with deposits up 19% and loan up 9%. We anticipate similar loan growth levels for next year at ABA.

A few weeks ago, we announced that Lucie Blanchet is transitioning to a strategic advisory role and that Julie Lévesque is taking over as Head of Personal Banking effective January 1. I'd like to take this opportunity to recognize Lucie for her many contributions over the last 23 years, including making the bank a leader in client experience. I look forward to continue to count on her counsel in her new role.

I also want to congratulate Julie on her appointment. A member of the senior leadership team since 2020, Julie is the ideal candidate for the role, bringing her track record as Head of Operations and Technology to evolve our retail banking model, increase efficiency and accelerate our growth.

In conclusion, while the economic environment remains complex, the bank enters 2026 from a position of financial strength and with a clear strategy. With our increased national presence, diversified business mix, strong capital position and credit profile, we have the tools to generate continued growth and superior returns. Our goal is to be a strong and reliable banking partner for Canadians from coast to coast, an employer of choice for our people and to deliver sustainable value for our shareholders.

I will now pass the call to Marie Chantal.

Thank you, Laurent, and good morning, everyone. My comments will begin on Slide 11. The bank delivered strong results in 2025. Revenues grew 25%, PTPP increased 32%, and we achieved positive operating leverage every quarter. Our performance reflected particular strength in Capital Markets and in Wealth Management. The CWB transaction added $878 million to revenues and $440 million to expenses. Excluding CWB, revenues increased 17% and PTPP was up 23%.

We capped the year with strong performance in the fourth quarter. Revenues increased 28% year-over-year and PTPP grew 33%. Operating leverage was positive at 4.4%. When excluding CWB, revenues grew 18% year-over-year, expenses were up 14% and PTPP rose 21%. Expenses were mainly driven by higher technology and compensation costs with variable compensation accounting for over half of the increase, consistent with our strong performance. Of note, Q4 technology expenses in the P&C segment included a $62 million impairment of intangible assets, representing an after-tax impact of $0.11 per share.

Moving to Slide 12. NII, excluding trading, grew 3% sequentially, driven by solid growth on both sides of the balance sheet. The all-bank NIM, excluding trading, was 2.19%, down 3 basis points from the prior quarter, primarily reflecting business mix. The P&C NIM was stable sequentially. Looking ahead, we expect the P&C NIM to gradually trend upward in 2026 on the back of improving loan spread with the all-bank nontrading NIM improving slightly in the second half of the year. As always, many factors could impact the total bank NIM, including business mix.

Turning now to Slide 13. We continue to deliver solid balance sheet growth driven by strong momentum across the bank. Total loans reached $303 billion, up 3% sequentially. Deposits totaled $318 billion, that is up $15 billion or 5% sequentially, reflecting higher demand deposits in wealth management and ABA as well as strong momentum in commercial banking deposits.

Now moving to capital on Slide 14. We ended the quarter with a CET1 ratio of 13.75%, supported by capital generation of 35 basis points. Solid RWA growth consumed 40 basis points of capital in line with balance sheet growth. Share buybacks during the quarter reduced the CET1 ratio by 11 basis points. Since September, we have bought back 2.1 million shares or approximately 27% of our current program.

Slide 15 provides a road map to the AIRB conversion of several CWB portfolios. We are pursuing a phased implementation with the largest benefits expected in Q4 2026, subject to regulatory approvals. In 2026, we will submit models for approval covering general commercial, commercial real estate and RESL portfolios, which together represent approximately 2/3 of acquired assets or about $20 billion of standardized credit risk RWA. The models still under reviews for migration in 2027 and beyond include the equipment finance and optimum mortgage portfolios. The total conversion is expected to free up 50 to 75 basis points of CET1 with their year-end capital level already reflecting the benefit of 5 basis points. We expect the next phase to release 35 to 55 basis points in Q4 2026 and the remainder in fiscal 2027 and onwards.

Turning to Slide 16. With our strong execution, we are realizing cost and funding synergies ahead of plan. Since closing, we have delivered synergies of $116 million, and we will achieve our Q1 2026 target of $135 million by the end of the month. Building on this momentum, we now expect to fully realize the $270 million target by the end of fiscal 2026, achieving this milestone in less than 2 years, more than a year ahead of our initial 3-year plan.

On Slide 17, we introduced CWB revenue synergies. We are now providing a full suite of products and services to clients, generating opportunities for incremental NII and fee income. As we are focusing on post-integration servicing through the first half of the year, we will initially earn mostly ancillary revenues, and we'll see NII growth accelerating towards the second half of the year. With these drivers, we expect to deliver pretax revenue synergies of approximately $50 million in fiscal 2026, growing to between $200 million and $250 million by the end of fiscal 2028.

Now looking ahead to 2026, let me provide additional color on our financial outlook following Laurent's remarks. We expect adjusted EPS growth to be within our 5% to 10% medium-term objective, translating into an ROE of approximately 15%. This will be supported by positive operating leverage for the full year, recalling that comparison will be challenging against last year's strong first half. We expect continued momentum across our business segments, while the improvement we saw in the Other segment in the second half of the year should be maintained. Accordingly, we anticipate a PTPP loss ranging between $225 million and $275 million in the Other segment for 2026 with quarterly revenues and expenses at a lower level than in Q4. Impaired PCLs are expected to be in line with last year's range of 25 to 35 basis points for the full year. And finally, we plan to continue repurchasing shares and have flexibility to increase the size of the program.

As for the recently announced transaction with Laurentian Bank, it is expected to be accretive to adjusted EPS by 1.5% to 2% in the first year following closing of the resale portfolio and marginally accretive to adjusted ROE before any revenue synergies. The transaction is also expected to reduce our CET1 ratio by 25 to 30 basis points, of which approximately 5 basis points relate to the syndicated loan portfolio. The regulatory capital treatment is expected to be under the standardized approach at each closing. Also, please note that the transaction is not expected to have a material impact on our fiscal 2026 outlook.

To conclude, we are pleased with the strong performance, effective execution and strategic progress to achieve in 2025. Going forward, our balanced investment and growth strategy positions us well to meet evolving client needs in an increasingly digital banking environment. Supported by robust capital, we are poised to accelerate organic growth while enhancing efficiency by optimizing our operations and advancing our technology. Furthermore, our strong execution enables us to capture revenue synergies that will underpin sustainable growth and profitability.

I will now turn the call over to Jean-Sebastien.

[Foreign Language] Marie Chantal, and good morning, everyone. I'll start on Slide 19, looking at our credit performance over the past year. Throughout 2025, the Canadian economy continued to soften, marked by slower growth, rising unemployment and tariff uncertainty. In response, the Bank of Canada cut interest rates to support economic activity. In this environment, the performance of our credit portfolios remained resilient, benefiting from our defensive positioning, disciplined risk management and prudent provisioning. Total provisions for credit losses for the full year were 45 basis points. Excluding the initial provision on performing loans related to the CWB transaction, total PCLs were 36 basis points and performing provisions were 8 basis points as we prudently built additional allowances in every quarter. As expected, impaired PCLs were 28 basis points for the full year, in line with our guidance.

Now turning to the fourth quarter results. Total PCLs were $244 million or 33 basis points, an increase of 5 basis points compared to the last quarter. We added 4 basis points of performing provisions in Q4, primarily driven by model calibration and portfolio growth. PCL on impaired loans were $211 million or 28 basis points, up 7 basis points quarter-over-quarter and 4 basis points year-over-year. Personal Banking provisions were $9 million higher sequentially, mainly driven by consumer credit. Commercial Banking provisions increased quarter-over-quarter by $22 million, primarily driven by 3 files. At ABA, impaired provisions increased to USD 25 million due to new formations during the quarter and model calibration.

Turning to Slide 20. Our total allowances for credit losses were $2.4 billion, representing 5.5x coverage of our net charge-offs. Our performing allowances were $1.6 billion, demonstrating a strong performing ACL coverage ratio of 2x. We have been building allowances for the past 14 quarters and remain comfortable with our prudent provisioning levels.

Turning to Slide 21. Our gross impaired loan ratio was 109 basis points. Excluding USSF&I, yields were 81 basis points. Net formation increased by 3 basis points compared to last quarter, mainly driven by one file in Capital Markets. At ABA, while net formations increased quarter-over-quarter, they remain below the Q4 2024 peak.

On Slide 22 and 23, we highlight our Canadian RESL portfolio. Approximately 85% of the portfolio has been repriced, absorbing the impact of higher interest rates. Upcoming renewals continue to show a significantly reduced payment shock compared to a year ago, and our variable rate mortgage portfolio has been benefiting from the lower interest rates.

On Slide 35, we provide additional information on our financial services loans. Our largest exposure within the industry is from USSF&I, mainly Credigy. Excluding USSF&I, our nonbank financials represent less than 2% of our total loan portfolio.

Looking ahead to 2026, we anticipate economic growth to be slow, yet positive amid persistent trade uncertainties. The unemployment rate is expected to remain relatively steady but elevated, while the lower interest rates should provide some support for consumer spending and the housing market. Accordingly, we remain cautious in our outlook.

Turning to our domestic portfolio. We expect further increases in delinquencies in retail, while our wholesale book remains subject to periodic lumpiness. At Credigy, as in prior years, we expect provisions to be primarily driven by growth, mix and a normal seasoning of portfolios. At ABA, with the local economy continuing to operate below potential, we expect impaired PCLs to remain elevated. At the total bank level, we expect impaired PCLs to remain within the range of 25 to 35 basis points for the full year 2026, with trends similar to what we observed this year.

In conclusion, we are pleased with the credit performance in 2025. As market dynamics continue to evolve, our defensive qualities, resilient business mix and prudent allowances position us well entering 2026.

With that, I will now turn the call back to the operator for the Q&A.

[Operator Instructions] Your first question comes from the line of John Aiken with Jefferies.

In terms of the success that we've had in terms of the expense synergies, the $270 million that you're expecting to achieve by the end of next year. Given the fact that the timetable has moved up, is there any chance that you're actually going to be able to exceed the $270 million? And if that is to happen, would we -- can we expect additional guidance?

John, it's Marie Chantal. Thanks for the question. So we're very happy today to announce that we are accelerating the realization of cost and funding synergies. As you know, we've closed the transaction not even a year ago, very happy with the client migration. So it's a bit too early for us to comment on the magnitude. So on the pace, very happy. We're delivering cost and funding synergies a year ahead of initial plan. And we'll, as we did all year long, keep you posted. Stay tuned in 2026 for an update on magnitude.

And just one other add-on, if I may. When we look at your regulatory capital ratio, the relief that CWB is going to get, then the drawdown from the Laurentian acquisition, but my sense is that all of this is basically going to happen in Q4 2026 or later. Laurent, you talked about wanting to invest in organic growth. And -- but when we take a look at where your CET1 ratio has been going about, can we expect at least in the near to midterm, ongoing and maybe even more aggressive buybacks if we're going to manage the CET1 ratio down closer to 13% like you had targeted by the end of 2026?

This is Laurent. Thank you for your question. Look, on capital deployment, the strategy is to deliver premium ROE. So that's the focus of the team. And we added additional information and guidance on ROE for '26 and '27. And so the focus for the next couple of years is on that. And there are 4 components on our path to 17% plus in 2027. So the first one is the impact of CWB. So I think we've provided enough information on cost, funding synergies. We have revenue synergies coming up, the impact also of CWB itself on the bank. So that's the first thing.

Second thing is organic growth across all segments and continued efficiency, particularly in P&C, which we think we are going to be able to deliver over the next couple of years. And then, yes, capital management which is primarily deliver sustainable dividend increases complemented with buybacks. And obviously, we're going to take into account here the impact of AIRB transition.

And finally, also strategic tuck-ins like in P&C and Wealth, like you saw this week with the acquisition of Laurentian Bank's retail and SME business. I think that's a good example of how we view capital deployment over the years. So buyback are a complement. So we're not here to engineer higher ROE. They are a complement to our strategy.

Your next question comes from the line of Matthew Lee with Canaccord Genuity.

On the CWB revenue synergies, how should we be thinking about the breakup of that $200 million to $250 million by business line? And then how much of that expectation is sort of low-hanging fruit versus maybe more aspirational targets?

Thanks, Matthew. It's Marie Chantal. I'll start with the first portion of the answer to your question, and I'll let Judith maybe complement. So as I said in my remarks, we're now providing a full suite of products and services to clients, so really unlocking new opportunities for incremental NII and fee-based revenue streams. So the revenue synergy trajectory implies that noninterest income will represent a larger share of total revenues in 2026 with a gradual shift towards a greater proportion of NII towards 2027. At full target, we anticipate that roughly 2/3 of the revenue synergies will come from NII. For fiscal '26, as I said, we estimate that $50 million will be generated in revenue synergies and progressing nicely in 2027. It's still premature to provide a specific target for 2027, but we're very confident in achieving the range that we provided.

Now from maybe a segment perspective, when you look at the full target revenue synergies, we estimate that roughly 2/3 of those will be realized within the commercial segment, underscoring their key role in driving revenue synergies. So maybe I'll let Judith maybe comment on the second part of your question and possibilities for 2026.

Thanks, Marie Chantal. So I'll just give you a little bit more color for commercial for 2026, what we have done concretely to get to these numbers. So first, we have set up a team focused specifically on driving revenue synergy and have governance and tracking of key KPIs in place to ensure we are entering momentum. So formal products and sales training programs have been implemented for CWB employees, covering our comprehensive total bank solutions. And lastly, I would say that I'm really happy about that. We have physically relocated some of our top capital market team members to Western Canada to support growth in the region, especially on the derivative product side, which is really the focus next year.

Okay. That's helpful. And then maybe when I think about CWB and Commercial Banking in general, it's fairly relationship-driven. How much of your revenue targets depend on retaining key commercial bankers? And what have you seen so far in terms of ability to retain the people you've integrated into the business?

So in terms of employee retention, I will say that right now, we -- everybody recognized that this is a significant change. So we're really prioritizing positive integration experience of our employee retention and most importantly, on the people in front of client. We've been meeting frontline employees, join teams in person head of our migrations and retention trends are consistent with historical norms for both CWB and NBC, and we're very pleased about that. And this is particularly important considering, so we have a very big focus of relationship manager retention right now, and we're very pleased with the retention as we speak.

Your next question comes from the line of Stephen Boland with Raymond James.

The first one on ABA, and I'm just wondering if these 2 things are related. You talked about model calibration relating to impaired, but also that when I look at the LTV in that portfolio, it's gone from in the 40s into the 50s LTV. And I'm just wondering if it's related. It seems like a big move or maybe it's 5 basis points or 10 basis points, but it just seems on the LTV, it seems like a big move for 1 quarter.

Yes. So thank you, Stephen, for your questions. If it's okay with you, I'll separate it in two questions, and I'll start with the second one on the LTVs. So we did see a decrease in collateral values, which is completely expected given the economic softness and the LTVs did go up to the 50s. And before that, they were in the high 40s. We're not seeing a material decline in collateral value. It's mostly gradual. -- but real estate markets have been soft for some time. It's important to note that we don't have exposure to high-rise condos or developers or hotels, which are the most impacted asset class. And you'll also see this quarter that we continue to build performing provisions and our impaired provision levels remain high. So that's for the LTVs.

Now for the model calibration, so you've heard us talk about model calibration at the bank level for a long period of time. And you have seen higher impaired PCL at ABA. And there's 3 components to those higher impaired PCLs. First, the economy continues to perform below its potential. We are in the credit cycle. Second, there was an impact of the tariff uncertainty in Q2 and Q3. So there's always a lag between the uncertainty and the impact on our portfolio. So it really hit the formations this quarter. But we're happy because in the end of July, we saw the tariff rate get set at 19%, which was a positive development.

For the calibration of model, if you recall, for IFRS 9, it's a point-in-time model and not a through-the-cycle model for capital. So it's normal that as we see defaults rise, we need to calibrate the models up. So it's basically an additional level of conservatism.

Okay. That's great. Sorry, just in your P&C segment, I believe I think about 8 basis points of the PCLs came from the Canadian Western portfolio. I'm just wondering what portfolios, can you give any description on that?

So when you look at our retail portfolio in general, it's really mostly consumer credit. So there was a bit of auto loans, a bit of credit cards, a bit of mortgages and a little bit of direct loan, but really nothing to call out.

Your next question comes from the line of Doug Young with Desjardins.

Maybe sticking with the P&C segment. I know there's a $62 million intangible impairment. But if you -- even if you back that out, it seems like expenses were a little bit higher than normal this quarter. And then I think, Laurent, you talked a bit about efficiency improvements coming particularly from Canadian P&C banking. So I'm hoping you can address what happened in the quarter, if there's anything to call out? And then where -- like how do you foresee outside of CWB, where else do efficiency improvements come in the banking side?

Yes. Thank you. It's Lucie. I'll take that question. So obviously, a big increase in the expense comes from the CWB, the intangible asset, we talked about it. And on the technology side, we see a 17% increase from the previous year. And it's on purpose in the sense that we continue to invest to sustain our long-term performance. So we purposely decided to continue and in some areas to accelerate our investments aligned with our strategic priorities. So that's a reflection. The expense growth this year is a reflection of that. And we are selective in where we invest, and we try to generate benefit on both on the top line and the expense.

So for example, we're -- we are currently in a major upgrade of our technological environment in the contact center, and that will bring much more improvement in the customer experience, but also reduce calls and handling time. So that's a very concrete example. We're also investing in a complete ramp-up of our credit card ecosystem to support -- as you know, we are underpenetrated in that business, and it's a high ROE business. So when we look ahead, we believe that these investments will continue to pay off.

And the third big bucket, I would say, is really leveraging our transversal capabilities as the retail business is a big user of any technological components, we believe that we can reuse much of these investments also in the other business lines to be able to contribute overall to the reduction of expenses. So that's some of the examples. So we do definitely see opportunities.

And maybe -- so just maybe to kind of simplify this, like if I take the P&C Banking expenses, take the $62 million, is that a reasonable run rate from which to expect expenses to grow next year? Or was there something abnormal and we should see a bit of a normalization?

Exactly. Yes, that's exactly that. So when we look ahead for 2026, we do see much more normalization. And also, you have to take into consideration that in 2025, we also increased our marketing expenses. We've redone a rebranding exercise. We're still in the process of doing that. And so we see a little bit of that also in '26.

Okay. And then second question, I think, Laurent, when you talked about uses of capital, you talked about an acceleration of operational efficiencies. Can you dig into what that means? Is there systems that could be written off? Or maybe you can just kind of flesh that out.

It's still a very high level. I touched on this publicly in the past couple of conferences. But we do see potential for improvement in our P&C business. The market is evolving rapidly as well. We think retail and small business banking environment will continue to be challenged. I mean fintechs, challenger banks are now reaching scale, and they are a growing part of the Canadian banking model. And we -- with the latest budget, we clearly see openness from the government on banking competition in areas of payments, digital assets, stablecoins and open banking. And you throw in AI on top of that.

So one of the things that we're working on right now, it's a mindset of the team is to take all these trends very seriously. And there's a couple of things that we're looking at right now. So the first thing is the cost structure analysis and evaluate our competitiveness going forward. That's something that we're working on. A little early to start going through what are those components, but it's something that we have -- we're starting to do work on. The speed of digital adoption also and our mobile strategy.

And the other thing that I've touched on is as we move ahead, we are -- our openness towards more partnership in technology. A lot of tech is better than elsewhere than within banks. And so partnership and technology and also distribution or other products. So there's -- like it's not just cost, but it's also a business model that we're thinking about. So this is a focus of the team, but it's a little early to go through where we think the impacts are going to be, but you will be kept updated on all these.

So it doesn't sound like there's a big charge as a way of use of capital. This seems more strategic oriented. Is that?

Yes, correct.

And then if I could sneak one just last clarification on the Laurentian Bank portfolio acquisition. The way that we should think about this, you are just absorbing the loans and the deposits, 0 cost and the cost to you in terms of the CET1 impact is simply the amount of capital you have to back this. So this is a portfolio acquisition that basically comes with 0 cost. Is that the right way to think about it?

Yes, Doug, that's absolutely it.

Your next question comes from the line of Paul Holden with CIBC.

Maybe you can drill down into the PCL guidance a little bit of 25 to 35. So effectively suggesting no change versus '25. But if I look at economic projections for Canada and specifically, it does suggest some improvement versus '25. So are there particular areas that you're concerned about are trending the wrong way? Or are you just being conservative in your guidance?

Thank you for your question, Paul. And I'm afraid I'm going to give you a long answer for this one because there's a lot of puts and takes on this one. But you're right, we are calling that 2026 will be kind of a transition year and look similar to 2025. And when you look at 2025, looking at each quarter, so we had a 32 bp impaired, 32 bp impaired, 21 bp impaired, 28 bp impaired. So a lot of volatility between the different quarters, and we expect that to continue.

When you look at the credit landscape, there's some positives. So on the retail, we are seeing that the customers are showing resilience. As we mentioned in our slide, about 85% of our RESL portfolio has been repriced and also the delinquency is still low. And for wholesale, there are some also positive trends. The downgrade rates are stabilizing. Clients have more time to prepare for possible tariffs, but there's still the renegotiation of USMC that is hanging. But we do need to stay cautious, and I'll explain to you why.

First, in retail, we saw that unemployment has increased, but mostly for younger age cohorts. But the future driver of outcomes will be unemployment for the 25 to 54 age cohort, which could still continue to increase. And we're also looking at layoff rates, which to date have still remained below historical averages. We still expect the unsecured borrowers who are renters to be the most affected here. And that's why we're keeping a strong ACL coverage ratio on credit cards at close to 8%. The RESL has remained very resilient, but we are seeing pockets of softness where supply outpaces demand and where you're seeing specific industry issues.

But you could also see some deterioration in the regions if the unemployment grows in those specific regions. And for wholesale, that's the tough one. We should expect lumpiness, especially in industries where collateral and enterprise values have remained under pressure, and there's a couple of them. And there's still obviously tariff-related risks. So in this environment, we're remaining prudent, and that's why we're continuing for the past 14 quarters to build performing provisions to get ready for 2026.

Okay. So what was noticeably absent from your answer was any reference to ABA in Cambodia and any reference to the elevated losses in the CWB book. And I'm assuming that's intentional, no particular concerns on those 2 areas beyond what you've already discussed for the quarter?

Yes. So for ABA, I mentioned it. I think I answered it. It's -- we expect it to remain elevated for the year. And for CWB, we call it on our slide, but it's really a couple of deals. It's lumpiness, and it's normal given the wholesale composition of that book, but it's definitely not a trend.

Okay. Okay. That's helpful. Second question, maybe for Laurent. Just wondering how you think National Bank is positioned to benefit from the federal budget and particularly thinking about the planned infrastructure build-out. And one of the concerns around that is it's going to take time for these things to actually manifest. But if you have any thoughts around when you might potentially benefit as well? Like could this be a 2027 story? Is this built into your 2027 ROE expectation and capital deployment in any way?

Thank you for your question. And obviously, we are encouraged with the focus on from our government on the economy on nation building projects and all that. But we are at the mercy of execution in this case. So we're ready to deploy capital any time, but it could take some time. And could the impact -- could we see some towards the end of 2026? I'm hopeful. In the meantime, we're definitely supporting any initiative and staying close to our partners across the country to make sure that we're going to be there. And you're right, we are well positioned in terms of expertise and capital position to benefit from expanding growth in infrastructure across the country.

Your next question comes from the line of Mario Mendonca with TD Securities.

Could we go back to CWB and ABA? I mean these are clearly issues that are top of mind for investors this morning. First on CWB. So you report that there's $63 million in impaired PCL, 69 basis points there. That obviously stands out. Can you talk to what particular segments are showing the stress and why your content to suggest that this is not a trend?

Sure, Mario. So I'll call out 2 specific files. So one was previously impaired. Basically, it's a real estate file, well-known real estate files. And it went from a -- with tenant to nontenant. So obviously, we get go dark values. So that had a good effect on the value. And the second one is a retail trade or a health company. We're still being paid in this file, but we are not believing that we will be fully repaid in time. So we proactively impaired the file and took an according provision to this. And the reason why I'm confident for this is if you look at the 2 previous quarters, they were more in line with the results of National Bank than this one.

That's helpful. And then on ABA. So the gross impaired loans now have essentially hit $1 billion. It's up from maybe $200 million just a couple of years ago. And I think you're clear with us that the LTVs are moving higher. Where I'm going with this is, although the LTVs have gone higher, they're still really low at 50% or call it, 55%, let's say. Why are there write-offs? Like the $15 million we saw this quarter, these elevated levels, why are they increasing if the LTVs are that low? Like why would there be losses at all? Like I guess what I'm getting at is when you recover the property out of foreclosure, what are you learning about the LTVs when you get them back?

Yes. So there's a couple of components to that answer. First, it's not the first quarter where we're taking write-offs on this portfolio. And the write-offs that you're seeing are tied to aged impaired accounts with higher LTVs. The 50 we're quoting here is for performing accounts, and it's an average, but there are some that are higher than others. And all of them had already been provisioned. As you know, the recuperation time because of legal delays in Cambodia has been long. We have been mentioning that in the past, but we're continuing to take prudent provisions and writing them off as they age with higher LTVs.

And in any given quarter, this quarter, for example, can you speak to how many properties were recovered where you actually got access to the property and had a look at it? Is it like a single-digit number, like 5? Or has it been more like 60?

No, it's a higher number than that because it's a portfolio with average loan size of $65,000. So it's significantly higher than that. But it's still a long process. And as we've mentioned before, there's always 2 ways about it. The first one is to go the legal way and the second one is to go on amicable settlement, and that's what we try to push for. And that's why in the past quarters, you have seen a reduction in formations because we had more settlements and more return to upgrades.

And when you say significantly more, I think you meant significantly more than 5. Is that right?

Yes. Yes.

Your next question comes from the line of Darko Mihelic with RBC Capital Markets.

Maybe just a clarification first on the benefits of converting CWB's portfolio to AIRB. Why such a wide range?

Thanks, Darko. It's Marie Chantal. So we've explained in the past couple of quarters, the process we're going through for converting those portfolios to AIRB. So first, it's going as planned. So we're very happy about the execution. We're still expecting to be able to release the capital gains in Q4 2026. As this progress is ongoing, there are still some analysis and uncertainty around model calibration, so we're doing the fit for use for every model related to the portfolios that we're submitting. So you saw on our slide that we're talking about the general commercial, commercial real estate and the RESL. So it's really part of the process that we're doing with the regulators in order to confirm the gain that we'll get from the advanced method. So if I resume it very simply, still some model calibration that we're working on.

Okay. Maybe I'll follow up with you later on that. Another question with respect to capital is -- when I look at Slide -- what slide number my eyes are terrible. Slide 14. One of the things that stands out for me is the high level of consumption of capital, let's call it, organically, the 40 basis points of RWA growth, that is higher than what you're generating. And given your outlook for loan growth into 2026, is it fair to say that, that's kind of like the quarterly sort of assumption is that you will deploy organically capital over and above what you generate in any given quarter for the next foreseeable 4 quarters?

So thanks, Darko. On the capital consumption from RWA this quarter, so 40 basis points is a little bit higher than what our historical rate is. We're usually around 30-ish basis points. It's coming -- so maybe I'll explain to you in different items. It's coming mostly from book size this quarter, more than book quality, mainly from the book size actually. And it's really well diversified between the different segments, whether it's Corporate Banking, retail, commercial, ABA. So really reflective of the balance sheet growth that we're seeing this quarter in terms of the diversified growth from our loans Q-over-Q.

Okay. So if it's really well diversified and not too far out of the norm, is it still correct to think that in '26, you will deploy more capital than you generate? Is that what you're budgeting for?

Well, we're always very happy to deploy capital because this is our first priority, right, in terms of our capital strategy. So when you look at next year, I think reverting back to our historical growth of around 30 basis points would probably be a good range.

Okay. And maybe just one last question, if I may. In your discussion on the exposure to private credit, you were quick to point out excluding Credigy. I just want to understand why did you exclude Credigy? Does Credigy play in private credit?

So maybe I'll give you a little bit more information on Credigy, and we can have Etienne complement. So yes, it is a part of what they do, but we're very comfortable with it because they've been in this space for over 20 years, and they've shown consistent discipline in both underwriting, perfection of security, which is key and portfolio monitoring. And you've seen in the past years, they haven't gone for growth in the expense of quality. And you need to remember also that the underlying collateral of Credigy are smaller loans with an average size of $225,000. So it's not what you're seeing with the bigger cockroaches.

Okay. And where does the other 2% come from then? Because my understanding was the private credit market is essentially in the U.S. I didn't think your cap markets business reached far into the U.S., but maybe, Etienne, you can speak to how you have that exposure.

Yes. So just to rephrase to make sure we're talking about the same thing. So we have all our exposure in financial services. Around half of that is USSF&I, which is mostly Credigy. And of those $9 billion remaining, $6 billion are nonbank financials, so not necessarily private credit, which is less than 2% of our book. And on the NBFI population, 90% are Canadian, and we have a nominal exposure to U.S. private credit funds. So the rest of the NBFIs would be insurance companies, pension funds, investment funds, some equipment financing facilities.

Your next question comes from the line of Jill Shea with UBS.

Marie Chantal, you mentioned the P&C margin would trend upward in 2026. And then you mentioned also that the all-bank NIM would go slightly higher in the second half of '26. Could you just tease that out for us? What's the expectation of the all-bank NIM in the first half? And just any dynamics there? And then just a second piece to the question would be on CWB growth ramping in 2026 or the Laurentian loans and deposits that you acquired. Will either of those be impactful to the NIM path as we think about 2026?

All right. Thanks, Jill. I'll start with the all-bank NIM, and then I'll pass it over to Lucie for some comments on the P&C. So as I said in my remarks, we are expecting the all-bank NIM, excluding trading, to remain relatively stable from the Q4 level in the first half of the year and expecting a slight increase towards the end of 2026, mainly driven by the upside that we're seeing on the P&C NIM. So I'll let Lucie give you some of the drivers there.

And on the P&C NIM, overall, across the different asset class, including commercial, we see better repricing conditions of the loan portfolio. As we look ahead also, we see less pressure coming from the repricing of the fixed term portfolio compared to the context that we had in the last 2 years, and that is going to start as of Q1 2026. So the situation will start to taper there. And on the business mix, which is an important driver, we see deposit growth closer to our loan growth in 2026. So that would help on the business mix and help on the margin side.

Very helpful. And maybe just switching to the Laurentian Bank loans that you acquired. You mentioned that it is coming over on a standardized approach. Just a quick clarification. Could you potentially shift those over to advanced approaches and less than that 25 to -- or 25, 30 basis points you outlined on CET1?

Yes. Thanks, Jill. So you're right that closing, we will be transferring those portfolios on the standardized approach. Transition toward the AIRB method will have to be evaluated after closing. So nothing material in the short term regarding the potential conversion to AIRB, potentially a couple of basis points related to the client overlap in the syndicated portfolio, but all of that is subject to regulatory approval. So yes, this is something that we're looking into as we are integrating -- preparing for the integration of those portfolios.

Your next question comes from the line of Sohrab Movahedi with BMO Capital Markets.

I don't know if it's for Marie Chantal or Laurent, but I wanted to get a little bit more detail beyond just the words that you have on Slide 9 as to how you arrive at the 17%. So for starters, are you assuming a 13% CET1 ratio?

Sohrab, so yes, that's what we are targeting for the end of 2027, working around a 13% CET1 ratio. So nothing very different from what we've been discussing in the past couple of quarters.

Yes. Marie Chantal, what sort of PCL ratio would you need to have to be able to give that 17% on 13% CET1?

I think within the guidance that we provided.

So within -- I mean, if your PCLs aren't improving, is this improvement in ROE simply because of your CET1 coming down?

It's Laurent, Sohrab. No, it's not that. And I don't know if you caught my answer earlier because I did talk about how we are viewing capital deployment over the next couple of years, given our target of 17% plus ROE in 2027. The first thing is CWB as a whole, cost funding, revenue synergies that are going to impact. I think we've got the disclosure on those numbers. Then there's organic growth. I talked also a little bit about continued efficiency in our P&C business. And as we view buybacks, right, they are a complement. And so they are part of the overall capital deployment over the next 2 years. Our calculation right now is that we're targeting, as Marie Chantal just said, roughly 13% of CET1 towards the end of 2027.

Look, things can change. I mean we could see opportunities like we announced this week, right, the acquisition of the portfolios of Laurentian Bank are going to impact our CET1 approximately -- our CET1 by approximately 25 basis points. So we want to remain flexible. We want to have buffers, but our numbers are showing and the way we're going to be deploying capital over the next 2 years that we're going to be able to achieve premium ROE in 2027, 17% plus with a CET1 target of 13% towards the end of the year.

I don't quite -- where do you think your dividend payout ratio is going to be for that 17% ROE?

Look, our focus is not payout ratio. Our focus is sustainable dividend increases. And to -- if you look historically is that we are top of the range in terms of our dividend growth. But our aim is to be in the low 40s.

Yes. I mean, Laurent, I think for you and Marie Chantal, I think it would be helpful if you gave us a bit more numeric examples as to how you get to that 17%. I appreciate the concepts. But I think at least I for one, I'm having a bit of a difficult time trying to triangulate to that 17%.

I understand, and we'll try to get to a place where you feel better about our story.

Your next question comes from the line of Ebrahim Poonawala with Bank of America.

I just had a follow-up question around your outlook for loan growth and the messaging on credit. Correct me if I'm wrong, I think you expect commercial loan growth high single digits next year. My understanding is the government actions may not really play a role next year. So how should we think about that level of loan growth? What are the drivers relative to -- I think you laid out a relatively cautious outlook on credit unemployment for the first half of next year.

So thanks for the question, Ebrahim. It's Judith. So we -- as Laurent said, we expect to grow commercial loan in the high single-digit range, starting from Q4 balance, including -- just to be clear, including of CWB with a gradual ramp-up as we expect to start growing the CW portfolio in the second half of the year. Of course, the current economic environment and tariff risk is particular, brings a level of uncertainty, but we continue to stay close to our clients to navigate this. If you want to have just a little bit more details of where we see growth, so it will be driven by a greater focus on our general commercial business, both large and mid-market, predominantly in Ontario and Western Canada as well as continued growth in our insured real estate portfolio.

Understood. And then I guess just a separate question on Canadian Western you're done with the integration, the synergies on the cost side have been running ahead of schedule. Just talk about opportunities to invest and double up on that franchise now that you have the distribution. Like what are the plans in terms of investing and hiring there, which I assume would probably feed into operational efficiency growth as we think about the ROE.

Thanks, Ebrahim. It's Marie Chantal. So I'll take the first pass at your question. So as you saw from our disclosure, our real focus is really on revenue synergies. So we are very happy with the first phase of the potential for growth that we saw from -- coming from CWB. So for us, execution was key in generating those cost and funding synergies, and it really allowed us to generate those a year earlier than we had anticipated. And when you look at the different aspects of why we're delivering those earlier, it's really execution on integrating processes from CWB into National Bank's processes. So we've been already demonstrating that there's efficiency and opportunities there in generating those cost and funding synergies. So that's the first part.

And as you know, CWB for us was really a growth strategy. So the most important aspect of it is really generating the revenue synergies that we've disclosed this morning that we expect will be at full target between $200 million and $250 million. So those are the real 2 biggest drivers that we see. As we've been doing at National Bank being consistently very disciplined in managing expenses. This will also be the case with the overall combined banks.

Got it. I was just wondering in terms of are you going to ramp up hiring of bankers now that this is behind you within Western Canada, any additional franchise investments to kind of monetize the acquisition beyond the revenue synergies you've laid out?

So Ebrahim, it's Judith. So in terms of growing our commercial book, so right now, we are really obsessed by talent, I would say. So we want -- as I said at the beginning, we want to keep the top talent we have in CWB and integrating the bank and just to give you a little bit more what's happening in the field right now. So we are in the post-migration reality. So equipping teams to go to market, training on our comprehensive value proposition and supporting clients in driving their business forward through the full range of products and services. So this is for us an opportunity to really make sure that our talent is well equipped to continue supporting the clients in the CWB acquisition, but as well also in our core banking in Canada. So there's a lot of focus right now on training and making sure we are like really close to the talent. So that's our focus right now.

We have time for one more question, and that question comes from the line of Mike Rizvanovic with Scotiabank.

I want to go back to Laurent on your 17% ROE target. And I understand you'll give us more color, I guess, at some point in the near term on how you get there. But can you slice it out for us a little bit, give us a little bit of context on where you see that added earnings power across your segments? Is it going to be largely financial markets driven, wealth management, P&C banking or sort of evenly split, but where should we see that torque materialize?

Very good question. Obviously, we think all of our businesses have torque. But I do see an acceleration in P&C and Wealth over the next several years. The acquisition of CWB was very strategic. You see the upside on cost funding and revenue. But you also see our franchise growing across Canada, our ability to attract talent and grow faster. So we think all of our businesses continue to have potential to grow, but I do see more coming from our P&C and our Wealth business over the next couple of years.

Okay. That's helpful. And then in terms of the buyback program, I think you referred to it as complementary. Is there a possibility that, that could become a bigger complement to your earnings? Are you going to maybe consider a higher share buyback if, in fact, you can't draw your capital down toward that 13% target and maybe some of the tuck-in M&A that you're expecting could come up, doesn't come up. Would you consider a bigger NCIB?

Yes, of course, we would. I mean it remains -- we call it a complement. It's opportunistic at the same time, the same way we look at tuck-ins. So of course, we would -- if we think that it's better to buy back for our shareholders, that's what we're going to do.

And that concludes our question-and-answer session. I will now turn it back to Laurent for closing comments.

Thank you, operator. First, I want to thank Lucie for her leadership in Personal Banking over the years. She shared with me that she's going to miss all of you, and this call. So thank you for all those years, Lucie.

As we head into the holiday season, I wish to sincerely thank our employees for their dedication, our shareholders for their continued confidence and our clients for their loyalty and trust. On behalf of the National Bank team, we wish you all the best for the holidays and the new year. Thank you.

And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good morning. Welcome to the Barclays Global Financial Services Conference. I'm Brian Morton and I cover Canadian and Latin American banks here at Barclays. For this morning's presentation, we're going to start with -- we have Trey Greene, who is the Chief Operating Officer at Credigy. Credigy is a specialty finance subsidiary of the National Bank of Canada, it's headquartered in Georgia and has over $8 billion in assets under management. With that, welcome, Trey.

Thank you.

For the investors who aren't as familiar with the Credigy story, can you briefly describe your strategy and market position? And also, could you describe how you fit into the overall strategy for National Bank?

Sure. So first and foremost, we've been a part of National Bank since 2006. We've been a fully consolidated subsidiary for going on 20 years, which I think is important for people to understand that we are fully integrated part of the bank. In terms of our business, we like to think of ourselves as providing capital to either acquire or finance financial assets, primarily in the U.S. across a wide variety of asset classes, including mortgage, consumer, consumer-related products.

Great. Credigy has a very unique and diverse asset portfolio. I mean maybe starting with the largest segment, structured mortgage credit investments. Maybe talk about how your competitive advantages in this segment as well as the outlook for the mortgage investments and the stable to potentially lower interest rate environment, though elevated housing prices.

Sure. So competitive advantage for us, I think always, first and foremost, is our people. We've got a great team, about 185 people down in Atlanta, extremely tenured team. Our executive team has been together almost 19 years on average at the company. And I think we like to think of ourselves as competing on execution, not on price. We don't line up and try to compete with some of the big banks and other more recent entrants into the private credit space but really try to provide reliable execution and flexibility for our partners, which I think, hopefully, sets us apart from the crowd there.

In terms of trajectory for our mortgage investments, I mean we think we've seen a significant increase in momentum in Q2 and Q3, and we think that will continue for us going forward. Typically speaking, we're targeting very high credit quality consumers and relatively low LTV mortgages that even in a complicated macroeconomic environment, we think will perform pretty well.

And your last question on interest rates. Generally speaking, we think that a declining rate environment would be a tailwind for Credigy, but we've really tried to build our business over the last 20 years to be resilient and be able to deploy capital in a wide variety of environments, but certainly, lower funding costs and an increase in the velocity of cash coming back to us in the mortgage business would certainly be a tailwind.

Okay. Great. Also, can you talk about the insurance-related segment? Are you seeing opportunities to deploy capital in this segment? Are you seeing insurance companies looking to divest some of these assets?

Yes. So just to level set within our insurance-related segments, it typically does not mean that we're buying assets from an insurance company. Typically, the types of products that we're focused on in that segment are consumer-facing products that have an underlying credit exposure back to a high-quality insurance company. And certainly, we continue to see good opportunities there. We like the credit performance, and we also like that it's largely uncorrelated with the other drivers of the consumer kind of credit performance that we see within the rest of our portfolio. So less reactive to changes in interest rates or in underlying sort of consumer trends, so it provides a nice diversification for us as well.

Maybe a question just as I was thinking about, can you maybe talk about how more -- how you interact with customers? Are you just -- are you purchasing these assets through intermediaries? Or do you have direct relationships with the individual customers?

Yes, important question. So we're a purely B2B business. So we're not originating any assets or loans directly to consumers. Everything that we do is either directly with another company or through one of those intermediaries. So we have a large investment team that's focused on building relationships with asset originators, funds, banks, sellers, brokers of all shapes and sizes to help us generate the investments that we do. So -- but everything is on a B2B basis and nothing direct to consumer.

Okay. Great. I mean do you see other adjacent asset classes to expand into? And would you consider an acquisition to add scale or capability?

Unlikely that we would consider an acquisition. I mean for us, we want to grow our business by partnering with great companies that allows us to stay lean and flexible and really at the heart of our approach to the market is we want to be able to maintain our risk discipline at all times and having somewhat bulky origination operations could be limiting in that regard. So unlikely that we would acquire something via an acquisition, rather we think we can grow organically with the partners that we have.

Do you see other adjacencies outside to kind of the five verticals that you're working in?

Yes. So look, Credigy is always looking to kind of grow and evolve the opportunity set that we're focused on. I mean for us, the goal is to have the widest possible funnel to the market and filter through as many opportunities to find the good ones as we can. That being said, we have a pretty high bar for entering a new asset class. Some of the things that we're looking for there are availability and reliability of performance data, how predictable is this asset class? What does the servicing environment look like? Can we get to a place from an operational risk perspective that we feel comfortable with? So it's a very high bar, and I don't know that I necessarily see any massive changes there in the near term. But again, it's an important part of our culture to continue to innovate.

If you look at our balance sheet going back 5 years, you'd see a dramatically different distribution of assets than what we see today. And if you were to go back 10 years, you'd see other dramatically different distribution of assets. To us, that's important. That's a good thing. We want to see that balance sheet evolving because that means we're being responsive to where we think we can find the best value in the markets.

One trend we're seeing is the rise in private credit as well as a growing number of fintechs and other financial -- nonbank financial intermediaries. How do you see the competitive environment right now from the nonbank community from potentially better funded competitors?

Yes. No doubt, it's competitive. We have seen a lot of new capital come into this business, in particular, you see these asset managers and insurance company tie-ups that could be very competitive with us. That being said, we're still able to find opportunities with our partners to find assets that we like. Again, our strategy is not necessarily to line up and compete against those larger sources of capital in the market. But to find places where our liquidity matters more, whether it's more complicated products or smaller opportunities or things that are maybe less attractive for those big guys or in certain categories where maybe they have less focus for one reason or another.

But it's also important to know that they're not exclusively competitive. Those can often provide client opportunities for us as well. Asset managers and funds need leverage. That's something that we can provide, even if we don't like the prices at which they're acquiring assets, perhaps on a senior lending basis, we might be comfortable with the attachment points, and that creates opportunity for us. A lot of these funds have target durations that may not be matched to the underlying assets they're acquiring, especially in the mortgage market, and that may create periodic liquidity needs for them.

So it's -- that increase in competition is not exclusively competitive for us. It's created a lot of opportunities as well. And I think the same is true of the fintech world generally. So we have a lot of long-standing partnerships with fintech originators and folks in that ecosystem that have the same needs for capital than anybody else would and are often innovating in some way that maybe makes it easier for a smaller, more agile organization like ours to partner with them as opposed to some of these larger names that have entered the space recently.

Okay. Great. Now there's one thing I was looking at. So it looks like the credit loss content in the portfolio looks relatively small, kind of given the structure and secured nature of the assets, but still, do you have any concerns from a credit perspective?

No credit concerns with our portfolio. I mean we have largely stayed focused on very high credit quality consumers and relatively low LTVs in the mortgage space where we're focused. I mean I think it's no surprise to anyone here that you've got really a bifurcated economy when it comes to the consumer and our focus for the last few years has been on the upper end of that spectrum. So no credit concerns from our perspective within the portfolio.

Also, maybe could you talk about the liquidity for these assets? I mean do you need to mark them to market? And if needed, do you think you can -- the assets could be liquidated quickly?

Yes. So first and foremost, I think it's important to say we think of ourselves as a long-term value investor. We're not buying these assets with the intent to do anything other than hold them to maturity and we're certainly not buying to any kind of near-term exit for these assets. But that being said, we do think there's liquidity there if we needed it. There have been a handful of times over the past few years where we've decided to sell assets or securitize assets on an opportunistic basis. And that's really how we have thought about asset sales is not a core part of our strategy. The goal is to continue to grow our balance sheet at 5% to 10% per year for the long term. But the liquidity is there. Again, we're buying high-quality assets. I'm sure we'd have a lot of takers if we wanted to make that a part of the strategy, but our goal is to just continue to build the asset base.

Great. Can you discuss your funding strategy? Are you raising deposits in the United States? And what kind of support do you have from the parent for funding Also, do you match the duration of the assets with funding?

Yes. So we are not taking deposits first and foremost. So all of our capital is coming from National Bank. And that funding partnership, again, has been developed over the last 20 years and is a really integral part of our business. So we can give our clients confidence that we can fund them quickly and easily because we have the ability to fund quickly and easily ourselves through National Bank.

In terms of interest rate risk, you're absolutely right. We're going out and trying to match the duration of all of our investments to the funding that we received from the bank. And it's important to note that for a long time now, we've been an integrated part of the bank's risk management framework that includes credit. That includes interest rate risk management, all of that, we roll up through the bank and have for some time.

While the business model is very efficient with an operating efficiency ratio below 30%, are you feeling pressures to increase technology investments in the business, particularly as it pertains to the implementation of AI?

Sure. So efficiency ratio in our business, while certainly related to the scale of the business and the technology investments that we've made, I think is also notably just a byproduct of our asset mix. So if we're buying, for example, unsecured consumer loan portfolios, they're going to have significantly higher servicing expenses associated with them that's going to impact the efficiency ratio for those assets compared with something like mortgages, which is going to have dramatically lower servicing expense. So like a lot of things in our business. It's going to be dependent on asset mix. The same can be said of our PCL content, the same can be said of our ROAs. It's really a byproduct in large part of our mix. What was the last part of the question?

As it pertains to AI?

Right. Yes. Look, we are, like everybody else, trying to figure out the most efficient ways to implement those technologies. I mean for us, we've been able to grow our balance sheet fivefold over the last 10 years or so. And we've done that with a reasonably similar head count. I mean we've only got a few more bodies than we did 10 years ago. And the reason is that we've been pretty consistently investing in technology and automation, including those emerging technologies.

I think what's important to us, though, is that we're doing so not in -- as a research project, but rather to find practical ways to enable our business to move faster. We win, as I said on execution meaning speed and decision-making and how supportive we can be to our clients, we're definitely leveraging and investing a lot in technology to make sure that we can do that.

An example, in our world of how that works is like when we think about due diligence on financial assets that we're buying, whether it's mortgages or consumer loans or other products, we have invested heavily in technology that allows us to review all of the documents and all of the data associated with those loans. So that's going to tell us very quickly if the assets that we're looking at sort of pass muster from a quality and consistency standpoint, so that we can either decide this is not something that we want to do or we can say with much more conviction to our clients that it is something that we're interested in. That used to be the sort of thing that you could do on a sample basis because they required so much human intervention. But with the investment we've made in these technologies now, we can do full portfolio reviews in a much more efficient manner, which we think helps both kind of manage our expenses but also lower the risk content of our portfolios.

And maybe can you also talk about the amount of leverage used in financing these assets? And what is your kind of target level of returns? How much capital is required to run the business? And do you feel any capital constraints?

We don't feel any capital constraints. I mean, in terms of profitability, what we're targeting is something in the range of 2.5% ROAs. But as I said, they're going to be dependent heavily on the portfolio mix at any given point in time, right? If we're over allocated to, say, mortgages, and that tends to be on the lower end of the ROA spectrum. If we're doing more unsecured consumer, you would see that number be significantly higher. What's the last part?

About leverage.

Right. Yes, no other leverage. All of our capital comes from National Bank. It's -- we try to be a very simple business that way. We're looking to add quality assets to the portfolio, and that's really it.

And then do you target any type of level of like growth in the asset base? Or is it just kind of taking what the industry growth is?

So what we've said publicly is that we're looking for an average growth rate of 5% to 10% over the long term. But I think the important thing to understand is that we want to keep our risk framework consistent. And so that's a range because the market conditions are going to change around us, right? We don't want to be chasing what we think are unattractive risk-adjusted returns. If we find ourselves in an environment where we think the spreads are too thin relative to the risk that we're taking, we'll invest less. And the opposite is true if there was a liquidity event in the market or a major credit event in the market, I think you'd see us growing significantly beyond the 5% to 10% range.

But if you look back, we reported relatively modest growth in the first half of this year. I think that really reflected the environment that we were in at the time prior to some of the volatility and liquidity issues that came up with the tariff announcements enable.

Can you talk about maybe some of your -- the regulatory framework for Credigy, your -- in the specialty finance area, a little bit smaller than some of the other financial firms out there, but you also have this Canadian parent bank. How does that at all this impact you on the regular framework?

Yes. So I think first and foremost, we are directly overseeing as part of the bank by OSFI, Credigy has been through a stand-alone review and our part and parcel with the bank from a risk management perspective. Within the U.S., again, not originating directly to consumers, we're not directly regulated by a lot of those entities. But of course, there's a regulatory compliance framework that we have to operate within, licensing that's required of us depending on what asset class we're investing in that's sort of on a state-by-state basis. But we think of our primary regulatory entity as OSFI through the bank.

Great. Thanks, Trey. That's pretty much from my question. Is there anything else we haven't covered? Or would you like to make any concluding remarks?

No, I think that's it. We think that we've had a strong third quarter, and we continue to see a lot of momentum building in our business and goal is to continue to be a part of the selective growth that the bank is targeting in the U.S., and it's been a great partnership and appreciate the time to talk about it.

Great. Thank you very much, Trey. Let's open it up to -- does anyone have any questions on the floor? And of course, I would like to kind of keep the conversation on Credigy, anything for National bank of Canada, we'll just take those questions later off-line. But we'll start here in the front.

[indiscernible]

Yes, easy answer, zero in both cases. So we're pretty much exclusively focused on the resi market in the U.S. And again, that exposure for us is typically high FICO homeowners with a relatively low LTV. Again, it's not to say we wouldn't necessarily potentially invest in those asset classes, but it's not part of our portfolio.

What would you consider to be the binding constraint for growth for you guys? Is it just available opportunities? Is it competing versus the other biz segments for dedicated capital. How do you think about what your limiters are if there are any?

Yes. So look, I -- as part of the bank, I feel like we're obligated to sort of demonstrate that we can generate strong ROEs and strong risk-adjusted returns like any other units of the bank. But I feel good about that. That hasn't been a binding constraint for us. I mean what is potentially limiting growth at Credigy at any given point in time, it's just going to be how our risk framework overlays with what's available in the market. So certainly, there are competitive dynamics at play there in today's world, a high-quality loan portfolio of any type of scale is going to be extremely competitive with asset managers, insurance companies, funds of various shapes and sizes and so for us, the constant is our risk framework. And so in the event that there was some disruption there, some liquidity event, we think that opportunity set would increase dramatically. And we've seen that over many different sort of cycles at this point, whether it was early in the life of Credigy in the global financial crisis or events like COVID or even localized events like the tariff announcements in April, whenever there's sort of significant volatility in the market, that creates a massive inflow of opportunities for us.

Any more questions?

Please join me in thanking Trey for his presentation.

So I'd like to introduce our next guest, Laurent Ferreira, Chief Executive Officer of National Bank. Welcome, Laurent.

Thank you.

Thanks for coming today.

Thanks for having us.

I'd love to start off by asking you sort of a macro question, how you see the economy right now, where you see risks, how you sort of feel. I think the perception in the investment community is that you've taken a bit of a cautious approach versus some of your peers. And any thoughts you can offer?

And that was our sense coming into the year. Our Q2 numbers are not great. Business investments are down, exports as well, confidence in general. Consumers are doing well, though. We're seeing resiliency in demand.

Geopolitics are still a source of instability. Government deficits still need to be discovered and a concern for the bond market as well. So longer-term rates are trending higher.

Now having said that, I obviously am more and more encouraged with what we're hearing from our governments, both in Ottawa provinces and the focus on the Canadian economy, everything that we're hearing about putting back the emphasis on productivity, nation building projects, the focus on manufacturing, defense spending, these are all great news for Canada.

We have to get it done though. So that's, I think, one of the things that is going to be important in the next couple of quarters. And as a bank, we're obviously very pleased to hear that.

It's good for banking industry in general, not just National Bank. But it's something we're really focused on, focused on Canadians, focused on the Canadian economy, and hearing our governments putting so much focus on productivity and being a leader in the G7 is really good news to us.

Congratulations for that. And maybe Quebec specifically, I think your predecessor, Louis, would like to quote a couple of interesting numbers on Quebec in terms of 2-income households and some of the buffers that are there that make it a bit less risky. Obviously, the housing market not being as -- not having gotten to an inflated level like we saw in other parts of Canada, like...

There's less leverage in the Quebec economy. If you take median prices for a home here in Toronto, $1.2 million, it's $570,000 in Montreal. So it's a big difference when your mortgage is $350,000 versus $800,000 in terms of cash flow. So that's one of it.

Generally higher level of savings as well. So I think that plays a big part of it. Now Quebec is affected, right? We have the highest level of tariffs versus all the other provinces at roughly 8%. That's because of steel, aluminum. And we have a big proportion of our GDP that comes from manufacturing.

So like Ontario, we're feeling the brunt of the tariffs. Unemployment is still low. So that's good in general. But the big thing is really less leverage, I think, on the consumer side.

Population growth was not as big in Quebec than it was in Ontario, right? When we had these big years post-COVID, population growth in Toronto was 100,000 a month. It was 10,000 a month in Montreal. So that plays into it as well, I think, in terms of the resiliency of the market and how it can get through a slowdown in the economy.

So fair to say, through a cycle, you would expect Quebec to be relatively well positioned versus the rest of the country.

Yes.

Okay. Fair enough. Thanks for that. And maybe talking about the CWB integration, obviously, very topical. Given that it closed recently, there's still that revenue upside potential that I believe you'll be announcing in the maybe Q4 results.

Certainly something we're going to talk about. Yes.

Anything you wanted to touch on, maybe what's impressed you about the client base that you've acquired versus the more challenging parts of that acquisition?

So a lot to say about CWB. First of all, a big year for us entering 2025. In March, we onboarded all of CWB employees. So that was all done, everyone got their paycheck. And in August, we did our first client migration. So that went really well. In the next couple of months, that's what we're working on.

So by the end of the year, we're going to have all of the CWB clients on our system. So a lot of work. It's -- when you think about a migration, it's not just putting data onto your system. It's connecting with your clients. It's sending e-mails about the change. It's telling them to onboard digitally.

And so people don't necessarily react to your e-mail. So you have to call them and you have to work with them. I've been very impressed with the commitment of our employees, both CWB and National Bank. So that has been fantastic. And it's a tough time, right? You're going through a change.

So for National Bank, there's excitement. There's excitement as well at CWB, but there's also a lot of emotions, right, because they're seeing a big change and a logo that's leaving, CWB is leaving, it's becoming National Bank. You have to respect that as you do that. But I am really happy with how things are going, impressed with the team.

Client attrition is very, very low. You have to work at it, though. And during this time, the goal is minimize disruption. No one likes to go through changes, to minimize disruption, get everyone on board. And yes, and then we're going to focus on growing the pie. And that's going to be a focus for 2026.

And what about the cultural differences? Obviously, Quebec, Alberta, different in some respects. Anything on the climate side or the employee side that you've seen as maybe a bit of a hiccup?

I'm glad you're bringing it up, because we worked on this transaction for over 2 years before we announced it in June of last year. And culture was a big topic of discussion between us and CWB and the Board of CWB and our Board. And it is one of the main reasons we decided to merge because there are a ton of similarity between our two institutions, our go-to-market, our values, the mission of the bank.

So -- and in terms of clients, like we understand the market. We've been there since the mid-'80s, serving governments, serving institutions, serving corporations. CWB is just an extension of all that.

Now you're going to bring up the French and the English thing. Well, I think it's what makes us unique, right? I think we are maybe the most bilingual Canadian bank, and I think that's unique and I think good for us and something different. But I am not concerned at all. On the contrary, I think we are going to be able to leverage the cultures between National Bank and CWB.

Okay. That's very helpful. In terms of expansion, whether it's the number of physical locations that CWB has, I think it's 40-some-odd. Where is there an opportunity? Is it on the digital side? Is it more so on investing and just getting more physical infrastructure out? What does the growth trajectory look like once you sort of settled into that getting the clients...

For sure, more digital. That's for sure. So branch, no plans on reducing. We're there to grow. We're not there to shrink. Maybe optimization between National Bank, National Bank Financial, so our brokerage, commercial centers and other retail branches that we have and CWB. So we're going to work on that.

But the main expansion is digital. CWB did not have the tools. So this is something we're bringing to clients. So this is another change for a lot of the clients is onboarding them on our tools. So digital expansion for commercial clients, bringing also retail banking. So that's something -- for CWB, it was not a focus.

A lot of the CWB commercial clients were not doing their banking with CWB. So that's another area of growth and opportunity for us and wealth as well. But -- so the focus is more bringing the tools and onboarding all the clients on the National Bank platform and then expanding that.

And also being more visible, also more, I think, marketing, we want to shift a little bit of our marketing spend outside of Quebec and into Western Canada. So that's going to be part of it as well.

Okay. Awesome. And then I guess the obvious question is with CWB, that's really helped your geographic expansion domestically. You've got USSF&I. You've got an outlet to grow, and that's obviously grown very well for you outside of Canada.

Financial market has been great. What's sort of the next leg of the journey to international. Like just in terms of whether it's geographic expansion or maybe business line-wise, like what are you sort of -- what are you focused on?

We still have a lot of room to grow, right? So you're right, capital markets, our wealth business, and commercial as well, a lot of our growth over the past couple of years has been outside of Quebec. We still have a lot of space to grow. CWB is going to allow us to boost that growth as well. So that's our focus in terms of organic growth where we're going.

Now if you go beyond that, one of the areas that we want to work on is retail banking. And reason for that is we believe that we are going to see in retail banking, all industry over the next 5 years, the most disruption than any other segment, whether it's AI, whether it's fintechs, whether it's regulatory pressure, competition.

I think fees in general in retail banking are going down. I think the pressure on NII is going to go up. The cost of deposits is going up in general. So there are a couple of things that I'm working on with the team, and this is going to be a focus going forward. We have to keep improving our cost structure, right?

That's systems, automation, using all of the available tools, but also simplifying our product offering. So that's something that is going to continue to be a focus for us in terms of growth. And the other area is -- well, not the other area, sorry, but within retail, we can't act like the large banks.

So our retail banking model, right, very established in Quebec, an opportunity to grow out West. But we think that partnerships are also going to be part of our business model. We're going to do more of them. I think you have to take small players like Wealthsimple, for instance, very seriously.

And I'd rather work with them than fight them. And so that's the approach we have. So we think that there's going to be -- this disruption is going to keep going. These are trends that are accelerating, and we're going to work with those trends. We're not going to fight them.

It sounds like it's an obvious one for open banking, too, and that seems to have sort of fallen off to the side. Do you think it's...

I think it's going to come back. I think it's going to come back, and I think we're going to see something much more serious with the current government. Before, it was all conceptual. I definitely think that it is going to be -- with our Prime Minister who has definitely experienced -- has experienced it also in the U.K. I think that's something that we might see coming back very soon.

Okay. What about capital deployment? Obviously, a very, very strong CET1, 13.9% as of last quarter. And yet the NCIB that you did announce at 2%, I do think some investors thought, well...

A bit underwhelming.

I wasn't going to use that word, but maybe the option could have been to maybe come in at 3% or 4%. Anything you wanted to add on that? I know you talked about it on the call a little bit, but...

So on the buyback, we announced 2% just because of where we stand in terms of our capital at 13.9%. We had a couple of things that came into the quarter. We sold our participation in two banks in Africa. We also had capital refinements. RWA and market risk went down significantly also in Q2.

We don't see that go up in the near term. So we thought it was appropriate at this point in time to start buying back our shares. And so that's why we announced the buyback. Now we think that 2% is the right number.

Now I want to be clear on this, and I think -- I thought we were very clear on our call, 13.9% where we ended Q2 does not include any benefit from the conversion of our commercial loan book at CWB to the advanced model.

So that is still -- I don't know if you -- were you surprised with my comments? So those benefits are going to come. We were very clear. We're going to work on those in 2026. We've already engaged with our regulator to work on those during 2026.

So those are things, but we're not going to announce those things before they are realized. Now in terms of where we stand, I am not in the camp of 12.5%. We want to operate at 13%, not 14%, 13%. That's where we believe we're at the right spot, right? It gives us optionality.

We're delivering this year at this level, 15% ROE. We're going to deliver a very similar ROE next year. And with all the synergies coming in, CWB and the capital benefit, we believe that in 2027, we're going to be back in the middle of our 15% to 20% target.

So when I think of capital deployment, right, the #1 priority for National Bank is peer-leading ROE. And how do we do that? First, organic growth. After inorganic and tuck-ins that fit our strategic plan and that are going to boost organic growth, then it is sustainable dividend growth and then buyback, right?

So it was normal for us to announce a buyback at 13.9%. Would we announce a buyback at 13.4%? Maybe not. But we have capital upside with our capital generation and obviously, CWB coming.

So just to maybe clarify, so when you mentioned 13%, you don't want to be at 12.5%, do you mean you don't want to be at 12.5% because there's geopolitical risk that's a bit elevated. Or you see the long term...

I want to be able to say yes. So if there are opportunities that come to us, whether organic or inorganic, I'd rather be sitting at 13% than 12.5% and grow faster. And at 13%, we're still delivering peer-leading ROE. So to me, the important thing is where do we allocate capital that generates ROE and not necessarily where should we be operating? And we think that 13% is where we have ample flexibility.

And that's medium term.

Yes.

Okay. Thank you for clarifying that. Okay. That's great color there. Maybe going into some of the business lines, financial markets, which had been on rails on the trading volume side for a couple of quarters, first half of the year and then obviously, a pullback to a bit more of a normal level. Client activity is not going to always be as robust as it was in Q1 and 2.

Maybe talk a little bit about not the secret sauce of how you got that sizable trading line to where it was in the first 2 quarters, but just more so on some of the investments you made. And a couple of quarters ago, there was some discussion on strategically investing in the U.S., even in Europe. How that's sort of evolving on a go-forward basis?

So there's a lot of things. So first of all, the drivers, let's think about the first half of the year, structured products, securities lending, tons of opportunity there as well, especially in the first quarter. It was a very active quarter also in trading.

So when you see large movements, you see a lot of volume, and we have a large trading business, market-making business where we make markets on a lot of products. And so more volume, better spreads, those things.

So you've got the benefits of higher vol. So we generally tend to be long vol given the nature of our business, and we benefit from higher volume. So those were the drivers in the first half. And what you saw in Q3 is a significant shift in market sentiment, right?

I'd like to point out, in Q2, the realized vol in the markets was above 30%, and it was just above 10% in Q2 -- in Q3. So we went through that big shift, and we were still able to deliver year-over-year growth in our trading businesses.

Volumes were down, obviously, sequentially, we had to manage that drop in volatility, drop in volumes. And we don't benefit as much from markets that rally very strongly. So what did you see in Q3? You saw very good markets.

So you would say, well, Laurent, that should be good for your structured product business, you're issuing more products. Yes. So we did do that. But we had also a big drop in volatility and in volumes that counterbalance that, right?

You also saw a big rally in credit. So we don't hold inventories in credit. We don't hold portfolios in bonds. So we don't have that kind of philosophy. We're a trading house. We focus on areas that we know are -- that we know well.

We know how to allocate capital. We understand the risk. We control pricing. And we have skill and experience that allows us to take advantage of market stress because this is what you said. So there's a market stress, go back to March 2020, right?

One of the worst market stress we've seen in the past 10 years, all right? We had a blowout quarter. So we want to run a business where we take advantage of certain products that we know we're good at, there's demand for it. And we're going to position ourselves such that if there's a spike in volatility in volumes, we're going to be there and we're going to take advantage of it.

And so we want to take that expertise, expand certain products, go into various markets like the U.S., Europe, but stick to what we know, right? Don't fall for FOMO, oh, the new thing, no. So for instance, structured products, we sell a lot more structured products now in the U.S. than in Canada versus 10 years ago. We're starting to sell more in Europe as well.

So as long as we know at the end of the day how we're making money on a daily basis and how we control risk on a daily basis, we're going to keep growing our franchise like that. So organic growth has been also, I think, very important.

Etienne, who leads our Financial Markets business, will talk often about technology, how it has been a big driver as well. I tend to think people first. But definitely, in-house technology, we've been investing in our systems for structured products, for trading since late 1990s and early 2000s. And that has allowed us to scale all of these businesses, right?

So back then, we didn't have the balance sheet to compete and -- but we had people and technology. And through time, we're able to build expertise. And so that's sort of maybe the secret sauce, I don't know if it's a secret sauce or not, but it's what we focus on.

Okay. It's very helpful. So with a strong capital ratio, you have the excess capital, you are still investing in financial markets on a go forward. And it is that strategical sort of surgical approach, let's call it. So you could continue to move the needle feasibly for the foreseeable future.

Yes. We want to see all of our businesses grow. Wealth is an important part as well of our revenue mix. And financial market is very tied to wealth as well, right? So when you listen to what I just said, so what do we do?

Structured products, a lot of the products, ETFs, all that, they're wealth products. So a lot of the philosophy in financial markets is what our retail clients and institutional clients are going to buy and trade. So that's part of it. So growing our wealth business is important for our Financial Markets business.

Okay. Switching over to P&C banking and the mortgage business, you alluded to the Montreal leverage level being a lot lower as -- comparable to Toronto, quite a bit lower. So I guess at the same time, you counterbalance it a little bit with less immigration coming into Quebec versus...

That's part of it.

But how do you see the mortgage business evolving in Quebec? And is it going -- should it be structurally better and a better growth story versus...

So it was clearly -- and you saw our numbers, 80% of our originations were in Quebec in Q3 and very healthy. So we saw most people renewed at lower rates, sticky clients. So a lot of -- 95% renewed with us. So that's -- retention rate has been very high. Better pricing as well. We're observing over the year.

So margins are slightly better. And 80% of our book has been repriced since the beginning of restricted monetary policy. All of our variable rate mortgage owners all have lower rates than the peak of Q3 2023. I think the average payment is down $300 per month right now on variable rate mortgages.

And fixed rate mortgages also are originating at slightly lower rates. And delinquencies are still relatively low. So very healthy for sure. House prices, definitely a big factor in our performance here, and our overexposure to Quebec is a good thing in this cycle.

Yes. What about the other parts of the business? Or maybe touch a bit on the cost side on the optimization of the branch channel. Every bank seems to be focused on optimizing as opposed to not necessarily cutting branches, but doing it more efficiently. How does National stack up there?

So again, we're going to continue to focus also on optimizing all of our businesses, but the bank branches are, for sure, a focus. We've been doing it for quite some time, reducing footprint. We have -- and I forget the exact amount, but we have several branches that are cashless now.

So that means that there are ATMs and services, but we don't have the transactional counter per se anymore. So that will keep going. And with CWB, we have an opportunity to be able to even accelerate those investments.

Again, and that's part of what I mentioned earlier, where I do believe that retail banking, we're going to go through a major disruption over the next 5 years. And so that has to be part of the analysis as well.

Okay. And then I can't not ask a question about credit. In terms of the outlook, obviously, a much better quarter on credit in Q3. Any thoughts there? And then maybe you can include a bit of a touch point on ABA Bank. I know investors are still a little bit, I might not say overly concerned, but there's still some lingering concerns about the GILs and they don't seem to peak out just yet.

So for credit, look, at the beginning of the year, we moved the goalpost because we saw what was coming, and we knew that impaireds were going to be a little bit higher in 2025. We entered a credit cycle. I think we're riding the top of the wave of the credit cycle at this point in time.

We could see some lumpiness, but I think we've guided well to where we think we're going to end up the year, and we're very happy with the performance. I think it's during -- a lot of learning through COVID and working with our clients, on going through a credit cycle, earlier intervention and working.

Our credit teams are not just passive anymore just waiting for something to happen. They're very involved in portfolio reviews, industry reviews, and remediation solutions for our clients is something that we do very proactively. So we're not out of the woods yet, I think, in terms of being in the credit, and that's why we're going to remain prudent.

We built 7 basis points of performing provision this quarter. Part of it was the growth of the balance sheet. But again, I don't think we're going up in terms of PCLs from here, but I think we're going to be writing this level for a period of time.

In terms of ABA, I think the one thing I would say, we've been through a cycle. I have no concerns overall with our -- the level of impaired. I am not happy with the resolution process. There's nothing I can do about it because it is what it is.

It is a core process that is much slower than here in Canada. Having said that, every file that has gone through the process has been resolved, and there is no cause for concern. It's been resolved, and it is the rule of law.

So that's the part that is -- it's hard for me to say it's going to -- we're going to clean it up and it's going to be done within 2 years. It is a different market, a different process, and it's a much longer process.

But I have, again, very comfortable given the secured nature of our book, very low LTVs, our level of allowances as well in this book. And we -- with the reserves we have, we could sustain and the level of our LTV, we could sustain a significant drop in real estate prices and we'd be fine and no losses, right? No additional losses.

Okay. Great. And maybe just some final words, if you want to share any key messages for investors in the room and online.

Well, sure. Thank you very much for your support. Our -- next couple of months for us is CWB migration. So we're going to be very busy. Our teams are very busy and work hard at this every day. And you can count on us for making sure that we get back to peer-leading ROE in the next couple of years. So that's it.

Thank you very much for joining us, Laurent. Thanks for insights.

Super happy to. Thank you.

Good morning, and welcome to National Bank of Canada's Third Quarter Results Conference Call. I would now like to turn the meeting over to Marianne Ratte, Vice President and Head of Investor Relations. Please go ahead, Marianne.

Merci, and welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO; Marie Chantal Gingras, CFO; and Jean-Sebastien Grise, Chief Risk Officer. Our business heads are also present for the Q&A session, including Lucie Blanchet, Personal Banking; Judith Menard, Commercial and Private Banking; Michael Denham, CWB Integration; Nancy Paquet, Wealth Management; Etienne Dubuc, Financial Markets; and Bill Bonnell, International.

Before we begin, please refer to Slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted.

I will now pass the call to Laurent.

Merci, Marianne, and thank you, everyone, for joining us. This morning, we reported earnings per share of $2.68 and return on equity of 14% for the third quarter of 2025. Our results reflect strong revenue fundamentals across our segments, firm traction in cost and funding synergies as we integrate CWB and a strong credit performance. We also ended the quarter with a CET1 ratio of 13.9%. This solid capital position provides us with ample flexibility and optionality.

This morning, we announced our intention to repurchase up to 8 million shares. Our decision to buy back shares at this point in time does not factor in benefits from CWB's AIRB conversion. We will also review our dividend next quarter, as per usual practice.

Turning to the economy. The Canadian economy has shown some resilience, but has been strained by tariff uncertainty, resulting in job losses in certain industries and an overall softer labor market. The USMCA trade agreement has been so far an effective safeguard for Canada. The full impact of tariffs is still unfolding and will continue to shape business confidence and investments.

While the path of inflation and of long-term rates remain uncertain due to tariffs and growing government deficits, we have a more constructive view on the economy now that the initial tariff shock is behind us and as trade tensions are deescalating. We are also encouraged by the focus of our federal and provincial governments on making structural changes to increase productivity and economic resilience. Investments in energy, security and nation-building infrastructure will stimulate growth and put us on the right path. As we look ahead, geopolitics and geoeconomics remain a source of instability, but we are encouraged by some of the positive outcomes of trade negotiations and the government focus on the Canadian economy.

Turning to the CWB integration. I am very pleased with our momentum and strong execution. Funding and cost synergies continue to progress at a rapid pace. Earlier this month, we marked an integration milestone with the successful completion of our first client migrations on to the National Bank platform. On that, I would like to recognize our teams who are working seamlessly together to ensure a positive onboarding experience for clients. Our migration process will continue over the months ahead, setting the table for revenue synergies which we will discuss in more detail on our Q4 call.

Looking now at our business segments. P&C Banking generated net income of $386 million, including $74 million from the CWB transaction for the third quarter. Excluding CWB, revenues were up 2% year-over-year for the segment against a strong level of noninterest income in the prior year.

We continue to grow our balance sheet. Our commercial loan book grew 13% year-over-year with continued opportunities in insured residential real estate and broad-based growth across our industries and geographies. Personal mortgages grew 5% year-over-year with strong origination level as anticipated entering the second half of the year. Wealth Management grew third quarter net income by 13% year-over-year on the back of strong organic growth. Net sales in our channels and rising equity markets reported double-digit growth in fee-based revenues.

Financial Markets generated strong quarterly results, growing net income by 5% over the past year. Corporate and Investment Banking delivered record revenues of $408 million for Q3. This was driven by strong performance across the franchise and a particularly active quarter for our M&A and DCM teams. Global Markets performance was resilient, growing revenues 3% year-over-year. This reflects broad-based growth in our rates and commodities businesses, while equity trading activity and volatility was down quarter-over-quarter.

Credigy delivered net income of $43 million this quarter, up 2% year-over-year. While average assets remained relatively stable sequentially, investment volumes picked up at quarter end, resulting in balances increasing 5% quarter-over-quarter. The market remains competitive, but we are starting to see more deal flow and opportunities that meet our investment criteria, including a solid pipeline for Q4.

At ABA Bank, net income increased by 16% year-over-year. Deposits were up 21%, supported by a 34% increase in client growth, and loans were up 8%. We are encouraged by the favorable outcome of a trade deal between the U.S. and Cambodia, which will keep the local economy competitive and set the stage for continued growth.

I will now pass the call to Marie Chantal.

Thank you, Laurent, and good morning, everyone. My comments will begin on Slide 8. The bank delivered strong performance in the third quarter. Organic growth across all segments was complemented by the CWB transaction. On an all-bank basis, revenue increased 19% year-over-year, PTPP rose 21% and operating leverage was positive at 2%.

Starting with results from CWB. The loan portfolio was stable compared to last quarter, while term deposits declined by $1 billion, mainly reflecting the planned roll down of broker deposits. The CWB transaction added $284 million to revenues, including funding synergies of $13 million in NII and the amortization of the fair mark of $27 million. It also added $142 million to expenses, reflecting momentum in the realization of cost synergies. PTPP was relatively unchanged quarter-over-quarter.

Now moving to our results excluding CWB. Revenue grew 10% year-over-year. Corporate and Investment Banking delivered record advisory and DCM underwriting fees, and wealth management's record AUM drove double-digit fee income growth. Balance sheet growth was solid, while treasury generated higher revenues. Expenses were up 8% year-over-year. Compensation and strategic investments in technology were the main drivers as we continue to invest in our franchise. Recall that in Q3 2024, the bank had a lump sum reimbursement of $11 million that reduced expenses in the P&C segment. With strong revenue growth and positive operating leverage, PTPP increased by 11% year-over-year.

Moving to Slide 9. NII excluding trading grew 4% quarter-over-quarter, reflecting solid balance sheet growth, higher treasury revenues, dividend recorded in USSF&I and the impact of fewer days in Q2. This was partially offset by the amortization of the fair value mark, which was $10 million higher than last quarter. The all-bank NIM, excluding trading, remained relatively stable quarter-over-quarter at 2.22%. P&C NIM was down 5 basis points, primarily driven by asset mix in our underlying commercial portfolio as well as by deposit mix. The all-bank NIM benefited from higher treasury revenues and USSF&I dividends.

Turning now to Slide 10. We continue to deliver solid expansion across the balance sheet with strong momentum throughout the franchise. Total loans reached $293 billion, up 7% year-over-year, excluding CWB. Deposits grew 11% year-over-year to $303 billion when excluding CWB. Looking at quarter-over-quarter performance, deposits rose by 3%. Personal demand deposits increased by almost $1 billion, driven primarily by strong growth in personal banking. Nonretail deposits were up 5%.

Now turning to capital on Slide 11. We ended the quarter with a CET1 ratio of 13.9%. Internal capital generation was strong, adding 33 basis points to CET1. RWA declined by 1 basis point sequentially, as solid loan growth was largely offset by continuous refinements and lower market risk. In addition, CET1 in Q3 benefited from other items, including a capital release from the divestiture of certain international investments as well as an income tax recovery of $47 million.

During the quarter, we benefited from the AIRB conversion of a small CWB portfolio, contributing 2 basis points to CET1. We are working closely with our regulators, and following the [ CMAP ] process, the framework under which capital model applications are assessed, and we still expect the capital benefit from the conversion to the advanced method to be realized towards the end of 2026.

Turning to Slide 12. We are pleased with our progress in realizing synergies at a faster pace than expected. We have realized synergies of $69 million to date, representing $173 million on an annualized basis or 64% of our 3-year target. With this momentum, we anticipate achieving our year 1 target of $135 million in December 2025.

As Laurent noted, we successfully completed our first client migration wave in August. The next waves are planned over the upcoming months. Majority of clients will migrate over this period. The ongoing migration continues to drive momentum in the realization of our synergies.

To conclude, we are pleased with the strong performance and growth delivered year-to-date and are well positioned to achieve the 2025 objectives outlined last quarter. Excluding the amortization of the fair value mark, we expect full year EPS growth will be a bit higher than the mid-single-digit range, and we continue to anticipate full year ROE to be around 15%. With the strength of our capital and the strategic advantage CWB brings to our businesses, we are in a good position to capitalize on the opportunities that lie ahead.

I will now turn the call over to Jean-Sebastien.

Thank you, Marie Chantal, and good morning, everyone. Starting on Slide 14. We are pleased with the strong credit performance this quarter. Total PCLs were $203 million, or 28 basis points, down 17 basis points sequentially. We added 7 basis points of performing provisions in Q3, primarily driven by portfolio growth and model calibration, partly offset by the macroeconomic outlook. PCL on impaired loans were $150 million or 21 basis points, down 11 basis points quarter-over-quarter.

Personal Banking provisions were relatively flat sequentially. Commercial Banking provisions declined quarter-over-quarter to $58 million. CWB's portfolio continues to perform in line with expectations with impaired provisions of $26 million or 28 basis points. In Financial Markets, there was a recovery of $1 million. At Credigy, we saw lower PCL on POCI loans. At ABA, impaired provisions declined to USD 11 million.

Turning to Slide 15. Our total allowances for credit losses reached $2.3 billion, representing 5x coverage of our net charge-offs. Our performing allowances reached $1.6 billion, representing a strong performing ACL coverage ratio of 2.1x. We have been building allowances for the past 13 quarters and remain comfortable with our prudent provisioning levels.

Turning to Slide 16. Our gross impaired loan ratio was 102 basis points, up 4 basis points sequentially. Excluding USSF&I, GILs were 73 basis points, 2 basis points higher than Q2. Net formations this quarter were lower sequentially. At ABA, net formations declined quarter-over-quarter and remained below the levels seen in Q4 last year.

On Slide 17 and 18, we highlight our Canadian RESL portfolio. Of note, approximately 80% of the portfolio has now been repriced at higher interest rates. Upcoming renewals are showing a significantly reduced payment shock compared to a year ago. And our variable rate mortgage portfolio has been benefiting from the lower interest rates.

In conclusion, we are pleased with the credit performance in the quarter. While we continue to monitor the evolving market conditions, our defensive qualities, resilient business mix and prudent levels of allowances position us well to navigate the current economic landscape. Looking ahead, while uncertainties remain in the forward path of the economy, we now expect impaired PCL to end up around the middle of the 25 to 35 basis points range for the full year.

And with that, I will now turn the call back to the operator for the Q&A.

[Operator Instructions] The first question is from Sohrab Movahedi from BMO Capital Markets.

Okay. Laurent, can you just talk us through how you decided to size the buyback? Why only 2% with the 13.9% CET1 are likely to go up?

Absolutely and thank you for your question, Sohrab. I think you -- our capital management over the past couple of years has been very prudent, going through post-pandemic, the inflation cycle, all the economic uncertainty and did a lot of work over the past year on capital refinement. I think some of the information is on our slide as well as divestiture, we've been working on selling some of our assets over the past year in Africa. So that came to fruition in Q3.

We also -- first wave integration of CWB, but we're still not done. We still have some work to do over the path over the next little while and capital optimization with conversion of models to AIRB. Look, I think we came up with a number on buyback at this point in time which I think is in line with our continued strategy to focus on organic growth. We have really good momentum, you see on our balance sheet growth. So again, buybacks are, in our view, a complement, not a growth strategy. So I think at this point time, given that we are at a very strong capital level, we feel like it was a good time for us to announce a buyback.

And as mentioned in my remarks, this is before conversion of our portfolios, AIRB. And look, we still see some good momentum in our balance sheet growth, and the teams are very focused on that. So I think it's the appropriate level of share buyback that we think is the right balance with the rest of the business.

Okay. Well, maybe we'll elaborate on that at a different time. But are you suggesting then that the organic growth opportunities ahead of you are likely to be more RWA-intensive than historical growth? Like, is there going to be a shift in risk appetite here? I'm just trying to understand, with this sort of a capital level, why an embarrassingly low 2% NCIB? Maybe there's growth opportunities, but I'm just trying to understand, is that growth going to be more capital intensive? Or is there any reason not to believe this capital is going to continue to stockpile?

No, there's no change in strategy or arguably, intensity, in -- going forward. So nothing has really changed in our focus on growing all of our business segments, Sohrab.

So your internal capital generation, you did 33 basis points this quarter. I mean, like, we could be sitting with 14% plus next quarter?

Look, there's all sorts of factors that come into capital. You've seen a significant drop in market risk over the quarter. So I'm not going to go into projection for the next quarter in terms of our CET1. But yes, we're still seeing a lot of strong organic growth. We're going to give another update in terms of revenue synergies, our -- more elaborate capital plan as well at Q4. But at this point in time, we're -- we think that the buyback that we announced is the appropriate number.

The next question is from Doug Young from Desjardins Capital Markets.

So first question on Canadian Banking, and I guess you prior -- just trying to get a sense, it seemed like it was -- your noninterest revenue was kind of flatlined. I figured it would be up a little bit more, but maybe there's something in there, and then lower NIMs sequentially. Just trying to get a sense, is this any run rate for the NIM? And then I've got a few follow-ups.

Yes. Thank you. It's Lucie. So if we look at the noninterest revenue, effectively, we had two nonrecurring elements of last year. So again, in the insurance portfolio and also last year in the same period of time, we had very high commercial client activities in the international business, and we compare that to lower-than-average activity this quarter. So that's for the noninterest revenue, and we continue to deliver pretty good NII growth.

So if we go to the NIM, I think that's the other part of your question. When we look at the sequential decline, it's mainly driven by the combination of our overall P&C business mix, combined also with lower spreads on some of the assets and deposit class. And I think it may be worth unpacking some of those elements for you. And I'll start with deposit spread maybe. So on the deposit front, we had the strongest retail demand deposit growth this quarter since COVID actually, adding close to $1 billion demand deposit, and that was partly offset by the repricing of the fixed term portfolio.

However, there is seasonality in Q3 related to the government and municipality deposit due to the tax payments, and they've always been stronger in Q3, and we brought in almost $1.5 billion sequentially. And these are lower margin deposits, so they have contributed to 1 bp in lower deposit spreads. You want -- yes?

Yes. And just -- is this kind of -- so it doesn't feel like this is an unusual quarter. It feels like this is kind of like more the normal run rate. Did I get that right? Or...

Well, so far, we continue to see a good balance sheet growth for Q4. So the loan growth, both in retail and commercial, should continue to outpace the deposit growth. So if we look at Q4, we could be potentially 1 or 2 basis points down in terms of NIM, but still with very good balance sheet and confident that we're going to generate good NII.

Good NII. Okay. That's fair. And then [indiscernible] the portfolio has been now converted to AIRB?

Doug, it's Marie Chantal. So far, we've done this quarter and the past quarter, a small conversion of portfolio totaling 5 basis points cumulative so far.

And what percentage of CWB's loan book has been shifted over? Is it 80% -- sorry, 10%, 5%, [ 20% ]?

It's very minimal. So we believe -- yes, we're very happy that we were able to convert a small portion. As I said, it represented only 2 basis points this quarter. So it's very minimal. We expect, as I said in my remarks, working on the process of converting the majority of the commercial portfolio. I'm saying majority because there are some portion of that portfolio that will remain on standardized, for example, equipment finance. So we're working very closely with our regulators for that conversion, and we expect to be able to beneficiate from that conversion mostly towards the end of 2026.

And that's the first conversion that would happen? Is that -- I guess, the first next time frame is the end of fiscal '26, when we would see another benefit from the AIRB conversion?

So at the end of 2026, yes, would be the first important portion of that conversion happening.

Okay. And then just lastly, at Credigy, average assets, I think, were down quarter-over-quarter. You can correct me if I'm wrong. But I figured the environment would be pretty good for this business over the coming year and opportunities there? And I know this can be lumpy. And so maybe that's just the case. But I'm just kind of curious if you're seeing increased competitive pressures in the certain businesses that Credigy is going after, are they kind of gearing up to pivot again to another segment away from where they stand today? Just maybe a little bit of an update on that business?

Doug, it's Etienne. So you're right, it's still competitive out there. But Credigy has continued to adapt the strategy and execute. So we continue to have success buying and financing, first and second lien, mortgages. That's about 2/3 of the deal flow this quarter. And we love those. These mortgage deals continue to produce very solid risk-adjusted returns for us. We saw really the pace of business accelerate during the second half of the quarter.

And we see some good things, some regulatory tailwinds that could drive more activity from U.S. regional banks, including increased M&A activity that softened some source of opportunity there. And so that's something that we're monitoring very closely. Generally, the core of our strategy is high FICO homeowners. And they're on solid ground with a very resilient labor market and solid home prices still in the U.S. So we're seeing increased deal flow, especially like I said, starting in the second half of Q3. And so that led to about a 5% growth in balances. So looking at the current deal pipeline, we think this momentum continues in the coming quarters. So overall, we feel really good about our guidance of average asset growth in the mid-single digits for full year 2025.

The next question is from Matthew Lee from Canaccord Genuity.

Thanks for squeezing me in here. Okay. Maybe you can just talk a little bit about client migration in CWB? I think a couple of quarters ago, you kind of mentioned that you didn't expect to have any client losses as you brought customers onto the national system. Has that been the case?

Matthew, it's Michael Denham. The short answer is yes. We're very pleased with the client retention. As Laurent mentioned, we've just migrated the first set of clients -- and a couple of weeks ago. And remain very close touch with the team there and the clients, and we're very satisfied so far with our ability to retain Canadian Western Bank clients.

Okay. And then I think in the deck, you kind of mentioned that CWB commercial loan book has been sort of flat. Is that a conscious decision to slow growth while the integration occurs? Or is that maybe more a reflection of a quiet commercial loan growth environment in general?

So I'm going to take this question, Matthew. It's Judith. So we are still growing the loan book at CWB as we speak because there's a lot of term loans that need to be replenished. And of course, the integration is very busy for the team, as you can imagine, training, understanding all the new systems. So it is kind of a balanced approach of continuing, generating new loans, while people are getting trained.

Thank you. The next question is from Jill Shea from UBS.

Perhaps just on credit quality, I really appreciate the color on the impaired PCLs landing closer to that middle of the range of the 25 to 35 basis points. With the 21 basis points that you did this quarter and then just looking at your first half results, not to put too fine a point on it, but it implies the impaired PCLs are back up around 30 basis points or so next quarter. Could you just walk us through the puts and takes this quarter and how you think about just the credit trends as we look forward into next quarter?

Thank you, Jill. So it's J.S. I'll take that question. So obviously, we're pleased with the credit performance this quarter. But you're right, it's not a new normal. We're still in the credit cycle. And the lumpiness that you would have seen in previous quarter is likely to continue.

We are seeing early signs of improvements, and I'll give you a couple of examples. For retail, customers are showing resilience. We have about 80% of our RESL portfolio that has been repriced, and the delinquency is still low. In wholesale, insolvency trends are stabilizing. We have downgrade rates that are reducing, and clients have more time to prepare for possible tariff shocks and the renegotiation of USMCA. But we do need to stay cautious.

For retail, the largest driver is always unemployment, and it continues to be the future driver of outcomes. We are seeing some stress among unsecured borrowers who are renters. But for the homeowners, it's going pretty well. We're obviously seeing that younger customers are feeling more of an impact given the higher unemployment numbers for that cohort. We're also continuing to see geographical differences, with Quebec outperforming in unsecured credit.

What I looked there is if we're well covered and our ACL coverage for credit cards remains above 8%, which is very prudent. In wholesale, lumpiness is still expected, especially in industries where collateral and enterprise values have remained under pressure. We're talking about manufacturing, talking about transportation. And there are still some tariff-related risks. Specifically, the USMCA right now is being used as a blanket or a shelter. And if it's significantly modified, there would be impacts. So in this environment, you've seen us continue to be prudent by building 7 basis points of performing provisions, which brings our total coverage ratio to over 2x.

The next question is from Darko Mihelic from RBC Capital Markets.

I just have a couple of questions here on CWB. The first thing is, if I look at your shareholder report, I can see the revenues, and I can make the adjustments for the mark and for the synergies. Where I land is a revenue number of around $298 million of CWB stand-alone. And that would be a 0 growth year-over-year. So I'm just wondering if you can maybe walk me through what it is that is sort of happening beyond loan growth at CWB that there would be 0 revenue growth for this bank on a stand-alone basis?

Hi, Darko. Marie Chantal, I'll take that question, and then maybe Judith can give some more color on what's happening in terms of the business. So you're absolutely right that when you look at the revenue growth sequentially for CWB, it's stable. There is the effect of acquisition accounting that you have to take into consideration. And also, when you look at the CWB portfolio, because of the transaction that occurred, it's not necessarily 100% comparable quarter-to-quarter because of, most importantly, the fair value mark. But when you look at the balance sheet on the loan -- and that's -- I think that's what's most important. It remained pretty much stable sequentially quarter-over-quarter. Judith has given some color a bit earlier. So we're pretty pleased with the way the portfolio is behaving, considering that we're in the middle of an integration.

So I would add on more color on the business side. So the integration as we see it now is going very well so far with the first branch converted successfully, with more branches planned in the coming months, that was a success. So I've met with many CWB clients, and overall sentiment toward the combination is very positive. CWB clients value our expanded offering and the additional services we now provide, they see the value.

So I want to emphasize, as I said at the last question, our CWB teams have been supporting clients, getting trained through the integration while also actively originating new loans. Having said that, we expect the CWB loan portfolio to be relatively stable during the integration period, as mentioned. So excluding the planned roll down of broker GICs and Wealth Management, deposits have also remained stable. So we feel that we're very well positioned to accelerate growth and realize revenue synergies as the integration progresses.

Okay. Can you maybe help me reconcile one other thing here with respect to your results that was presented? I mean one of the things, if I draw your attention to Page 4 of your shareholders' report. In there, you showed sort of the CWB impact. And in that consolidated results line, if I scroll down, I see provisions for credit losses adjusted at just $13 million. But in your slide deck, you're suggesting that CWB's impairment on impaired loans is $26 million. So is that to say that the total PCL essentially has a reserve release at CWB of around $13 million? Or is there something else that I should be thinking about?

So first, just in terms of -- there is a small reserve release in CWB, which is as expected as when you look at the bank level, the performing provisions were really driven by growth of the portfolio, and there hasn't been that growth at CWB. And we've seen less migration, or we continue to see migration from Stage 2 to Stage 3, which also makes a release in Stage 2. So yes, there was a little release in the CWB provisions.

When you say little, is $13 million little? Or...

Well, Darko, you need to remember, we took $230 million of performing provisions last quarter also, right? So it's normal that there's little puts and takes the quarter after.

[Operator Instructions] The next question is from Paul Holden from CIBC.

A couple of questions for Etienne. I guess, first off, looking at the equity trading results. Not exactly what we would have expected versus what peers have produced, equity trading down for National year-over-year. And just want to get a better sense of the drivers of that? I can look at the Appendix 12 and see there were some trading day losses, but they look pretty small. So anyways, maybe that's part of the factor, but I imagine it's not the entire explanation?

So thanks for your question, Paul, it's Etienne. So maybe take a step back and talk about the quarter as a whole because we're really pleased with the third quarter results for Financial Markets in a very different market environment than Q2, but still, the platform delivered its third best quarter ever. So I think that demonstrates the strength and the diversification of the platform. The results are consistent with the pacing we anticipated heading into the quarter. We knew there would be lower volumes due to seasonality. We anticipated lower equity volatility. So overall, a more normal market backdrop, and that caused lower equity and FX trading results sequentially, although our market share continues to progress in several key segments there, that these businesses are doing well.

And as markets normalize, Corporate and Investment Banking caught some great tailwinds and delivered record revenues with, as Laurent alluded to, DCM and M&A leading the way, but really, all segments did well in CIB. So overall, total revenues of Financial Markets were up 13% year-over-year. And I think the key highlight there is the resiliency and diversification of the platform.

And Paul, yes, there were a few down days during the quarter, I think, I counted 4. And these are days that -- down days that occurred during equity market rallies. So as you know, we have a very defensive positioning. This was extremely profitable for us in Q2. We are maintaining that defensive positioning because we think it's -- we want to maintain that diversification of cyclical and countercyclical market regimes and to do well in both. So really, since our focus is on liquidity, providing and structuring, we won't benefit as much as some peers from when credit tightens a lot like it did this quarter. So really, what you saw is the source of our defensive positioning in equities as a result. But overall, really pleased with the performance of the business.

Understand. Okay. So it's consistent with National's long [ vol ] comment, I think you gave us on the last quarter, and that makes sense. Okay.

Second question for, Etienne, I think it's for you. So Laurent, I think, highlighted that the market risk RWA was down Q-over-Q and that helped the CET1. And I get that you don't want to forecast the CET1 from quarter-to-quarter, but I think it would be helpful to understand why market risk RWA was down as much as it was quarter-over-quarter and if there is a potential for it to go back up to where it was in Q2?

Well, there is definitely the potential, Paul. As volatilities go down, market risk tends to go down. I also made a comment that we tend to deploy more as markets get volatile, we're in there with clients providing liquidity. And so we may raise density because of that. So as markets go back to being volatile, because of our defensive positioning, we'll be well positioned, and we'll be in there providing liquidity, being very active with clients. So it's go back to being more volatile, while we think we're in great position to profit from that, but look for market RWAs to creep back up.

There are no further questions at this time. I would like to turn the meeting back over to Mr. Ferreira.

Thank you. So as we look ahead, the bank is in a strong financial position, and we are focused on the execution of our CWB integration as well as growth across all of our business segments. So on that, thank you for joining us today.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.