Harry Culham: Victor needs no introductions, of course, been at the helm for many years helping shape our bank into what it is today. And we’re so pleased to get your perspectives today, Victor, on where we are, where we’re going. So maybe we’ll kick it off with some questions around, you know, the big picture out there. The jury’s still out on whether or not we’ll see a soft landing or a recession. And you’re always optimistic. And what are your reasons for optimism at this point in time, Your outlook perhaps and some things we should be watching out for at CIBC and then beyond?

Victor Dodig: Sure. So thank you, everyone for being here. It’s great to have you all at our conference. We take great pride in having you here and serving you and meeting all of your needs. So, Harry, let’s talk. Let’s make this a conversation. I mean, the world is in an interesting place. You say I’m optimistic all the time. Most of the time I am – I’m still, let’s say, encouraged by what I see ahead. In spite of all the issues that we see in the world today. The world, I think, is reorganizing itself. You know, central banks are playing their role, but I think the visible hand of government is going to play their role as well. I mean, we all see what’s kind of transpiring in the United States. You got two presidential contenders who are actually using the visible hand of government to try and shape outcomes for their respective economies from two different ways. One’s using tariffs, or purportedly using tariffs, and one’s using tax credits, which is what the current administration is doing to drive outcomes, whether it’s the CHIP Act or energy or infrastructure. I think you’re going to continue to see that. You’re going to continue to see that in the United States. You’re going to continue to see that in Europe. And you saw that with the Politburo in Beijing over the last couple of days, making big announcements on how they want to use their visible hand of government. The only difference between the two systems is we’re democratic and they’re not. But I think you’re going to see this visible hand of government trying to shape industrial policy and central banks doing what they typically do, right, try and manage inflation to the 2% target and then get interest rates to a better place. So I think we’re going to see a more benign rate environment. I think you’re going to see the cuts. I mean, Avery Shenfeld is going to share with us what’s really going to happen because he knows we have a perspective. But I would say that as we look at the year ahead as a CIBC leadership team, we see, you know, constructive loan growth, but not aggressive loan growth. We see rates getting to a better place. The consumer for the most part getting more encouraged, but what they can do as late rates get lower, although there’s one segment of the consumers and that’s the bottom quintile that in the Canada and the United States are probably feeling the most amount of pain.

Harry Culham: Right, Right. And I think just, you know, from a, from a capital markets perspective, as we’re out there in front of our clients, you know, daily, hourly, I would say there’s a cautious optimism when you talk about inflation and interest rates or hear more, as he’s pointed out from Avery and he’s normally right. So look forward to that at lunchtime. I think clients are comfortable in pursuing their growth ambitions. They’re cautious though around the political landscape. So you know, just in that theme, Victor, maybe just talking about inflation coming down, what at what point do these reductions in interest rates that we’ve seen thus far and Avery will talk more about have a meaningful impact on our client behaviour, whether that’s our commercial clients, our wealth clients, our retail clients, and how is that going to affect the economy. And then our individual clients sort of, you know, how they’re doing overall?

Victor Dodig: Well, let’s, let’s talk a little bit about the consumer first, right? So if you talk to any builder of homes or condominiums today, they will say that anybody that’s looking for a new build is waiting for rates to go down. Consumers got their antennas up. They listen to the news. It’s become mainstream news now, interest rates. And how many interest rate cuts will there be that the average Canadian who’s buying a home is sitting on the sidelines. They’re wringing their hands waiting for those rate cuts. They don’t want to commit today. I think if you get the three rate cuts in place, I think you see the five year mortgage had closer to 4%. I think you’re going to start to see the spring season and housing with the rate cuts in addition to the uninsured mortgage changes that we saw. The ceiling got lifted to a million and a half dollars in addition to what OSFI announced yesterday in terms of clients with uninsured mortgages no longer have to be with their bank, which means it’s going to be more competitive for us. All of that I think will provide a level of confidence to the housing market that we should see spring be much more encouraging than it feels today, right. And some developers are already starting to lay the pipes, build the infrastructure in anticipation of that. And some of the bigger subdivisions that we see wealth clients, you know two quarters ago we had, we always talk about this, we had $10 billion of interest expense paid out at CIBC in three months, one bank three months and two years before that, that same quarter was only $900 million. So people use this ability to park money, they put it into GICs. And what we see happening now is GIC rates are coming down and money’s flowing out of GICs and it’s moving into the bond market. It’s slowly moving into the equity market more I think in the dividend high yielding sectors. And our commercial clients are starting to feel more encouraged by the rate environment as well. They’ve been largely sitting on their hands. And I think you see the same thing in the large corporate space, right, In terms of how that’s transpiring. We talked about that in the large corporate space, in the private equity, private sponsor space. Where is the money coming from right, to drive this enthusiasm as you see it?

Harry Culham: It is unbelievable actually, over the last decade, the, the amount of capital that has been is being managed in this, in this area, of course. And we don’t see that ending. In fact, we think it’s with us for the for steal the future. We partner and we we’re focused on being at the intersection of private capital and the new economy in general. And we think it’s a trend that’s with us for the decades to come. And in some ways, it’s replacing some of the things we do, but in other ways, it’s giving us an opportunity to participate in, in new verticals, new opportunities and with new clients with deep relationships. And so we’re actually quite excited about that. It’s another way to help the economy continue to expand.

Victor Dodig: Do you think the rise of private credit is a threat to our business model?

Harry Culham: I don’t think it’s a threat to our business model. We’re focused on deep relationships that you always talk about, Victor, that our team talks about. These deep relationships need a bank like our bank, CIBC to help them in their to achieve their ambitions every day. And we we’re highly connected across all of our businesses to ensure that we’re delivering our entire bank to our clients, not just one area of our bank. And so I think that is our that is our added value. You know, these headwinds that that continue to continue to theoretically come at us, whether that be increasing risks in in the environment or new players in in the field or, you know, the regulatory changes or evolution. I think the group might be interested to hear your view on sort of how our bank manages against these headwinds that continuously confront us in a in a way, but we’re, I think, well equipped to handle all of them.

Victor Dodig: Absolutely. So, you know, the big, there’s some big things going on in banking aside from rates, aside from the daily competition, there’s the disintermediation thing that we always talk about. You talked about the at the large end it’s the rise of private credit, the non-bank financials. Those who tend to be less regulated or unregulated largely because they don’t take deposits have a lot fewer restrictions in terms of regulatory capital buffers. That sometimes the things that we would have done hurdle better on their balance sheets than they do on ours. And us being understanding that space, us partnering like you do with the larger pools of money and understanding what their needs are and how do we fit into that is really, really key. So we do have a response to that and we’re not worried about it. In fact, we’re encouraged by it. I think it might be a valve release for our opportunity to recycle capital. I think on the smaller end of disintermediation, you know, I often say the banking industry is probably going to go through something like the grocery industry’s gone through and the telecom industry is going through. The grocery industry’s seen over a period of 45 years, the discount chains take 45% market share. It’s at peak today since they got launched. So some clients shop the premium brands, many shop the discount brands and there’s a large group that shop both. You’re seeing that in the telecom space. Everyone’s got a flanker brand. I think here in our in our business, you know, Harry was running direct financial services, which included Simplii Financial and Investor’s Edge and the Alternative Solutions Group. It’s about our FX technologies getting to retail. All of that has grown nicely and now we’ve taken the step of tucking into respective businesses because they’ve gotten to a good maturity point. We’re ready for that disintermediation. We believe that what’s happened in the grocery segment, what’s happened in telco is going to happen. It is happening in banking today with consumers, you see the Gen Z and with the business that they’re doing with the likes of Questtrade and Wealthsimple, we’ve got our eyes on it as well. We’ve got the assets that are going to work to our advantage and we’re going to continue to nurture those to be competitive in that space. That’s a big trend. That’s probably the biggest trend that we’re seeing and we don’t want our business model disrupted. We want it to evolve to deal with those trends specifically. So strategically, let’s talk well, how about you? I mean wade in, I mean you run strategy at the bank. We got a very clear strategy that now the market is, for the first time in a long time, looking at all the data points of how we’ve led the bank over the past decade to say, well, forget about all this stuff that we keep thinking that something more is going to happen. CIBC is actually a well-led and run bank. We’ve got a very capable leadership team, not just me and Harry, but others who are here in the room who are all on the same focused strategy. And that is…

Harry Culham: We are focused on well we’re really anchored in our organics organic growth strategy, consistent sustainable growth around a few pillars, Victor, as we know, we’re focused on our private wealth opportunities in Canada and the US. We’re focused on that digital opportunity that we’re really good at actually in Canada around our retail bank, our personal business bank. We are a highly connected franchise where we’re delivering our entire bank to our capital markets, commercial and wealth clients. At the same time behind all of this, we’re focused on enabling and simplifying our bank, finding those efficiencies across our platform to deliver top TSR returns, total shareholder returns. So all of that comes together in a strategy that’s very focused on our organic consistent build that we’ve been focused on for, for years now.

Victor Dodig: Very undramatic, but delivers consistent performance, right. So that affluent space, that high net worth space, I mean everyone’s going after it, but I think we’re well positioned in terms of the advisors that we have here on the ground, whether it’s through our private wealth business or Imperial Service, in addition to our US private wealth business. We’ve got ranked #3 by Barron’s, the RIA space again, consistently that produces capital light returns, well, capital enhancing returns, capital light usage. If we look at how many clients we’ve acquired through the Costco platform, Simplii, and our CIBC platform in the last 12 months, we’ve acquired over 600 and 56140 thousand net new clients. Our data would suggest that that’s the top end of the market and that is about feeding the pipeline of the future. So work deeper with the clients that deliver great returns, build the clients for the future. That whole idea of connectivity, you know, our capital markets business, one in every $3 comes from its connectivity to our bank or retail banking partners

Harry Culham: Right.

Victor Dodig: We’re number one player in FX, right? Like how do we become the number one player in FX in the country?

Harry Culham: Well, it comes down to systems, technology and people.

Victor Dodig: Yeah.

Harry Culham: And then of course our client franchise where we’re delivering our entire our entire bank to our clients. I mean you talk about client growth, it’s robust across our organization. We’re maintaining our margins that we’re very focused on and that discipline around resources is so important to achieving the various different ratios we look at. I’d also say behind all of this, I think we take great pride in the way we manage our credit risk as an organization. We’re very pleased with the way things are going in that respect Victor.

Victor Dodig: Absolutely. And that’s what a relationship focused bank is supposed to do. Understand the underlying credit, know your client and make sure that your losses are not outsized.

Harry Culham: Well, I think the best way to manage risk is to know your clients really, really well. And you at the helm of our of our bank over the last decade has really, really put that in full force. So it’s, it’s been a great story.

Victor Dodig: Team sport. Nobody puts the puck in the net in this business on their own. Nobody.

Harry Culham: Good point. Maybe we could shift gears a little bit to politics.

Victor Dodig: Yeah, OK.

Harry Culham: U.S. presidential election coming up, obviously a potential federal election in Canada in the coming year. Where do you see the opportunities, the challenges as a result of that? I mean, in our world, we see perhaps some pent up demand. I talked about a little bit earlier, but I would say again, you know, they’re, they’re while clients are mindful of the election and perhaps they’ve front loaded some activity this year, the pipeline is strong.

Victor Dodig: Yeah.

Harry Culham: So how, how are you feeling about things? And none of us can predict what’s going to happen, but…

Victor Dodig: Well, I think that if, if you look at all of the regions in the world, the North American economy is the best economy to operate in. It is the one that’s growing the fastest as a large bloc. It has got visible, as I said, stimulus programs, particularly in the United States that’s driving that growth. There is a whole trend to re-shoring, right. I think it’s happening more in the United States certainly than it is in Canada. We probably need to focus more on that here, but it undeniably North America is the best place. Europe has got very tepid growth. I just was there last week and you can sort of feel it, right? Mario Draghi came out with his report on what Europe needs to do. That’s going to take a long time for Brussels to coalesce around that. He’s right. Europe is under invested in their economy. They don’t have deep capital markets. They don’t have integrated capital markets. So they don’t have that vibrancy of risk capital that North America has. And look, Asia’s reorganizing itself. China’s in a bit of a funk and everyone else is trying to run for cover, trying to figure out how to how do they deal with this kind of changing landscape.

Harry Culham: Absolutely. And maybe just on that theme in terms of the US market, our bank has grown significantly over the last, call it, a decade across our capital markets, our commercial and wealth businesses, and we’re very pleased with the trajectory. Maybe you can make a couple of comments on that. And you’re seeing some obstacles perhaps at least in the press around doing business in the US or at least growing in the US And we’re feeling good about things in the US.

Victor Dodig: We are, because we’ve picked, you know, any bank that wants to go outside of its home market really needs to think about do we replicate, copy, paste what we have in Canada, the United States. Our answer as a leadership team was no, that won’t work. The United States has got plenty of retail. It’s not as we don’t want to get in the crosshairs of any Senators or any Senate Finance Committee on retail. There’s a lot of stuff going on there. You see with Visa what happened this week, You, you see that time in and time out, it’s been a real private economy focused strategy. You know, you can see the world is moving to private markets. So the capital markets team, I’ll, I’ll let you chime in in a second here, but you’ve really engineered, with the team, a private market strategy. Our banking business is all about banking private businesses and managing their wealth. We’ve opened up wealth offices in all the key markets, including places like Palm Beach where the money is going, to San Francisco where the money still is. And it’s moving from places like Chicago, New York, Connecticut to these other jurisdictions, even though there’s still wealth in those markets. So we’re building a private banking, we’re building a private investment management, the private wealth business overall, we’re building out our commercial bank. Highly aligned with that and capital markets is banking those private players, whether it be pension plans or private equity firms.

Harry Culham: Absolutely. And what we’re doing is expanding what we do so well in Canada. I talked about the intersection of private capital and sustainable finance is a really good example where we have a competitive advantage, a comparative advantage and we really focus on servicing clients across our bank. If you think about it, we are a bit of a niche player in the United States. We’re not trying to be all things to all people, but we have a long term strategy that we’re very focused on that consistent sustainable growth and it’s working very well.

Victor Dodig: And we’ve grown our earnings in the US over the last 10 years. What was it about 2% of our earnings to, you know, 15 to 22 depending on the given year. So more like $1 in every $5 of profits now at CIBC are coming from the US, but in a very, very focused and risk controlled way.

Harry Culham: Yeah. And maybe just in the back of that, maybe you could comment on the execution. We focus a lot about this on this executive committee with our leadership team about the execution of our strategy and then the focus on the priority, the priority of capital allocation, where we allocate our capital and what we’re what we’re doing going forward.

Victor Dodig: Yeah. And I, I think you know how we do business with our clients. If we do it right, it manifests itself into a better return. So ROE is a big focus of ours. You know we had an investor day two years ago and we said we can achieve you know 16%, plus our regulators increased the capital buffers since then. But we are still focused on delivering a premium ROE – a premium ROE north of 14% is achievable. We do that through our relationship-based focus. We do that by getting more and more returns on the investments we’ve made in technology. We’ve made significant investments and now it’s time to scale more of that. We do that through our connected strategy across our bank. We do that through share buybacks. So all of that should get our ROE into a better place. And we’re monomaniacally focused on hitting our EPS targets of seven to 10%. Now it’s not easy to do time in and time out, but I think we’re kind of in this mode now, Harry, this organically focused mode where we’ve made our investments, the strategy is working and let’s now just continue doing that.

Harry Culham: You know, I would just go back when it comes to execution, I think our entire leadership team is focused on the discipline of our resources. We know the return on every dollar of capital that goes out the door. We know where we’re spending our money from a technology and infrastructure perspective, from a people perspective, we’re really disciplined around those resources and that’s leading to street-leading results. We’re very pleased with where we’re going. And so you know at the time is telling me we’re getting down on time years. I know there’s a big lunch and you’re going to hear from Avery, who knows a lot more than I’ll ever know about the economy. But maybe we’ll just finish off by saying thank you to our to our clients and our investors from me. But maybe just a couple of comments from you, Victor, on, on, on where we’re where we’re going, where we’re going next to CIBC.

Victor Dodig: Look, one thing you should know is that the leadership team at CIBC has fundamentally changed our bank from the bank that we inherited, which was a good bank, but it went through a rough time during the financial crisis, to a bank that has a sense of purpose. We roll out of bed every day and we know what we want to do. We want to serve our clients. I was just on the phone with a client upstairs and talking about $125 million line, right? And they call us and we respond. It is like a big bank in a small bank body. And that fundamental change you feel through the entire institution, you see that in terms of how our clients feel about us in our Net Promoter scores, they’ve improved more than any of the Canadian bank where we’ve improved in 15 points over 10 years. The market stayed pretty flat on that front. When it comes to our relationship oriented business, intense relationships like capital markets, investment banking, corporate banking, wealth management and commercial banking, Imperial Service, they’re in the 70s and 80s. In terms of Net Promoter scores, people feel a great deal of pride in working at our bank and knowing what we get up to do each and every day. It’s key for us to be able to deliver that consistency to you as our stakeholders. We take a great pride point in it. And as Harry said, I’d like to also thank you for being here. Thank you for your support and know that we will always get to you with an answer quickly, ideally an answer that’s yes. And we are very, very focused on your needs and your growth ambitions. So thank you very much for being here.

Harry Culham: And thank you to our investors. I hope you found that useful and insightful. And thank you, Victor, once again for your leadership.

Market Outlook with Victor Dodig and Harry Culham

Victor G. Dodig

President & CEO

CIBC

Harry Culham

President and CEO

CIBC

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