Canadian Imperial Bank of Commerce : 2024 Q2 financial reportsQ1 financial reports Transcript

CIBC Q2 2024 Earnings Conference Call

May 30, 2024

Disclaimer

The information contained in this transcript is a textual representation of the Canadian Imperial Bank of Commerce ("CIBC") Q2 2024 earnings conference call and while efforts are made to provide an accurate transcription, there may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. In no way does CIBC assume any responsibility for any investment or other decisions made based upon the information provided on CIBC's web site or in this transcript. Users are advised to review the webcast (available at https://www.cibc.com/en/about-cibc/investor-relations/quarterly-results.html)itself and CIBC's regulatory filings before making any investment or other decisions.

Forward Looking Information

From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including in this site, in filings with Canadian securities regulators or the U.S. Securities and Exchange Commission and in other communications. These statements include, but aren't limited to, statements about potential events and about our financial condition, priorities, targets, ongoing objectives, strategies and outlook. A variety of factors, many of which are beyond our control, affect our operations, performance and results and those of our business lines, and could cause actual results to differ materially from the expectations expressed in any of our forward-looking statements. We don't undertake to update any forward-looking statement except as required by law. For further details, refer to "A Note About Forward-Looking Statements" in our most recent Annual Report and Quarterly Report to Shareholders located at https://www.cibc.com/en/about-cibc/investor-relations/quarterly-results.html.

Corporate Participants

Geoff Weiss

Senior Vice-President, Investor Relations & Performance Measurement

Victor G. Dodig

President and Chief Executive Officer

Robert Sedran

Senior Executive Vice-President and Chief Financial Officer

Frank Guse

Senior Executive Vice-President and Chief Risk Officer

Hratch Panossian

Senior Executive Vice-President and Head of Personal and Business Banking, Canada

Shawn Beber

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

Senior Executive Vice-President and Group Head, U.S. Region; President and Chief Executive Officer, CIBC Bank USA

Harry Kenneth Culham

Senior Executive Vice-President and Group Head, Capital Markets and Direct Financial Services

Jon Hountalas

Senior Executive Vice-President and Group Head, Canadian Banking

Other Participants

Matthew Lee

Analyst, Canaccord Genuity Corp.

Doug Young

Analyst, Desjardins Capital Markets

Ebrahim H. Poonawala

Analyst, BofA Securities, Inc.

Meny Grauman

Analyst, Scotiabank

Sohrab Movahedi

Analyst, BMO Capital Markets Corp. (Canada)

Nigel D'Souza

Analyst, Veritas Investment Research Corp.

Lemar Persaud

Analyst, Cormark Securities, Inc.

Gabriel Dechaine

Analyst, National Bank Financial, Inc.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

Management Discussion Section

Operator

Good morning, and welcome to the CIBC Quarterly Financial Results Call. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Geoff Weiss, Senior Vice President, Investor Relations. Please go ahead, Geoff.

Geoff Weiss, Senior Vice-President, Investor Relations & Performance Measurement

Thank you, and good morning, everyone. We'll begin this morning's presentation with opening remarks from Victor Dodig, our President and Chief Executive Officer; followed by Rob Sedran, our Chief Financial Officer; and Frank Guse, our Chief Risk Officer. Also on the call today are a number of our group heads, including Shawn Beber, US Region; Harry Culham, Capital Markets and Direct Financial Services; Jon Hountalas, Canadian Banking; and Hratch Panossian, Personal and Business Banking. They're all available to take questions following the prepared remarks.

We have a hard stop this morning at 8:30, so please limit your questions to one during the Q&A to allow everyone to participate. As usual, we'll make ourselves available after the call for any follow-ups. As noted on slide 2 of our investor presentation, our comments may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results may differ materially.

With that, I will now turn the call over to Victor.

Victor G. Dodig, President and Chief Executive Officer

Thank you, Geoff, and good morning, everyone. I'll begin the call today with a brief overview of our second quarter results, followed by an update on our key operating segments and progress on our strategy. We delivered strong results this quarter that reflected our differentiated business model, our diversified portfolio, and our client-centric strategy, which we continue to consistently execute on.

On an adjusted basis, we reported net income of CAD 1.7 billion and earnings per share of CAD 1.75. This performance was driven by 9% pre-tax,pre-provision earnings growth and a third consecutive quarter of positive operating leverage. Our capital position remains strong with a CET1 ratio of 13.1%. This provides us with flexibility to draw on excess capital, support our clients, and continue growing our businesses while also returning capital to shareholders.

Our adjusted return on equity was 13.4%, as we maintained focus on profitability while holding elevated capital. Looking forward, our strategy is deliberately designed to deliver a robust, long-term return profile as we prioritize specific client segments, advance our digital capabilities, deepen client relationships, and realize efficiencies across our portfolio.

Now, turning to our business units. Starting with our Canadian Personal and Business Banking franchise, we delivered a strong quarter as we continue to advance our strategic priorities. In CIBC Imperial Service, which serves the needs of the mass affluent segment in Canada, our client Net Promoter Scores are trending higher, and money-in balance growth for Imperial Service clients was up 27% sequentially.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

With the support of AI, we're continuing to foster a cultural mindset of delivering an enhanced client experience. In one use case, we're using advanced analytics to compile a holistic client financial snapshot, which provides our advisors with deeper insights to guide more personalized conversations with their clients.

We're also leveraging our digital capabilities to continue deepening relationships with our Personal Banking clients. Today, 4 out of 10 core banking products are sold digitally, continuing to trend up from prior periods. In addition, we saw improved Net Promoter Scores for our digital channel clients as well.

So, turning to our Canadian Commercial Banking and Wealth Management businesses, softer economic growth and lower levels of residential construction have dampened loan demand, while financial markets have benefited from expectations of interest rate reductions later in the year. Our emphasis on client relationship returns generated significant growth in referral volumes between Commercial Banking and Wealth Management, which are on track to increase 70% relative to fiscal 2023.

In line with our strategic priorities, we recently launched a modernized platform for our investment advisors as we continue to evolve our wealth management capabilities. And during the quarter, our Asset Management business garnered first place out of our Big-6 peer group in absolute long-term and total retail mutual fund net sales. We will continue to drive growth in this business as we execute on our strategy to lead in the mass affluent and high net worth client segments.

In the US region, our results reflected continued progress on our growth agenda. During the quarter, C&I loan growth was strong and broad-based, while we continued to deemphasize certain segments of our institutional commercial real estate business.

In our Private Wealth Management business, we continue to invest in technology and infrastructure to scale our platform, attract new advisory teams, and drive connectivity. Cross-business referral volumes from the US are tracking well above our targets, supported by our ECRM investments. Scaling our highly connected US platform remains a critical imperative to our cross-border strategy and to our long-term enterprise earnings potential.

Moving to Capital Markets and Direct Financial Services, our differentiated platform delivered another strong quarter of results. We maintained our number one market share position among the Canadian peer group in equity trading, while also moving to the number one market share position for advisory fees. Revenue sourced from the US region was up 20% year-on-year on a year-to-date basis. In our DFS business, our efforts to build a best-in-class digital experience were recognized as well, with CIBC Investor's Edge ranking number one of the Big-5 Canadian banks and J.D. Power's Self-Directed Investor Satisfaction Study.

So underpinning our momentum are the investments that we've made to strengthen our bank. We're investing in technology to enhance our client experience, advance operational resilience, to protect our clients, and to deliver efficiencies in how we work. We're taking a thoughtful and proactive approach to how AI plays a role in advancing our client-focused strategy and in the governance required to do so effectively. We already use AI in key functions across our bank. Existing implementations include sophisticated risk and information security models that can detect fraud and enable our team to help prevent losses for our clients.

We're also using generative AI solutions to enhance our frontline experience, to improve our contact center efficiency, and to make head office activities easier and faster to perform. We've got many use cases currently in flight across our bank, all connected to our strategy and all with our clients at the center of our thinking.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

Delivering on our commitment to build a secure, equitable, and sustainable future, our efforts were recognized by several prominent third-party organizations again this quarter. For the second consecutive year, we were recognized by Global Finance as the Best Investment Bank and for our leadership in sustainable finance. For the third consecutive year, we were recognized by MediaCorp as one of Canada's Greenest Employers. And finally, for the fourth consecutive year, we ranked number one in Canada for gender equality by Equileap. These recognitions further enforce the hallmark of consistency we're focused on delivering across our bank on a number of fronts.

So in closing, we delivered another strong quarter to build on our recent momentum. We have a skilled, tenured, and connected management team that is laser-focused on the consistent execution of our clearly defined strategy. Going forward, our focus is to continue delivering on our strategic priorities, to remain disciplined with resource allocation, and to further improve the client experience.

With that, I'm pleased to hand things over to our new CFO, Rob Sedran, to review our financial results. Rob has a deep understanding of the banking sector and will bring valuable perspective to our CIBC Executive Committee. This move, along with the other new and expanded roles announced during the quarter, are consistent with our approach to deliver a strong bench, to draw from, to lead our bank into the future.

So Rob, over to you.

Robert Sedran, Senior Executive Vice-President and Chief Financial Officer

Thank you, Victor, and good morning, everyone. Having spent 19 years with CIBC in various roles, I'm very excited to serve as our bank CFO. So, let's get started with our Q2 2024 performance. I'm on slide 6.

The results this quarter reflect our focus on the consistent execution of the strategy Victor reiterated in his remarks. Strong performance in our largest business unit, Personal and Business Banking, momentum in market-sensitive businesses, and balance between expense control and investing in our growth, contributed to diluted earnings per share of CAD 1.79 and ROE of 13.7% on a reported basis. Excluding items of note, adjusted EPS was CAD 1.75 and adjusted ROE was 13.4%.

Our balance sheet remains in a strong position, with ratios that are well above our normal course operating targets. The balance of my presentation will refer to adjusted results, starting with slide 7. Unless otherwise noted, results are being compared with Q2 of 2023.

Adjusted net income of CAD 1.7 billion increased 6%. Pre-provision,pre-tax earnings of CAD 2.7 billion were up 9%, and revenues of CAD 6.2 billion were up 8%, aligned with our growth targets and supported by expanding margins, volume growth, and higher fee income. We also continued to prudently manage expenses, while still investing to support our strategy which helped generate positive operating leverage. Provisions for credit losses continue to be elevated, up 17% from a year ago, but they are down 12% sequentially. Frank will discuss credit in detail in his presentation.

Slide 8 highlights key drivers of net interest income. Excluding trading, NII was up 9% over the year, driven by expanding margins and continued balance sheet growth. The net interest margin performance this quarter and for the next couple of quarters is muddied by the impact of benchmark reform, as we approach the June 28 cessation of CDOR. I would note that this transition is revenue neutral and it is simply a shift of revenue to NII from other income.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

Excluding trading, Total Bank NIM was up 7 basis points from the prior year and stable sequentially. Canadian P&C NIM of 263 basis points was down 5 basis points sequentially. About half that decline was from revenue- neutral items in Commercial Banking, including benchmark reform. The balance of the decrease was driven by competitive pricing and business mix, also mainly in Commercial Banking, and has since largely stabilized.

In the US, NIM of 343 basis points was down 6 basis points from the prior quarter, with a continued mix shift in deposits and slightly lower loan margins. Consistent with our prior guidance, aside from the ongoing impact of benchmark reform, we continue to expect core margins to be stable for the balance of the year, based on current market rate expectations.

Turning to slide 9, non-interest income of CAD 2.9 billion was up 15% from the prior year amid growth in trading revenues as well as higher market-related and transactional fees. Excluding trading, market-related fees increased 13% due to higher underwriting and advisory fees as well as investment management and custodial revenues. Transaction-related fees were up 6%, driven by growth in deposit and payment, card and credit fees.

Slide 10 highlights our balanced approach to expense management. Excluding performance-based compensation linked to the stronger revenues and continued investments, expenses grew 4%. Over the last year, we realized efficiencies while investing to advance the four pillars of our strategy, as you can see on the slide. That combination helped us to deliver 50 basis points of positive operating leverage this quarter. With higher revenue-linked expenses, we expect expense growth to be in the mid-single digit range for the full year, and we remain committed to delivering positive operating leverage for the year.

Slide 11 highlights the strength of our balance sheet. Our CET1 ratio ended the quarter at 13.1%, up from 13% last quarter, and positions us well to absorb volatility in the operating environment while still supporting our clients. Solid organic capital generation, supported by share issuance, was partially offset by RWA increases, a combination of business growth and credit migration.

Based on our strong capital position and stable outlook, and as we signaled on our Q1 earnings call, we announced earlier this morning the formal elimination of the discount on our DRIP program, starting with our Q3 dividend payable on July 29th. Our liquidity position continues to be strong, with an average LCR of 129%, down from last quarter, and we moderated our funding activity during the period.

Starting on slide 10, with Personal and Business Banking, we highlight our strategic business unit results. Net income of CAD 653 million increased 1%, driven by strong revenue growth and operating leverage, partly offset by higher provisions for credit losses. Supported by core business momentum, pre-provision,pre-tax earnings were up 15%, as the execution of our client-focused strategy continues to deliver results.

Revenues of CAD 2.5 billion were up 9%, supported by a 16 basis point increase in the margin, along with volume growth. The sequential revenue decline was primarily owing to the impact of two fewer days in the quarter. Expenses of CAD 1.3 billion were up 4%, related to higher revenue growth and investments in strategic initiatives, partly offset by ongoing efficiencies.

On slide 13, we show Canadian Commercial Banking and Wealth Management, where net income and pre- provision, pre-tax earnings were stable to a year ago. Revenues of CAD 1.4 billion were up 4%, driven by strong Wealth Management revenue growth of 11%, with higher average fee-based assets on both increased client activity and market appreciation. This was partially offset by Commercial Banking revenue, which declined 5%.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

As I mentioned a few slides back, net interest margin in this segment was affected most directly by benchmark reform, and will be for the next couple of quarters, which again has no revenue impact. We also saw the impact of deposit competition and elevated funding costs as well as the impact of business mix during the quarter.

Other than the impact of benchmark reform, we are seeing these things start to level off, and so expect more stability in the core margin moving forward for this segment.

Expenses increased 7% from a year ago, mainly from higher compensation linked to the strong Wealth Management revenues. Our combined Canadian Personal and Commercial franchise delivered revenue growth of 6%, operating leverage of 3%, and pre-provision,pre-tax earnings growth of 8% over the prior year. Additional details on Canadian P&C have been included in the appendix.

Turning to US Commercial Banking and Wealth Management on slide 14. Net income of US $81 million was up from the prior year, largely from lower provisions in the office portfolio. Revenues were up 3%, with non- interest income up 10%, mainly due to market performance and wealth, partially offset by a 1% decline in net interest income.

Expenses were up 10% year-over-year, reflecting investments across our business and infrastructure. We continue to scale our US business and are positioned to drive long-term profitable growth across both Commercial Banking and Wealth Management.

Turning to slide 15 and our Capital Markets and DFS segment. Net income of CAD 509 million was up 2% year-over-year. Revenues of CAD 1.4 billion were up 4%, driven by strong results across all business lines, despite the impact of the federal budget changes on our Global Markets business. Corporate and Investment Banking benefited from growth in both equity and debt underwriting activity. And 5% growth in Direct Financial Services was helped by higher revenues in Investor's Edge, our direct investing platform. Expenses of CAD 706 million were up 6%, largely due to continued investments in growth initiatives and higher employee-related compensation.

Slide 16 reflects the results of the Corporate and Other business unit, which shows a net loss of CAD 9 million compared with a net loss of CAD 33 million in the prior year, driven by higher Treasury-related revenues and higher revenues from CIBC Caribbean, partly offset by higher expenses. This quarter's expenses included a charge related to the divestiture of certain CIBC Caribbean assets.

In periods of heightened volatility, our Treasury function can sometimes buffer the impact on our client-facing businesses. As that volatility settles back down, so too should the impact on our Corporate and Other segment, which we are now seeing. Therefore, in the current environment, we would anticipate losses of between zero and CAD 50 million, rather than our previous guidance of a loss of between CAD 50 million and CAD 100 million for this segment.

So, let me close with three takeaways from the results. First, our results reflect the consistent execution of our client-focused strategy and positive momentum across our diversified franchise. We remain very focused on controlling what we can control and positioning CIBC for consistent, strong, profitable growth. Second, our strong balance sheet combined with capital and liquidity ratios that are ahead of operating targets position us well for the present and the future as we continue to manage with a long-term lens. And third, our disciplined and balanced resource allocation approach allows us to focus our investments, support our clients, and drive sustainable shareholder value.

With that, I'll turn it over to Frank.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

Frank Guse, Senior Executive Vice-President and Chief Risk Officer

Thank you, Rob, and good morning, everyone. Our credit performance this quarter has remained stable despite a challenging environment. We completed a number of dispositions in our US office book, which reduced impaired balances in this sector. With strong allowance coverage, we remain focused on maintaining reserves for evolving macroeconomic conditions.

Turning to slide 20, our total provision for credit losses was CAD 514 million in Q2, compared to CAD 585 million last quarter. We've continued to build allowance levels by 9 basis points over the past 12 months to prepare for future changes in the economy. Our performing provision was CAD 67 million this quarter, primarily from our business and government portfolios. Provision on impaired loans was CAD 447 million, down CAD 45 million quarter-over-quarter. This was due to lower provisions in the Canadian retail portfolios, as well as both the Canadian and the US commercial lending portfolios.

Turning to slide 21, we are providing an updated view of our impaired PCLs by business. Over the past few quarters, we've seen total bank impaired PCL performing around our mid-30s guidance, with strong performance in a number of our strategic business units. In PBB, impaired PCL trended slightly higher over the past year. We expect it to move slightly higher in the coming quarters. The Canadian Commercial portfolio has yielded strong and stable performance. While some fluctuation will be normal for this portfolio, we remain pleased with these results.

I would also highlight the performance in our Capital Markets business, where impaired PCL rates over the past few quarters remain muted. US Commercial impaired PCL has seen improvements over the past few quarters, with lower provisions in the office sector, partially offset by increases in diversified commercial. We expect to see these improvements continue. Our credit performance this quarter reflects strong credit quality across all of our portfolios, driven by our underlying relationship and client-focused strategies and proactive risk management approaches.

Slide 22 summarizes our gross impaired loans and formations. Growth impaired balances were down in Q2, mainly due to the disposition of US office loans, partially offset by an increase in Canadian personal lending. Overall, new formations continued to remain stable quarter-over-quarter, with the increase in retail offset by a reduction in business and government.

Slide 23 summarizes the net write-off and 90-plus day delinquency rates of our Canadian consumer portfolios. We're seeing 90-plus day delinquency rates trending higher, reflecting the year-over-year impact of rising unemployment and elevated interest rates. The overall credit quality and portfolio health of our clients remain strong. We also remain comfortable with our mortgage portfolio, given the overall reasonable loan-to-value metrics, and we do not expect to see material losses from this portfolio.

Consistent with last quarter, our analysis on clients who are renewing in the next 12 months demonstrates that only 1% of these renewal balances are clients in uninsured mortgages and at a higher risk from a credit perspective. We also continue to see positive trends in negatively amortizing mortgages that was down from CAD 38 billion in Q1 to CAD 36 billion this quarter, primarily from clients continuing to voluntarily increase payments to reduce the interest rate impact.

Slide 24 shows an updated view of our US office portfolio. Our team's focused efforts have reduced the portfolio size by more than 20% year-over-year. As mentioned in my opening remarks, the disposition actions taken have reduced our gross impaired loan ratio from 19.7% last quarter to 10.3% in Q2. With the reduction in impaired balances, our allowance coverage is now at 10.2%, down from 13.7% last quarter. Going forward, we

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

believe that we are through the bulk of substantive issues in this portfolio and expect losses to continue to trend lower in the coming quarters.

In closing, we continue to proactively assess the portfolio and we remain comfortable with our mid-30s guidance. Our allowance coverage remains strong for the macroeconomic environment we operate in, and we remain prudently provisioned for what is ahead. As market uncertainty persists, our team remains focused on closely monitoring portfolio performance and quality, while also staying engaged with our clients.

And I will now turn the call back to the operator.

Question and Answer Section

Operator

Thank you. [Operator Instructions] Our first question is from Matthew Lee from Canaccord. Please go ahead.

Matthew Lee, Analyst, Canaccord Genuity Corp.

Good morning, guys; and thanks for taking my question. I wanted to hone in on the Canadian PBB segment, which saw a sequential improvement in impaired PCL that sort of goes against the industry-wide trend in this space. Could you maybe talk about the puts and takes in that business and maybe how we should expect that to trend in the back half of the year, just given the increasingly strained Canadian consumer?

Frank Guse, Senior Executive Vice President and Chief Risk Officer

Thanks, Matthew. Thanks for the question. I think as we guided in my prepared remarks, we continue to expect NCLs trending up a little bit more in the second half of the year, and that should be expected against the macroeconomic environment. But we do remain overall very comfortable with our performance and credit quality in the Canadian consumer book.

We're very intentionally focused on growing relationships with clients with strong credit quality. We have invested heavily in retail strategies, focused on the mass affluent segment. Even investing in our co-brand credit card has improved overall credit quality for the portfolio. And we are also investing heavily in risk strategies. And Victor touched upon some of those using AI and bringing in more data to just be very conscious about risk decisions that we are making in the portfolio at origination, during the life cycle of the loan, and even when it comes to collection efforts and pre-delinquency strategies.

So I would say, a very intentional strategy, good investments that we are making both on the business and the risk side. And that's what you're seeing reflected there in the results. Notwithstanding, we are still guiding to net credit losses to continue to trend up moderately in the second half of the quarter.

Matthew Lee, Analyst, Canaccord Genuity Corp.

Okay. That's helpful. And then...

Victor G. Dodig, President and Chief Executive Officer

Yeah. Sorry, Matthew, yeah, you got another question? Go ahead.

Matthew Lee, Analyst, Canaccord Genuity Corp.

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CIBC Q2 2024 Earnings Conference Call Transcript - May 30, 2024

Oh, no, no, no. Go ahead.

Victor G. Dodig, President and Chief Executive Officer

No, I want to hear from you, Matthew.

Matthew Lee, Analyst, Canaccord Genuity Corp.

Oh, sure. I just wanted to ask about the Costco portfolio. It feels like when I go to Costco, get my groceries, enjoy my CAD 1.50 hotdog, I can see how it's really easy to end up with a Costco CIBC Mastercard and perhaps even open a bank account. But just, can you maybe elaborate on how you've been able to take that initial interaction with the consumer and turn it into a kind of longer-termmulti-product relationship?

Victor G. Dodig, President and Chief Executive Officer

Yeah, sure. I'm going to hand it off to Hratch in a moment. The whole Costco strategy is very much tied to our overall client strategy, to build a product suite that is market-leading. And in that instance, we have a market- leading travel and non-travel credit card portfolio that's been performing very well. And to make sure that our clients, including you, Matthew, have an opportunity to do more banking business with us. So, franchising the client and making progress on that front is something that we're seeing in a very encouraging way in our partnership with Costco and, quite frankly, across our banking business.

So Hratch, over to you.

Hratch Panossian, Senior Executive Vice-President and Head of Personal and Business Banking, Canada

Thanks, Victor; and good morning, Matthew. The Costco portfolio overall is trending very well for us. And let me go back for a second and remind you what we had said at the time of the acquisition. The card itself is interesting to us. The economics of the card, per our business case, were good. But the real value for us was building the relationship and franchising that client base, which is several million that we've acquired and hundreds of thousands that we are acquiring on an annual basis going forward as new cardholders. And a large portion of that client base aligns with our strategy of our focus on mass affluent.

And so, what we're seeing so far on the card itself, there's some puts and takes. Cost of funds is higher because of where the environment is. That hurts us. But if I look at some of the operational metrics in terms of number of accounts, in terms of number of new accounts, in terms of balances, in terms of transaction volumes, in terms of how that spend is materializing, all of that is trending at or better than business case. And so, I would say, overall, the economics of the card are as good as we expected in the business case.

When I look at the real value of franchising though, we are ahead. We're ahead of our initial goals life to-date. We're acquiring clients. We're engaging those clients. So you asked, how are we doing that? A large portion, I would say, the vast majority of the client base that's coming to us through this portfolio, is digitally engaged.

And so, we're able to engage with those clients digitally after the fact to build the relationship. We've got the data on the clients. And so, we understand those clients. And as we do with all of our client base, mind that data to generate insights and understand what other products and services could be beneficial to those clients.

And we've got a very good relationship with our partner. And we think, over time, there's more and more we can do with that partner, both with cardholders, but also the overall base that they serve, their member base, which is significantly larger than that.