The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst
: I want to ask about the net release and the big performing provision release. So I see from your note, the graphics there showing your base case
assumptions for GDP unemployment and all that looks like it's become a bit more conservative than what you had at the last quarter or the start
of -- end of last year. Your loans classified as Stage 2, the higher-risk performing category, up 14% quarter-over-quarter. And then I see this, whatever,
$504 million performing ACL release. That's the second biggest number since the release cycle started in 2021. Can you help me understand the
moving pieces here? On one hand, it looks like deterioration, but then from a provisioning standpoint, clearly not.
Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst
: Okay. That's very clear. Just a technical question though. I've heard Dave talk about it on numerous occasions there, labor shortages and inflation,
I mean obvious challenges to the economy. Where does that all -- and yourself for that matter, where does that factor in? When I look at these
forward-looking indicators, that primarily a tag on your GDP forecast. Like it's not -- it's something that -- these are the major risks to the economic
outlook, I guess. And just wondering where I would see that reflected?
Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst
: Graeme, I wanted to just come back to you. I mean I think you've done a excellent job of explaining the challenges of providing provisions under
IFRS 9. I guess what I would like to understand is, is the net result that provisioning now just becomes a lot more reactionary than forward looking?
I guess, number one. And number two, what would have been then 1 or 2 key drivers that would have contributed to the bank's decision to put
so much reserves aside during COVID that have now, I guess, reversed? And I'm hoping for more than just, well, the economy is reopening. And
I'd just like to understand what did you anticipate was going to happen and to what order of magnitude? And how has that not transpired?
Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst
: I mean not to belabor the point, but I could argue back that -- or what would you say if I argue back and say, yes, but Canadian consumer leverage
at an all-time high. Interest rates going up. Higher funding costs for the corporate borrowers. Higher energy costs for your corporate borrowers.
Higher labor costs for your corporate borrowers compliance with ESG going to eat away. Like I mean are we not going to see corporate profit
margins if your borrowers deteriorate. And maybe you're saying, yes, but not until 2024, so I'll worry about it later. But like how do you factor all of
that in? Or do you disagree with that assessment?
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