To all participants, thank you for standing by. The conference is ready to begin. Please be advised, this conference is being recorded. Good afternoon and welcome to BMO Financial Group's Q1 2017 Earnings Release and Conference Call for February 28, 2017. Your host for today is Ms. Jill Homenuk, Head of Investor Relations. Ms. Homenuk, please go ahead.

Thank you. Good afternoon, everyone, and thanks for joining us today. Our agenda for today's investor presentation is as follows. We will begin the call with remarks from Bill Downe, BMO's CEO; followed by presentations from Tom Flynn, the bank's Chief Financial Officer; and Surjit Rajpal, our Chief Risk Officer. After their presentations, we will have a short question-and-answer period where we will take questions from pre-qualified analysts. To give everyone an opportunity to participate, please keep it to one or two questions and then re-queue. We have with us today, Darryl White, Chief Operating Officer; Cam Fowler from Canadian P&C; Dave Casper from U.S. P&C; Pat Cronin from BMO Capital Markets; and Gilles Ouellette from Wealth Management. On behalf of those speaking today, I note that forward-looking statements may be made during this call. Actual results could differ materially from forecasts, projections or conclusions in these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results to assess and measure performance by business and the overall bank. Management assesses performance on a reported and adjusted basis, and considers those to be useful in assessing underlying business performance. Bill and Tom will be referring to adjusted results in their remarks, unless otherwise noted as reported. Additional information on adjusting items, the bank's reported results, and factors and assumptions related to forward-looking information can be found in our Annual Report and our fourth quarter Report to Shareholders. With that said, I will hand things over to Bill.

Thank you, Jill, and welcome to everyone joining us on the call. Today, we announced net income for the first quarter of $1.5 billion and earnings per share of $2.28. Strong earnings growth of 30% was driven by good performance across our businesses, and an improved environment compared to this time last year. Although our results benefited from the net impact of the sale of non-strategic assets during the quarter, underlying earnings grew at 19%. Good revenue growth and well-controlled expenses resulted in continued positive operating leverage. Performance was broad-based, demonstrating momentum across operating groups and geographies. Credit quality remains good, and Surjit will provide details in his remarks. Our capital position was strengthened. With a CET1 ratio of 11.1%, ROE was 15.3%. Moving to slide 5, I'll review a few highlights from our operating groups. Our North American Personal and Commercial Banking businesses performed well and in line with our outlook. Operating performance in Canadian banking was driven by well-diversified balance sheet growth across Commercial and Personal businesses. Loans grew by 5% and deposits were up 8%, as we continue to grow and deepen customer relationships. Expenses continued to be well-managed, up 3% year-over-year. While the gain on sale of Moneris US contributed positively to this quarter's performance, the underlying business generated positive operating leverage and good net income growth. Our U.S. banking results were also driven by balance sheet growth and improved net interest margin. Expenses remained well-controlled, up approximately 1%, excluding the extra month of Transportation Finance in the current quarter. The sale of a portion of our U.S. indirect auto portfolio impacted top-line growth, but underlying operating leverage remained strong. I'm confident in the strides we're making to accelerate the role of technology in delivering a leading customer experience. Building on our long track record of…

Thanks, Bill. I'll start my comments on slide 8. Reported EPS for the quarter was $2.22, and net income was $1.5 billion. As Bill mentioned, we had good underlying performance across the bank in the quarter. Results in the quarter also benefited from the combination of the sale of Moneris US and the sale of a portion of our U.S indirect auto loan portfolio, which resulted in a net gain of $133 million after tax or $0.20 per share. Consistent with past practice for similar gains and losses, this amount is included in adjusted earnings. Adjusted EPS was $2.28 and net income was $1.5 billion, both up 30% year-over-year, or 19% excluding the net gain. Adjusting items are similar in character to past quarters and are shown on slide 25. Adjusted net revenue of $5.4 billion was up 13% from last year, with the net gain contributing 3% of that. Net interest income was up 2%. Adjusted non-interest revenue was up 24%, primarily due to the gain on sale, as well as higher trading revenue, insurance revenue, and underwriting and advisory fees. Adjusted expenses were up 4% from last year. The increase was primarily due to higher employee-related costs, in line with performance. On a net revenue basis, the adjusted operating leverage was 9.1%, with 3% of that coming from the net gain. The adjusted efficiency ratio improved 530 basis points to 61.5%, with 150 basis points of the improvement due to the net gain. On a reported basis, efficiency was 62.6%. The adjusted effective tax rate was 19.8%, up from 16.2% a year ago, and was 24.4% on a TEB basis, down from 24.8%. Moving now to slide 9. The common equity Tier 1 ratio was 11.1%, up from 10.1% last quarter. As shown on the slide, the increase…

Thank you, Tom, and good afternoon, everyone. Starting on slide 16, our PCLs were $173 million or 19 basis points, flat compared to the prior quarter. PCLs in the Canadian P&C business were down as a result of continuing below-trend consumer losses. In U.S. P&C, PCL was also slightly down with low new reserves in the commercial business more than offsetting consumer losses that increased after two low quarters. Capital Markets had a PCL of negative $4 million, once again benefiting from recoveries in the oil and gas sector. On slide 17, formations and gross impaired loans were both down, with gross impaired loans decreasing 2 basis points to 60 basis points. Turning to slide 18, the risk characteristics of our Canadian residential portfolio remains strong. 57% of this portfolio is insured and our loan-to-value ratio on uninsured mortgages remains low at 54%. Looking at GVA and GTA, which have been the focus of much attention. We are well-positioned with loan-to-value, delinquency and bureau scores, all better than the national average. Our approach to consumer adjudication is based primarily on the financial strength of the borrower and we remain prudent in our underwriting practices with lower LTVs for higher-risk segments. In summary, good results in U.S. Commercial and Capital Markets, which reflect normal variability in these businesses, contributed to another good quarter from a credit risk perspective. I'll now turn it over to the operator for the question-and-answer portion of today's presentation.

Thank you. Our first question is from Sumit Malhotra from Scotia Capital. Please go ahead.

Thanks. Good afternoon. First question is for Tom Flynn and it goes to your capital ratio. So there's obviously a reversal of the Basel I floor, RWA floor inclusion that we had. We saw it for the first time last quarter, but I think it has impacted your numbers over the last year after the restatement. So, that $15 billion swing, could you maybe help me understand what triggers that going away this quarter? And from your perspective, what is the likelihood that we see this line item reemerge again going forward in terms of your capital sustainability?

Sure. It's Tom. Thank you for the question. So the Basel I floor risk-weighted assets did go just a little below, in fact zero in the quarter. Reflected I would say two categories of things. Firstly, accounting for almost half of the reduction. We took a series of actions focused on reducing assets that are heavy from a Basel I perspective and did that through the course of the quarter and referred to that in the press release and on the slide. And then, in addition, there were a number of other things that helped reduce the number, and they would include higher source currency Basel III risk-weighted assets, pension impacts, FX and risk-weight changes. And those things contributed the balance of the half of the change. And then, in terms of the go-forward expectation, two things. Firstly, notwithstanding the strong improvement in the ratio in the quarter, our ordinary course moved through time. Expectation would be that the ratio would go up by in the zone of 10 to 15 basis points a quarter. And it's possible in some quarters that the Basal I floor will pop up. It's just slightly underwater this quarter. But as we look at it, that's just part of what drives the ratio. And overall, we would expect what I'd call a traditional normal build through time.

So, I mean, when we look at that line, that Basel I capital floor, so over the past five quarters previous to this one, it had had a steady increase before dropping off. So, when you say it's just slightly below water, I think that's what you said. If it was to reemerge, it would be at a smaller level than the larger ones we saw in the back half of 2016. Am I thinking about that the right way?

That's correct. It should be at a smaller level. And I'd say we're managing it in a tighter way in order to get that resolved.

And let me wrap it up here. It's for you or maybe for Bill. I feel like your capital deployment and management strategy has been pretty consistent for a number of years now. After you undertake an acquisition, you spend some time building the capital back up, usually more quickly than I've expected. And you put the buyback in place and are somewhat active on it until you find something else from an acquisition perspective that works. By filing for the NCIB today, is it reasonable to think you're in a position now that we will see you active on the buyback in the near-term if and when it's approved, this short order? In other words, does step-up in capital today gives you enough comfort that you can activate the NCIB?

Well, Sumit, it's Bill. I think the first two-thirds of what you just said was almost a perfect recall of what we say in almost every call. Having the normal-course issuer bid back in place gives us the flexibility to repurchase stock. And, obviously, the higher ratio gives us the ability to transact if opportunities represent themselves. And I think, really what Tom has laid out is the completion of a set of actions we took in 2016 after announcing a significant acquisition. And that's the pattern that we have really held to is rebuild capital in order to restore flexibility and then have the option of deploying that either through stock purchase or, when the opportunity presents itself, businesses that are complementary to our existing suite of capabilities. So I wouldn't say it signals anything different than what we've always said that we want to have make maximum flexibility.

Thanks for your time.

You're welcome.

Thank you. The next question is from Steve Theriault from Eight Capital. Please go ahead.

Thank you very much. First, probably for Tom. Tom, the U.S. margin up nicely this quarter. I saw a mention of the loan sale and higher rates. But can you split out the impact from the loan sale and higher rates and anything else that's driving that? And all else equal, is there more upside looking out to Q2 and beyond from the December rate hike or the divestiture, or how should we think about that?

Sure. So we were happy with the margin in the quarter. It was up 12 basis points from Q4, which is a nice increase. A little over half of that came from the sale of the indirect auto loans, and they are a lower yielding part of the loan portfolio. And as a reminder, when we announced the acquisition of Transportation Finance, we said we would reduce that portfolio by about half. And the sale that we had in the current quarter really accomplishes that objective and does improve the margin. And then, around half of the increase came from the higher Fed increase that we had in the quarter. And there is some upside to that that we'll see in the next quarter. So I would expect the NIM to be up a bit next quarter, based mainly on the remainder of the Fed increase rolling through and a little bit of benefit also from the indirect auto.

Is it fair to say that's about half the benefit from the December rate hike that we saw in Q4 – Q1?

In the zone of half, yes.

Okay. Okay. Then, maybe also for you, Tom. The adjusted loss in the Corporate Services has been higher now for a couple of consecutive quarters, which is still a guidance to somewhere closer to $100 million per quarter. If anything changed in there, the loss will be higher. I ask in part because I'm seeing these like higher expenses in the Report to Shareholders. So, wondering if maybe there's more unallocated expenses. How should we think about that line item after a couple of quarters of lumpiness there?

So, a couple of things, I guess. Over time, we've had some residual expenses in Corporate and some residual negative revenue. And then, we've also had the benefit of loan loss recoveries. And there was a point in time a few years ago where those were significant. But they have been helpful over the last couple of years, although in a smaller way. And at this point, those have pretty much gone away. And so, with those going away, the net negative in Corporate is likely to be on average a little higher this year than it's been over the last couple of years. And the level we're running at this quarter, negative $140 million, is actually pretty much in line with the average level that we've had over the last year. The numbers do move around quarter-to-quarter. Some of that is timing of spend. Some of that is residual items from a treasury perspective. And as a reminder, in Q1 of every year, we do have our eligible-to-retire expense, and that was included in the expense number for the Corporate segment in the current quarter and that was about $30 million. So, a bit of a long answer. PCLs are part of the story. But with the benefit we've had from that over time going away, I'd expect a slightly higher net negative in Corporate going forward, like you saw this quarter.

So in the – obviously, Tom, it bounces around but in the range of what we saw this quarter?

I'd say that's as good a number as any.

Okay. Thanks a lot. Thanks for the time.

Thank you. The next question is from Meny Grauman from Cormark Securities. Please go ahead.

Hi. I'd like to ask about your outlook for U.S. bank valuations. One of your peers talked about the fact that they thought that an ability to generate synergies and return on capital remains challenging at best, their words. I'm wondering if you agree, and if not then what's your outlook in terms of U.S. bank valuations right now as you think about the M&A opportunities?

It's Tom. I'll take that. I don't think I'll comment directly on bank valuations, but I will say that we feel good about the ability to grow our U.S. business organically. And over time, we've made meaningful investments in our U.S. platform. We do think we've got the ability to drive positive operating leverage off a bit. And that's particularly true in a better revenue environment, which we certainly had in the first quarter and we're hopeful that we'll have over the balance of the year. So we're happy to have the U.S. exposure expected to grow, but the focus of the management team is really on generating good organic growth.

Thanks a lot.

Thank you. The next question is from Robert Sedran from CIBC. Please go ahead.

Hi. Good afternoon. I wanted to come back to the portfolio sale in the U.S., and I guess it's for Tom. But I'm just curious what gave rise to the loss, whether it was rates or credit quality or something else? And whether there's any contemplation of – now that you've kind of gotten to where you said you'd get to, A, how you chose the ones that you sold, and B, whether you might be inclined to do a little bit more?

Okay. It's Tom. I'll take that. The loss was actually driven by writing off a deferred in effect sales commission that we have on the portfolio. And we call the portfolio the indirect auto portfolio because it's originated through auto dealers, and we pay a fee for that and we amortize that fee over the life of the loans. And so, with the sale of the loan, we wrote off the balance of that deferred commission. And the financial asset itself for the loan was basically sold at a price pretty close to par. And in terms of future direction for the portfolio, it has been a lower-yielding portfolio. We wanted to reduce it for that reason. We do think being in the business in our footprint makes sense. And so we'd expect the portfolio to continue to be in the zone that it's in now, maybe a little bit of growth but not significant. And we're not looking at completing another sale.

So this is very much not a business in run-off. It's just a business now that you're going to replace as things roll off and kind of grow with the market. Is that the idea here?

That's correct. In a sense, we accelerated the reduction in the portfolio that we talked about at the time of the Transportation Finance acquisition. And we're very much in the business with our customers in our footprint, and that's what the remaining business represents.

Okay. Thank you.

Thank you. The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Good afternoon. My first question, it's on this RWA reduction. When I see these things happen, it's positive at the outset because we get a nice little capital boost. But then I have to ask myself if there's any negative impact on earnings. If I look at your return on risk-weighted assets, that's around 2%. I suspect the risk-weighted assets that went away this time aren't that lucrative, but is there any material or noticeable earnings impact from this RWA reduction?

It's Tom, Gabriel. There is some impact, but it's modest. And we were focused on B1 assets, and Basel I as you know is less risk-sensitive. And so we were able to reduce assets in a pretty efficient way. And I think the run rate impact is being a little under $5 million in net income per quarter...

Okay.

...for the actions that we took.

Okay. And then just a follow-up to the comment you made about the U.S. margins. So, 12-basis-point increase sequentially, half of that is tied to the Fed rate hike plus a little bit more. So, if I take 6 basis points, let's just use what happened this quarter, we're affected about $100 million of net interest income. So, if there are more this year, we could see. Is it linear? Are we going to see that much of an impact on your revenue line in the U.S. this year, if these rate hikes happen?

Yeah. Well, that...

$100 million in the quarter. Sorry.

Yeah. That seems high off one increase. But I guess, I'd say two things. Number one, we absolutely have a positive sensitivity to higher U.S. short rates and we're hopeful the Fed moves again this year, we'll see. And then secondly, there is a diminishing benefit as rates move up more through time.

The pass-through. Yeah.

Yeah. Because customers become more sensitive as money has a higher value. And so it's not a linear curve, it does decline through time.

Of course. Okay. Sorry. And then just a quick final one. I appreciated your Annual Report disclosure on sensitivity to U.S. tax rate changes. And it clearly outlined the benefits of a reduction of the statutory rates. Did you take into consideration any offsets, interest deductibility, anything of that nature that you would call out that something we should be aware of?

Yeah.

That could water that down?

I guess, from our perspective, it's too early to comment on that. There's lots of public discussion about the direction that U.S. tax policy might take. And we'll wait for the process to work through rather than commenting on different things that might or might not happen. But given the commitment that the administration has had to lowering the corporate tax rate, we gave the sensitivity, which was that 4% or 5% reduction in the corporate tax rate in the U.S., it would increase our annual earnings by about $75 million. And going forward, as the proposals get firmed up, we'll give additional color.

Okay. I appreciate the responses. Thanks.

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead.

Hi. Two quick questions. First, operating leverage in the Capital Markets business, not something I look at very often, but I was a little surprised at how big the operating leverage has been over the last three quarters. Just not something I would expect. Is that really a function of the mix or is that a change in philosophy toward expenses in Capital Markets?

Oh, hi. It's Pat. And it's actually – it's a combination of both of those things. And so, certainly, if you look at the revenue increases that we've seen in the U.S. market, there we're getting very strong operating leverage, consistent with what we have said for a while. The installed base there of Capital and FTE we have said for a long time had significant upside potential on revenue. So we expect to get very high degrees of operating leverage there. And, at the same time, we have been very focused on costs generally speaking, both in the U.S. and also in Canada, with a much higher level of discipline over the course of the last two years. And so the combination of both of those things is driving that operating leverage. The other thing you're seeing as well though is you're looking at, especially year-over-year, you're seeing revenue comparisons, particularly the Q1 last year where we had a fairly weak Q1. So you're seeing larger revenue growth numbers than you might otherwise see. As we roll forward, the comparison of strong revenue quarters will start to temper that operating leverage that you're seeing.

So, like, what was the nature of the revenue in the U.S. that would have been supportive of the big operating leverage?

It was really broad-based. Obviously, market conditions were very conducive in the quarter. And there were some catalyst events that are well-known, like the Fed rate hike and the OPEC decision and the Presidential election, that released a fair bit of pent-up demand. And so client volumes, and you can see that in almost all of the market volume-related metrics, you saw very significant increases certainly year-over-year, but even quarter-over-quarter. So market volumes were higher, generally speaking, across the board.

And you're saying that those revenue streams didn't give rise to similar levels of expense growth?

Yeah. Absolutely. And like we've said for a while, we think we have a platform there that can support a significant increase in revenue without a commensurate increase in cost.

Okay. Now a quick question for Tom, just – I'm going back to the notes I have from last quarter where I think you offered that U.S. margins could – we could see 2 to 3 basis points of margin pressure going forward each quarter. Now it sounds like things have changed, but the rate increase, I thought that was sort of well-known around that time. Am I missing something? Like, what else may have changed?

I think that guidance was absent a Fed increase.

Oh, I see.

And so that's the difference.

Good. Thank you.

Okay.

Thank you. The next question is from Nick Stogdill from Credit Suisse. Please go ahead. Nick Stogdill - Credit Suisse Securities (Canada), Inc: Hi. Good afternoon. Just a follow-up on the Basel I floor reduction. Were capital-relief trades a material driver of that reduction in the Basel I floor? And is that a tool you could continue to use going forward to mitigate the return of the floor?

Well, we looked at a number of ways to reduce the RWA intensity of some of the Basel I assets. We did have some credit default transactions that were part of what we did. And looking forward, I'd say, we have some ability to manage the numbers, that's not complete. And like we talked about earlier, the B1 floor is sort of just below being operative. And so, some chance that it will be part of the ratio as we go through the year. But, overall, looking at risk-weighted assets and our growth in capital, we'd expect some growth in the ratio through time, like we've seen looking back. Nick Stogdill - Credit Suisse Securities (Canada), Inc: Okay. Thank you. And then, just a quick question for Surjit. Another strong quarter on credit with PCLs at 19 basis points. Is mid-20s for 2017 still a realistic number? And if so, what business lines do you see kind of ticking up from here?

Well, I still think mid-20s is a good number to work with because there is variability in the commercial and corporate businesses. And while the economic environment we're operating in is very good at this point in time and the credit is again from a loss perspective in a very benign environment, I don't want to become complacent, but I would say mid-20s is a good number to work with. Nick Stogdill - Credit Suisse Securities (Canada), Inc: Okay. Thank you.

Thank you. The next question is from Sumit Malhotra from Scotia Capital. Please go ahead.

Oh. Thanks for getting me back on. A couple of more number questions to clarify. First off, in U.S. Banking, commercial loan growth has been one area where this bank has had very strong performance for a long time. At least on a sequential basis, from looking at this correctly, it looked like the growth was much flatter than we've seen in a long time. Can you give me some detail on what you're seeing in the commercial portfolio and why that portfolio growth slowed so abruptly?

Sure. This is Dave. You're right. We have had really very strong, probably above-market growth for two or three years now. The last quarter, a couple of things, and I think you've probably seen in the press a fair amount of press around this since what's happened to loans and commercial loans late, and we were probably no exception. We saw one thing that was unique for us that was utilization in our revolving loans was down close to 1% and that's $700 million or $800 million, and that's a reasonable amount. And I think we still expect our loan growth to be very good this year. We expect it to be above market, whatever the market will be. And our pipelines continue to be good. We continue to add new clients. And I feel confident about continued good growth. But as we've guided in the past, not at the levels we've had in the past.

This business, even obviously the last year, you've had your year-over-year comparisons benefiting from the Trade Finance acquisition. But even ex of that, it looks like this has been a double-digit business for quite some time. And it's been carrying a lot of weight given that the consumer portfolio has been declining. When you say very good, do you still think that commercial for BMO is a double-digit growth business in the U.S.?

So, back when you called it Trade Finance, but I think you meant Transportation Finance.

Yeah. Sorry. Transportation Finance.

And the transportation finance, even without that, the growth has been double-digit. It's hard to tell over time where it will be. I feel more confident saying we'll be at or above the market than to be able to predict specifically where it would be for the year. I think it will be good. I would say it will probably be a little bit lumpy, but I would expect it to be around 10%. That's what I would expect based on what I see today.

That's good. Last one, I'll say it's probably for Tom. Your insurance business. So, earnings that you show us from insurance are up about $25 million quarter-over-quarter. I think we've all gotten used to some volatility in this business based on what happens with loan yields, good or bad. When we look at this $104 million number, is there what you would term somewhat of a one-off in here as a result of the large upward move in yields? Or is $100 million or so more of a run rate number now based on where yields ended the quarter?

It's Gilles Ouellette.

Hi, Gilles.

Hi. I mean, the way it work is that when rates do go up, we get a one-time bump. And as you know, for the last six or seven years, rates have been going down and we've had this headwind. But the last two quarters, the rates have been going up and that's been the outflow in fourth quarter, but much more so this quarter. The underlying business, it's probably yielding about somewhere around $65 million a quarter. But this quarter, we get benefit of something like $40 million worth of combination of interest rates and equity moves. And the numbers roughly, Sumit, are for a 100-basis-point increase in loan rates. That's probably worth about $65 million after-tax; and for a 10% move in the equity markets, that's worth about $30 million after-tax. So, if we're expecting going forward rates will be going up and markets will be going up, this should be a tailwind for us.

All right. So, that's some really good detail. Thank you for that. So run rate you're saying has been around $65 million. Last two quarters have helped. And then based on these factors, continuing to work, that's where the bump to run rate earnings comes into play.

Yeah. And so, if you're looking at flat rate environment, you should probably start around $65 million.

That's very helpful. Thank you for your time.

Thank you. The last question for today is from Doug Young from Desjardins Capital Markets. Please go ahead.

I'll be quick. Gilles, just – so I didn't catch that. Did you say 100-basis-point increase in equity markets equal $65 million, did I get that number right?

No, no. That's a 100-basis-point increase in loan rates is $65 million.

Okay.

And 10% increase in the equity markets is worth around $30 million after-tax.

$30 million after – and that's on an annual basis or is that – that can go through in the quarter, I guess so?

It goes through the quarter.

Yeah.

If that's the experience in a quarter, that's what we're going to get. So we'll get some fraction of that.

Okay. And then just my other question for Gilles too is, I mean, traditional Wealth Management earnings were extremely strong. They were up 16% year-over-year. I mean, AUM I think was up around 102%. AUA I think was down. So, just trying to triangulate. I understand expenses – it sounds like expense management was a big contributor. Can you maybe break it out a little bit in terms of the delta between what we're seeing in the traditional earnings growth and what we're seeing in what I would consider to be the main metrics that would drive earnings?

Yeah. I mean, the single biggest factor for us, Doug, is foreign exchange. As you know, in the Asset Management business, I mean half of the book is in the UK. And so, obviously, the pound coming off in the last two quarters had a real impact on AUM. Now that's going to rectify itself in another couple of quarters, right? So, when you look at year-over-year starting in the third quarter, we're not going to have that. But the reason that you don't see much of an increase in rates – or increase in assets converted back to Canadian is because of FX. In constant currency, numbers are quite different than that. And the assets are growing in the UK, et cetera, but when we convert it back, compare that to last year, we're not getting the impact. But, to your point though, I mean, there's been a real drive for efficiency, as you know, around here for the last few years. And we had some real dividend this quarter. I mean, I think you look at our top line grew by something in the order of about 13%. And our expenses actually came off in spite of the fact that there's revenue-based costs in this. So we've had some real benefits of the work we've done in last couple of years. And we expect to get more of this going forward because, as you know, around BMO, that's been a big emphasis in the last couple of years.

So, just to kind of follow up. I mean I understand the UK pound being down impacts the AUM. Does that not impact your revenue and your earnings as well? Or have you hedged out any of your currency exposure that you're benefiting from on the ?

We're dealing with the issue of why the AUM hasn't moved up but the revenues have, okay? And it's the book that's been impacted by the pound, but we're having the same impact on revenues. I mean, in constant currency, the revenues are higher but something in the order of about 3% more of what you see there and as are the costs also, right? And so how do I explain? I mean, it's the book that's being impacted more than the revenues. We're getting – revenues are getting the benefit from revenues and the cost reductions.

Okay. And Tom, you're not hedging out any currency exposures here, are you?

We're not.

Okay.

We don't hedge either the U.S. dollar or the pound.

Okay. Thank you.

Thank you. This concludes the question-and-answer session. I'll now turn the meeting back over to Ms. Jill Homenuk. Please go ahead.

Thank you and thanks everyone for joining us on the call today. We look forward to talking to you again in May. Have a good day.

Thank you. The conference has now ended. Please disconnect your line at this time. We thank you for your participation.