Canadian Imperial Bank of Commerce at National Bank Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Research Division - Analyst : Let's kick off with the big picture question and you know we have the macro backdrop that's not helpful for any forecasting or any outlook commentary. Nonetheless, I'll ask you an outlook commentary because -- and specifically related to organic growth. Your comments over the past few quarters, including Q1, pretty optimistic and bullish on organic growth in Canada, which seems to be at odds with reality. I guess, the way I see it, I'm a bit more glass half empty, I guess. What are you seeing that's more positive than we might expect. Hratch Panossian - Canadian Imperial Bank of Commerce - Senior Executive Vice President, Chief Financial Officer and Head of Enterprise Strategy Yeah, so thank you for the question, Gabe, and good afternoon, everybody, or good morning. Nice to be here. (interpreted) It's always a pleasure to be with you in Montreal. To our strategy, to answer your question, right, the macro environment is not something we control. And so we always go back to do we have the right strategy that allows us to perform regardless of the environment and what's going on out there, and we believe we do. So I'm going to spend a few minutes on our strategy. I won't take too long, but you know at the core of it within our division, we're on a mission to build the best relationship focused bank in the country. And what I mean by that is we need to be the most client focused, the most future ready relationship-oriented bank for consumers that becomes a clear choice for any consumer in Canada that wants to have a broader relationship with their FI. And to do that like we believe you've got to be REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 25, 2025 / 2:30PM, CM.TO - Canadian Imperial Bank of Commerce at National Bank Financial Services Conference able to deliver to clients' value with seamless experiences across the channels that are digitally enabled and personalized advice and you got to lead with advice. And our entire strategy is focused on those things. It starts with a team we've got an amazing team, but you also have to leverage all the relevant emerging technologies to empower that team. And I think as an industry, frankly, putting those two things together and getting the best of both to deliver real value to consumers, we can do far better than anybody's done in the industry. And I think that inflection point comes in the next 5 to 10 years. And for me, having moved from the tech world to banking about 20 years ago, this has been a personal mission of mine, and so I'm really excited and I think we've got the right platform at CIBC to do it. So how are we doing that and why am I so confident right this leads to your questions. Well, listen, if we execute our strategy, we've talked a lot of our priorities. I won't reiterate them, but it's get the right clients, acquire clients specifically in key segments, mass affluent being a big segment, deepen relationships with existing clients and do everything that we can to make those experiences seamless and improve our efficiency across client experience and team member experience. And we think we can deliver. We think we can deliver even in slower environments revenue growth that's above market. We think we can deliver mix ratio in ROE that is above median over time and we're not there today. We're inching towards it. And we think we can deliver best-in-class client experience and team member experience. And you've seen a lot of the results on that so very quickly, right, on client acquisition. We acquired last year almost 600,000 clients, but more importantly, even as some segments like students and new commerce started slowing, we're seeing continued momentum slower but continued momentum and we're seeing share gains in those key segments that we believe are more valuable. In terms of deepening relationships, we touch one in three Canadians that are old enough to have a banking relationship. So we have lots of relationships and we've done the math on the opportunity to consolidate those relationships if we engage with those clients and we're seeing the results of that. So far this year our funds managed and funds consolidation has been far exceeding, with existing clients, has far exceeded what our plans were and it is providing the majority of our growth. So even in a slower environment and less Canadians coming in, we've got a lot of op opportunity to deepen the base. And in terms of our experience with clients and everything that we do, we've set ourselves up now with our or structure changes, key business capability build, operating model change, data and analytics, digitization. We've set up an infrastructure and a model where we're relentlessly focused on optimizing and digitizing all of our processes end to end in the personal bank, and you're seeing the results of that, right? Our next ratio dropped below 40% in Q1. Now there's going to be ups and downs, but I think we're on the right trajectory. Our MPS scores are the highest they've ever been. Our last Ipsos MPS study, we were number two, and we had the smallest gap to the market leader and we're just getting started doing these things. So I've got conviction that we can continue delivering on this strategy. And just as we've done recently, right, we haven't had the highest volume growth. But this strategy is one that focuses on margins, focuses on profitability, it drives client engagement and by doing that we've driven above-market revenue growth. We've improved efficiency, we've driven good ROE despite some of the performing provision that that has impacted that and so I think that positions us really well in the tariff world. Now, quickly on the tariffs. We're seeing, I keep summarizing that hesitance and uncertainty, so we're seeing that from consumers. That's a natural reaction. People are waiting on big financial decisions, a little less proactive on home buying. You're seeing the sales data on the housing market. Reso has slowed down since January. A little bit of slowing we're seeing on the lower ends of market on purchase volumes on cards, and you're seeing a preference again for liquidity and demand deposits over GIC. So those things are there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 25, 2025 / 2:30PM, CM.TO - Canadian Imperial Bank of Commerce at National Bank Financial Services Conference But with all of that again we go back to our strategy, right? We're staying close to our clients we're deploying the best insights we have on the clients to our best advisers to do what's right for the client and we're continuing to drive good growth so that's what makes me feel confident.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Research Division - Analyst : Well, let's stick with that then, the imperial service. What's the typical customer look like and what's the opportunity there in terms of making that the, I guess, I'm more appreciated part of the bank because I think it's, we, it comes up a lot. But I don't know if people really understand, at least I don't. What's been going on with that business for years and how it's a better position today. Hratch Panossian - Canadian Imperial Bank of Commerce - Senior Executive Vice President, Chief Financial Officer and Head of Enterprise Strategy Yeah, it's part of the platform we're most excited about and so mass affluent very quickly you've all heard it, right? It's a very attractive segment for obvious reasons, right? We've got roughly when we look at imperial about 5 times the revenue per client than we do with the average client. We've REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 25, 2025 / 2:30PM, CM.TO - Canadian Imperial Bank of Commerce at National Bank Financial Services Conference got higher profitability and it's actually growing four or five times higher in terms of the revenue opportunity with those clients. So that's why it's attractive. No surprise, it's a segment that everybody in Canada is focused on. So I think the real question is, why us? Why do we think we can compete in this segment? Imperial service is a unique proposition. Our Costco partnership is another unique asset we have, and we're leveraging both of them to gain share in the market, right? So when you look at Imperial, what are we doing? We've got a platform of over 2000 registered advisors. Each of them serves, you have a few 100 clients in their portfolio. And it's that dedicated four-quadrant advisor that'll do everything for you across investments, lending, everyday banking, advice, and so forth. And we've got all the technology behind that, right? So we're growing that we're adding about 100 advisors this year and as we add clients to the platform, we'll keep adding advisors. We're growing the tools, right? I talked a little bit about the CGP tool. But we're also digitizing the processes we're using now Gen AI to help advisors with preparing for meetings with next steps after meetings. We're using the machine learning algorithms on clients to give better leads. We're doing all of that and that's actually driving productivity of the advisors up. So when I look at how much time we've saved, we've saved hundreds of thousands of hours of advisor time over the last number of years in imperial service. And that gives them more time to spend time with clients. So the number of calls with clients and the number of meetings with clients per advisor year over year is up 20%, and again we're just getting started on this front. And as we do that over time, we can push up those loading factors on clients per advisor. Because clients want to do things more digitally, simple, mundane things aren't coming to advisors anymore, and advisors are more powerful. It takes them less time to do things with the infrastructure that we're giving them. And then lastly, we're adding clients and this is where the big opportunity is, right? And it links to what I was saying before. There's three avenues we're adding clients. One of the big ones is looking at the current CIBC base. So about 10% of our clients would sit in Imperial today. If we look at the rest of the 90% in CIBC, that one in three Canadian that we have a touch point with. We've done through analytics work to realize that there is about a million of those clients that have the assets to be part of the Imperial service platform. And if we go after those clients and consolidate those clients alone, that opportunity could double the size of imperial service. And we have another million that would be slightly lower than that and we've got another tier of clients we're addressing a different way. But if you look at the opportunity with just consolidating investments and other assets with existing clients in CIBC and that's where we're just getting started. We've moved a small portion over the last two years of those million clients into imperial service, and we've seen that NPS lift and the funds managed lift of 50%. I saw I was telling you earlier about. And we can keep doing that. So as clients come in as capabilities get better, the adviser force grows, the productivity of those advisors grow, we can keep driving the results, right? So what have we seen this year? In funds managed, even though funds managed has been low single-digit growth across the whole platform. Imperial service annualized rate is high-single digits this year already. We're seeing MPS scores that are best-in-class already 70% plus 80% plus if you go through a full-advice conversation, those are up 10 points year over year. And you're looking at engagement of advisors as we're hiring more advisors and voluntary turnover is down 50%, so it's half what it was. And we're seeing again strong results, right? Our advisors ranked us 9 out of 10, number one in satisfaction as a platform just recently in '24, and we're aiming for that 10 out of 10 over time, right? So there's a lot in imperial service that we can go after and we're continuing to glow the client base on the platform. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 25, 2025 / 2:30PM, CM.TO - Canadian Imperial Bank of Commerce at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc. - Research Division - Analyst : Yeah, it's a good news, bad news story that the revolving balance is still being quite low-revenue headwind, but you know it's an underappreciated indication of the resilience of the Canadian consumer that they're paying off still an above-average rate of their monthly balances and. I guess that's a true both in the Costco and the non-Costco portfolio? Hratch Panossian - Canadian Imperial Bank of Commerce - Senior Executive Vice President, Chief Financial Officer and Head of Enterprise Strategy It is true and again we've seen those revolving balances grow faster than the outstandings. Now look, I think where we're all going to have to watch this portfolio is what happens as the economy turns, right? As I said, purchase volumes not on the affluent folks but lower down you're starting to see a bit of slowdown. It's that uncertainty. I think people are starting to be careful to see where things go with tariffs. And, obviously, if we do see unemployment starting to move at some point then you could start seeing an impact here but we're being very prudent and at least proactively as well starting to zero in on the segments of our client base where we think there'd be more risk in what's coming ahead of us and then trying to get ahead of it.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Research Division - Analyst : A bit higher and has it grown since then and what's the cross-sell experience been? Hratch Panossian - Canadian Imperial Bank of Commerce - Senior Executive Vice President, Chief Financial Officer and Head of Enterprise Strategy Yeah, it has. So look, we're very pleased with our partnership. It was strategic. It was part of our strategy to go after mass affluent predominantly. Or majority of their clients have some element of mass affluent into it or what they call their members. And so it's been a good program for us, right? If you look at the card, yes, it was around that 3 billion mark, it's more than doubled since then. We've added more than a million clients since then in terms of new card holders. And if you look at our penetration within their client base remember base continues to go up in terms of the card, but their member base is also growing at a very fast pace. So the card still has a long way to go. If you look at the economics of the card, it's fine, right? Funding cost has been a bit of a headwind to original business case because interest rates went up higher than anybody thought, but lots of other puts and takes, I would say the card is at business case and it was always going to be fine, right? But the real opportunity and we're excited about is the franchising. And that's been a tremendous success, right? When you look at our franchising, we've only franchised about 10% of the cardholders to date, but that's still a material number in terms of clients at the CIBC, and it's been investments, it's been deposits, it's been mortgages, and again we're just getting started and we can go from 10% higher up. Then we have the opportunity of the whole member base. And so what we've now started doing which we're very excited about and we just started this pilot in one location in the GTA is we now have kiosks to have start-banking relationships directly with clients who don't have the card. So we're addressing the whole member base and we're also doing that digitally through costco.com. We're doing that digitally through their mailings and so we are going to the entire 8-million-member base with targeted offers in order to grow our penetration there too. And when you look at that client base that we've franchise, 10% of them have actually joined Imperial Service. And so it is a core part of our strategy on mass affluent. Something we're excited about, and we're investing in, right? We'll keep investing in the card. We'll keep investing in the relationship and they've proven that, so will they.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Research Division - Analyst : I don't know if that's a mass affluent crowd but I get it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 25, 2025 / 2:30PM, CM.TO - Canadian Imperial Bank of Commerce at National Bank Financial Services Conference So business banking also under your purview. We don't spend too much time talking about it like, can you know the portfolio, the size, I mean it's probably fairly small, but from a risk standpoint, is there any reason there to be concerned? Hratch Panossian - Canadian Imperial Bank of Commerce - Senior Executive Vice President, Chief Financial Officer and Head of Enterprise Strategy No, and then there's a reason we don't talk about it a lot, right? It is a small part of our portfolio. So we would have kind of in a teens percent share on deposits, but we're actually underrepresented single-digit share in lending, and that's been partly by design. So the lending portfolio is about 3 billion. Majority of it is actually secured by real estate or other tangible assets. All of it has personal guarantees from the owners of the business, and most of the owners of the businesses are CIBC clients with broader relationships, and it goes to our relationship strategy. So when we look at the portfolio, it's small, but we've done the analysis. We're never going to let rest on our laurels. Only about mid-single digit percent of the portfolio is actually in manufacturing or has any nexus to the US. They're both roughly the same number. And so we don't expect an impact. These are Canadian businesses, Canadian supply chain, Canadian customer base. And so if we do see a Canadian impact to the economy, to unemployment to people spending and buy that I could see, but there's no direct impact from the tariffs to our small business portfolio. In fact, longer term, with this national sentiment by Canada focus on productivity, local investment, we actually think the small business space may benefit in Canada. And so we're starting to think through and have a few things on the go on how can we support Canada and Canadians in starting some of those efforts and trying to drive some of the local productivity up and so we're excited about that.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Research Division - Analyst : Okay, we're nearing the two-minute warning here. I got a couple more questions. One on the NIM outlook, I guess. Couple of years ago, the big surge in demand deposits was -- create a lot of pressure on margins. A lot of those deposits are maturing currently. Is that dynamic supportive of margin expansion given maybe they're substituting into checking accounts or investment products or what have you so that you could see some tailwinds from lower funding costs. Hratch Panossian - Canadian Imperial Bank of Commerce - Senior Executive Vice President, Chief Financial Officer and Head of Enterprise Strategy Yeah, absolutely. So we, to be fair, we talked about this a bit in Q1. So we had actually in the fall a bit of an increased pace of maturities in our GICs, but that's kind of stabilized to a more normal level now for the foreseeable future. But you know what you saw a lot of change, right? You saw clients who were coming out of GICs with a five handle on it and now facing a three handle, right? So that was naturally an opportunity to have an advice conversation. That's where we had our advisers work with folks to say, okay, what's the right thing for you at this point? And we've seen a few things, right? We've seen some clients need the liquidity because of their circumstances and so they've gone to demand products and that's why we've seen a good portion of GIC's maturing going there. We've seen some clients needing to pay down debt. We've seen some clients who have who don't need the cash and have longer-term goals require investments and so a lot of that's gone to demand and a lot of it is gone to investments and the way we've approached those client conversations and given advice is part of the reason why we've driven demand share growth. We've been number one in sales it's because we've done the right thing for the client and we always say right thing for the client and right for shareholders. And this has been a really key area for that. And one of the things we've leveraged is actually our data and analytics, and we didn't talk a lot about that but. It is one of our biggest areas of investment. I've personally spent time essentially acting our CDAO for the retail business, understanding our data and how we can drive value in it. And we now have a full plan on how we can extend that another order of magnitude in terms of our capabilities, the investments behind it and the value we can drive from it, but it's already paid a lot of dividends.