All participants please standby, your meeting is about to begin. Please be advised that this conference call is being recorded. Good morning, and welcome to BMO Financial Group's Q3 2022 Earnings Release and Conference Call for August 30, 2022. Your host for today is Christine Viau. Please go ahead.

Thank you, and good morning. We will begin today's call with remarks from Darryl White, BMO's CEO; followed by Tayfun Tuzun, our Chief Financial Officer; and Pat Cronin, our Chief Risk Officer. Also present to take questions are Ernie Johannson from Canadian P&C; Dave Casper from U.S. P&C; Dan Barclay from BMO Capital Markets; and Deland Kamanga from BMO Wealth Management. As noted on slide 2, forward-looking statements made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darryl and Tayfun will be referring to adjusted results in their remarks unless otherwise noted as reported. And with that, I will turn the call over to Darryl.

Thank you, Christine, and good morning, everyone. Our performance this quarter continues to demonstrate the strength and quality of our advantaged and diversified business mix, credit excellence and the resilience of our earnings power. Third quarter adjusted earnings per share were $3.09, driven by a very strong performance in our North American P&C businesses. Robust loan growth and margin expansion drove record revenue and over 15% pre-provision pretax earnings growth in both Canadian and U.S. P&C more than offsetting lower revenue in capital markets, which was impacted by more challenging market conditions. While the economic environment remains uncertain, there are signs that Central Bank action named at taming inflation are having an effect. While economic activity is moderating, low unemployment and still high consumer and business savings are likely to provide some buffer to the downturn. In the context of slower growth for the Canadian and U.S. economies, we, at BMO, are operating from a position of strength. Credit remains benign with strong reserves for loan losses, to which we added modestly this quarter. Our consistent PPPT performance positions us to support customers while delivering growth through the cycle. For the year-to-date, PPPT of $9.1 billion is up 7% with 1.5% operating leverage and an efficiency ratio of 55.4%. While operating leverage this quarter was impacted by underwriting markdowns due to changing market conditions and severance in capital markets, we continue to expect to deliver positive operating leverage for the year. Year-to-date, ROE was 16%, above our midterm target as we remain focused on driving improved returns and managing the bank for sustained growth. We're actively managing our capital position, balancing the dynamic environment to support client-driven balances and the pending acquisition of Bank of the West. We expect post closing, our CET1 ratio to build comfortably above 11% during…

Thank you, Darryl. Good morning, and thank you for joining us. My comments will start on Slide 9. Third quarter reported EPS was $1.95, and net income was $1.4 billion. Adjusting items are shown on Slide 41 and include the impact of fair value management activities related to the acquisition of Bank of the West, which this quarter reduced net income by $694 million, due to changes in interest rates compared with the prior quarter end. The remainder of my comments will focus on adjusted results. On an adjusted basis, EPS was $3.09 and net income was $2.1 billion, down from $2.3 billion last year. Performance in our P&C businesses was very strong with adjusted year-over-year pre-provision, pre-tax earnings growth of 15% in Canada and 16% in the US, as continued strong loan growth and margin expansion helped grow revenues at double-digits. Revenue this quarter is a record in both businesses. Continued weaker microenvironment lowered results in capital markets, including the impact of severance costs and down on loan commitments made earlier in the year and higher PCLs. Early indications quarter-to-date are more constructive. Total PCL was $136 million including a $32 million provision for performing loans compared with a total recovery of $70 million in the prior year. Pat will speak to these in his remarks. Moving to the balance sheet on Slide 10. Loan growth accelerated, up 14% year-over-year and 4% quarter-over-quarter. Business and government loans increased 17% from the prior year, with strong growth across all operating groups. Consumer balances were up 10%, reflecting diversified growth in the P&C businesses and in wealth. Average customer deposits increased 7% year-over-year. Looking ahead, we expect loan growth to continue in our P&C businesses, reflecting strong diversified pipelines. Turning to Slide 11. Net interest income was up 18% and up…

Thank you, Tayfun, and good morning, everyone. We were very pleased with our risk performance again this quarter and key portfolio metrics remain strong. This strong performance reflects the combination of disciplined risk origination from prior periods and strong risk management discipline through time. Starting on slide 22. The total provision for credit losses was $136 million, or 10 basis points, up from $50 million or four basis points last quarter. Impaired provisions for the quarter were $104 million or eight basis points, down from impaired provisions of $120 million or 10 basis points in Q2. Similar to last quarter, the strong impaired loan performance is due to very low formations and delinquency rates. We are pleased with these results, but do expect impaired provisions to return to more normal levels over time. Provision for credit losses on performing loans was $32 million this quarter, reflecting a deteriorating economic outlook relative to the prior quarter and strong portfolio growth. This was largely offset by positive credit migration again this quarter as well as a reduction in the judgment we have been applying specific to COVID-related uncertainty. Given the strong credit profile of our current portfolio and our forecast for impaired losses, we remain comfortable that our $2.3 billion of performing loan allowances provides adequate provisioning against loan losses in the coming year. Turning to the impaired loan credit performance in the operating groups. Loss provisions remained low across all business segments again this quarter. In Canadian P&C, Personal and Business Banking impaired loan losses were $94 million, up from very low levels in Q2, but still well below pre-COVID levels. US Personal and Business Banking had impaired loan losses of $1 million, flat relative to prior quarter. Consistent with prior quarters, the strong credit performance across our Personal and Business…

Thank you. We will now take questions from the telephone lines. [Operator Instructions] Our first question is from John Aiken from Barclays. Please go ahead.

Good morning. Dave, I wanted to discuss the U.S. deposits. Can you speak to what you saw in terms of customer behavior in the quarter? And what this leads you to believe in terms of growth moving forward?

Good morning, John. I think actually, I would say, both in Canada and the U.S., the deposit profile matches exactly the way we modeled the deposits in this rate environment. In the U.S., we have seen a small decline quarter-over-quarter. We are not quite aggressive in terms of matching some of the competitors' rate offers. We have not moved, for example, our digital deposit offers to an active state yet. And therefore, the betas actually have been below where we have modeled them. We do expect the betas to go up with each additional rate increase. And at one point, obviously, we will switch our digital offering on. But at this point, the slow outflow matches exactly the way we thought about how the deposits would behave. And the margin expansion that you have seen, the 21 basis point margin expansion in the U.S., reflects that effect. Q – John Aiken: Thank you

Thank you. Following question is from Ebrahim Poonawala from Bank of America. Please go ahead.

Hi, good morning. I guess I just wanted to follow up. I heard you loud and clear in terms of the outlook for positive operating leverage in 4Q. But when we look beyond and we look at your year-to-date adjusted efficiency ratio of around 55.4%. Give us a sense of should we expect incrementally more improvement over the next year or two years in a backdrop that doesn't get materially better either for capital markets and just overall for the economy? And if so, what are the drivers that would lead that efficiency ratio from the 55.4% into the low 50s?

Hi, Ebrahim, it's Darryl. Maybe I'll try to help you with that. Thanks for the question. So as I think about the future and how we travel on our PPPT performance and our operating leverage, look, we'll fall short here of giving 2023 outlook. We do that at the end of the year, but I can give you some of the considerations as we look at our business planning, we think we've got a lot of good momentum in our businesses, both on the revenue and the cost side. You're right, we're at 55.4% year-to-date. That compares to a peer set that I think averages only 100 basis points lower than that. So on the one hand, I would say that number used to be several hundred basis points the gap and now it's pretty narrow. And at the same time, it's a little higher than the average. So I think we continue to have a little bit of opportunity there. And as we build our plan as we go into 2023, we continue to think about operating leverage, we do have levers that we can continue to push on. And we'll update you more on that as we get into the beginning of 2023.

Got it. And if I can just quickly follow up in terms of Tayfun, on your comments on the margin. I guess one near term, is it possible that we see a similar level of expansion through consolidated in the segments in the fourth as we did in 3Q? And beyond that, as we think about the deposit pricing and some of the comments you made earlier. Give us a sense of does Bank of the West and when you look at their deposit betas, not very different from U.S. regional bank deposit betas last cycle? How does that inform your deposit strategy in the U.S. as you move towards deal close?

Yes. Look, I mean, I think our NIM performance continues to be very strong. Now to be honest with you, it looks even better when you take into account how well we have protected the downside since the start of the COVID environment. We do expect margin expansion going into next year, as I said. I try not to give quarterly updates because it really depends on the frequency and the magnitude of the rate increases. But yes, we expect NIM expansion next quarter and we expect NIM expansion into next year. In terms of the contribution from Bank of the West, they clearly have a very good core deposit portfolio, and core deposit portfolios tend to actually be very beneficial in terms of maintaining margins on -- depending upon what part of the rate cycle you're in. So once we actually absorb that balance sheet and start planning for the future, helped with our now national digital deposit gathering program. I do believe that we will have a better NIM profile even compared to the strong levels today post Bank of the West.

Got it. Thanks for taking my questions.

Thank you. The following question is from Doug Young from Desjardin Capital Markets. Please go ahead.

Hi. Good morning. Just wanted to start. Can you size out the book in which you took a mark, I guess, the leverage lending book which took the mark this quarter? And maybe if you can provide any more details on sector-wise or any more details on it? And just provide some color as to -- or quantification as to why you feel comfortable with the marks. It sounds like you're feeling comfortable and things are improving as you move through Q4. Just hoping to get a little more detail on that.

Sure. Doug, it’s Pat Cronin. Thanks for the question. Maybe I'll do two things. First, I'll separate out the loan book, which is quite a bit of a different thing altogether from where the underwriting markdowns came from. So the loan book, then the size of that is what we disclosed in the annual report. So you would have seen that number in last year's annual report, it was just over -- slightly over $20 billion under our definition. I want to be clear, our definition is sub-investment-grade loans to portfolio companies of financial sponsors. So that's what's under that definition. And you can apply wholesale loan growth rates that you've seen since that report was published and get a sense of what the current portfolio would look like. Now, of that total, we make a very clear distinction into two segments. The first is things -- parts of that portfolio that are highly secured. So these would be ABL, RBL, real estate secured loans, there are some capital call loans in there. So we treat those quite differently. And in fact, the leverage lending limit that we apply to this business, we don't actually even include those into that limit, because we view them as a very different risk profile, and that's supported by years of data around gross impaired loan rates and PCL experience. So the real portion of the loan book that we limit with our internal limit is traditional cash flow deals to those financial sponsors that I just talked about. That is roughly about 55% of that total that I just talked about. And we're very comfortable with that whole book. The current -- first of all, the current condition is very strong, notwithstanding what you might be reading about in the environment. Our gross…

Very fulsome, I appreciate it. If I can sneak one more in just on corporate. It seems like you had positive earnings in corporate in the quarter. I think -- and you can -- correct me I'm wrong, I think in the past, it was guided to $50 million to $75 million quarterly loss. But again, I could be probably I'm wrong on that. Just wanted to unpack some of the drivers, like was there anything around fund transfer pricing or gains on interest rate hedging or anything unusual that came to corporate?

Yeah. I think the corporate segment tends to move around a little bit. This quarter just happened to be -- there were some good mark-to-market valuations in our CRA investments in the U.S. So that had a positive impact. And then compared to last quarter, last quarter, we recorded the underwriting fees for our equity issuance in corporate. So those two items basically move to Q-over-Q numbers, but there's nothing that is unique this quarter that would impact the number.

Thank you.

Thank you. The following question is from Scott Chan from Canaccord Genuity. Please go ahead.

Good morning. My question is for Darryl on Walter or Asset Management. You talked in the opening remarks having 50 investment people on the equity and fixed income team, and just wondering kind of the strategy there because obviously, it's a pretty big investment. Is there like internalized asset opportunities, or is it mostly opportunities to gather assets over the medium-term?

No, no, great question, Scott, and thank you. And you're actually right on both accounts. When we sold the EMEA business that took away a lot of the expertise we had in managing a lot of international portfolios, growth portfolios. And so we took this opportunity to restack that. And it allows us to internalize a bunch of mandates that we have and then also expand the mandates to our distribution within our branches. So really it's going to solve both issues for us.

Is the focus on all segments, like in particular, retail or institutional or both?

Actually, so it's going to allow us to do both. So we have very good institutional capability with the EMEA team. And with that gone, that reduced the amount that we could do, especially with international portfolios, equity and fixed income. So it's going to solve both retail and institutional for us.

Okay. Thank you.

Thank you. A following question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Hi there. A couple of questions here. One, on the -- for Pat on the credit side. When I look at the migration and the performing portfolio, we saw Stage 2 classified loans going up 18%, about $7 billion worth of loans. And I'm just -- there's a lot of moving pieces in the performing provision, but I see that increase in almost $26 million of pro forma to $22 million of pro forma in sales this quarter, but the number maybe could have been higher than that? And then on a margin related question, and this pertains to the US business specifically. Deposit margins are increasing or it's really driving the demand expansion. I see deposits down 2% sequentially flat year-over-year and was soft versus some of your peers. I'm wondering how the outlook for deposit growth was, if you're seeing any commercial clients taking money of invested or whatever? And how that could trend over the next few quarters if the deposit base traits, how much of the NIM dampened, I guess?

Hi Gabe, it's Pat. I'll try and answer your first question. The audio quality was not great. But I think you were asking about the increase in Stage 2 balances quarter-over-quarter. And the answer there is quite simple. That's really almost entirely a function of the deterioration in the economic outlook that we use to calculate the provision. So as you probably know, that affects staging. That really isn't really migration in the traditional sense, because you would have seen in some -- in the -- particularly in the regulatory capital supplement, that credit risk RWA actually went down this quarter, and we had positive, actual positive risk rating migration in both consumer and wholesale. So, that's really just purely a function of that worsening economic outlook. I think the second part of your question maybe was you didn't see that maybe show up in an increase or more of an increase in the provision, if that's the question? That's really…

Yeah.

Okay. That's really a function of the fact that, that economic deterioration would have all else being equal, increased the size of the provision. But as I said in my prepared remarks, that was largely offset by a reduction in the overlays this quarter. As you can imagine, as we get farther out of COVID, some of those specific COVID related uncertainty overlays are starting to come down. And that's why you didn't see the provision itself go up as much as you might have expected.

Okay.

On the NIM question, Gabriel, again, if I heard your question correctly. In the US, as I said, deposit betas have been slower than we expected. And you did refer to the 2% decline, which again, we expected that type of decline. We continue to protect our turf. We're just not actively pricing up to attract for deposit growth, because we still have excess deposits in the US. The 20 basis point margin expansion was very strong this quarter. We shouldn't expect 20 basis points every quarter for the next three, four quarters. That's not going to happen. But, nevertheless, we still expect expansion going forward, especially in our Personal and Business Banking business. We are benefiting from this more so than commercial. In terms of -- I think you were asking about client behavior on deposits. Dave, would you want to comment on what you see from the client side?

Sure. So on the commercial side, we've had very modest decline, but very consistent with our peers on the commercial side. We had surge deposits. We maintain a large portion of those surge deposits larger than actually we thought, but our core deposits, which is really our bread and butter, where our clients are using us for their operating – continues to grow, and we feel real good about that. So the LDRs really are still stronger today than they were pre-pandemic. So we feel very good and expect to be able to manage this quite well. I hope that helps.

Thank you. Following question is from Paul Holden from CIBC. Please go ahead.

Thank you. Good morning. A real quick one to start. Just to clarify, the loan markdowns. Was that purely mark-to-market or did include some realized losses as well?

Hi, Paul, it's Pat. About 90% is unrealized. These are rough numbers. Then about 10% unrealized – realized, excuse me.

Perfect. Thank you. And then I want to ask you a question on competitive dynamics in the commercial loan segment, both US and Canada. We've heard some comments from Canadian competitors that the markets awfully competitive right now and risk-adjusted margins are not particularly attractive in certain pockets. And then some data points in the US almost point to the opposite sort of conclusion that that the banks are tightening up underwriting criteria in commercial loans. So, just wondering, what your perspective is on both of those markets?

This is Dave. I would say, for our business, both in Canada and the US, we see actually similar dynamics. Most of our clients, particularly the larger clients do business on both sides of the border, compete in similar industries. It is more competitive. And yet, if you go back over time, that's almost always said. And from my perspective, and I go back a long way in time, I actually don't think it's much more competitive for us. We really – and you'll always hear this too. We never compete on price. You hear that all the time. The reality is, in our business, price is an important part, but the clients that we're actually attracting and maintaining are looking at who can do the best job for them, helping them grow over the long term. So yeah, price is important. But having a long-term perspective and being in the business as long as we have is actually more important. So is it competitive? Yeah. Is it more competitive in the US or Canada? I actually don't think it is. And I think we just particularly, I can't really talk about other banks. But for BMO, I actually see really strong continued momentum on new client acquisition for clients that are really looking for long-term supporters. So I wouldn't get overly exercised over what's happening today. And I actually think the bank – our bank will do very well through the cycle and not substantially, certainly not change our risk appetite, but not change our risk reward to any extent as well. Hopefully, that helps. Might not be what you wanted to hear, but that's what's going on.

It does help. Thank you.

Thank you. Following question is from Meny Grauman from Scotiabank. Please go ahead.

Hi. Good morning. Just two questions on the US P&C business. Two aspects of the results that I was hoping to get a little bit more color on. One is the sequential decline in non-interest revenue. And the other one, if I look at expenses in US dollars, up I think about 6% quarter-over-quarter. So wondering if you could provide more detail on that expense jump. Is there anything unusual going on in the quarter in the US P&C business from an expense point of view?

So this is Dave again. Let me take the expense question first. We had a little bit higher expense this quarter, but nothing unusual. And if you look at it over the year, we continue to have positive operating leverage. And I'm really quite proud of the fact that our efficiency ratio is now well below 50 for the last several quarters, and I think that's very strong. And I would expect it will continue to remain positive operating leverage in the US going forward. The NIR question, there's a couple of things there. It's not overly complicated, but there's one aspect. We have -- I think we went down about $14 million in NIR quarter-over-quarter. And there was a $14 million decline in what we call our lease revenue. So let me just explain that very quickly. When clients buy equipment, they have a choice. They can either buy equipment directly and we make a loan. And if we do that, that's all NII. That's all interest. If they decide to lease it, they -- actually, we get that revenue as NIR because they're going to actually take the risk at the end on the residual. So the difference is, over time, more of our clients have actually decided to buy the equipment as opposed to lease it. And so we move it from NIR. Income goes from NIR to NII. So that's the substantial portion of the decline. But there are some other things we had some -- we had a record first quarter in terms of some syndication fees, M&A fees, those have declined a little bit in the market as we'd expect. And lastly, while we -- it's not a big deal, it does have some impact in earnings business. We have gotten rid of all of our overdraft fees. And so that has a decline as well. And I think that's the right thing to do for our business. And that should explain most of it. Does that help?

Yeah. That's good detail. Just on the overdraft, would you be able to size that in terms of the impact?

This quarter, I think it's relatively modest. I couldn't give you the exact number, but we can get back to you with some further detail. But it's a portion of the NIR decline.

Got it. Appreciate it.

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

Good morning. Tayfun, your comments about BMO being able to protect the margin on the way down, but still benefiting on the way up. That's an important one. Could you help me understand like breaking out the NIM, help me understand what's happening with asset yields over the last, say, the last couple of quarters relative to the positive cost and funding costs generally? Is there a way to break that out, or do you provide that in your report to shareholders that I just haven't seen yet?

Yeah. We can provide you with more details on that, Mario. In general, I think, there are two factors that typically are important to note. One is the mix change as we look into our loan portfolio. That helps, as well as spread changes. But I'm happy to sort of follow that up with a more detailed discussion around both the commercial business as well as the retail business and give you directional comments on that.

Okay. Sort of a follow-up to there. I'd like to look at the margins in various parts like your domestic retail, US retail and then everything else, which I'll just call non-retail. And that non-retail margin, which, of course, incorporates wealth, capital markets, that sort of thing, but not the trading. The margin there has been really strong. Can you talk a little bit about what's happening to the bank in the, say, the treasury function or just everything non-retail that's supporting the net interest income?

Yes. Look, I mean on the treasury side, as we shared with all of you in the past, our focus has been to manage our NIM to a stable direction. And we have done an excellent job in protecting the NIM. And that clearly has helped us to maintain support as rates have moved up. But at the same time, we also left room for more asset sensitivity. I think the strength of the deposit franchise, you mentioned the loan side and the asset side, has helped us tremendously in that sense. And that comes true very much so in the US, Canada has been more stable. And also, in general, I think, when I look at the composition of our loan portfolios in our P&C businesses, I believe that to a certain extent, our smaller mortgage portfolio is helping us to also have a bit of an outperformance and the way the margin is behaving as well.

If I could just quickly follow up then. BMO is the only bank where the all bank margin today is above where it was in Q1 2020. Every other bank would be slightly below to meaningfully below where it was in Q1 2020. And -- would I be correct in suggesting that, that is very much can be explained by the different loan composition, BMO's heavier commercial exposure? Is that the sort of structural advantages that you referred to or one of the advantages you referred to when you open up these comments about BMO's business mix? Is that part of the story?

I actually think that period-to-period, our hedging strategy and our very close focus in maintaining stability in our NIM is a big factor in that. But in addition to that, I think in general, our more commercial heavy exposure in our loan portfolio would also provide some help.

Thank you.

Mario, I'm going to add to that, it's Daryl. We talk about this a lot around here in terms of being margin managers as a core competency. The mix does matter. You're on to an important point. And whether it's in the wealth business, the capital markets business, the commercial business. When you think about them as high-touch relationship businesses, I mean we've been fond of reminding most of you that, for example, in our commercial business, 90% of our relationships are sole or lead relationships. And Dave talked about how we manage those relationships over time. And you heard earlier how we talk about managing deposits. I think the way we approach the relationship manager is a significant input to the question that you're asking.

Appreciate your help. Thank you.

We think it's an advantage.

Okay.

We got time for one more.

Thank you. Our following question is from Lemar Persaud from Cormark Securities. Please go ahead.

Thanks for taking my question. I appreciate the update on the status of the Bank of the West acquisition. And I noticed you guys still think it's going to close by the end of the year. What are the greatest risks to that getting pushed out? And then given the big move in interest rates from when the deal was announced today, how should we think about the impact on the accretion estimates? Thanks.

Yes. Maybe I'll take the first part and I'm going to ask Tayfun if he wants to chime in on the second. Look, we don't have -- I'm going to bore you a little bit with the answer. We don't have much more to say in terms of timing. Our best estimate at the time that we announced the acquisition back on the 20th of December that was -- that it would take approximately a year. And based on what we see and based on what we are involved in today, we stand by that prediction. And we'll update you as and if that changes. But as of now, that's our current view.

And in terms of the impact of the rates on accretion, I just want to remind you that the way we've hedged the exposure to higher rate mark and higher goodwill, basically, neutralized the impact from the moment we closed the transaction. So, I would say, the accretion estimates, with respect to rates is the same as we have assumed. Now, going forward, depending upon the rate environment once we close the transaction, we may get more strength if interest rates continue to go up and they bring asset sensitivity to us. But at this point, our accretion estimates stay the same as we announced.

Okay. Thanks for that. And then for Pat, I think you mentioned, you saw some of those COVID-related overlays in PCL. Can you put some numbers around that? And then, can you help us think about what the performing PCL would have been, if you didn't release some of those COVID overlays?

Sure. The two factors that would have otherwise contributed to a build, as I mentioned, were a deterioration in the macroeconomic variables and loan growth. Those two things together would have been roughly about $185 million. And so, that was offset by positive credit migration and the reduction in the overlays. I probably don't want to get into the size of the overlay. I would tell you, going into COVID, we were pretty close to zero on that, plus or minus 5% of our total provision made up of judgment. That would have hit a high back in Q4 of 2021 as we came out of COVID, and it's been reducing for three quarters in a row now. We are heading into an environment. While it's uncertain, we expect that our loss estimation models can understand the difficult recession. So, all I can tell you is, I would expect it to continue to come down, all else being equal, but I think I'm going to stop short of giving out specific numbers.

That’s fair. Appreciate the time. Thanks, guys.

Thank you. That's for the time we have for questions. I would now like to turn the meeting back over to Darryl White.

I'm just -- operator, I'm just being advised that we do have time for one more, if you've got somebody in the queue.

Certainly. We do have Darko Mihelic from RBC Capital Markets. Please go ahead.

Hey, thanks for squeezing me in. My main questions have been asked and answered, so I'm going to be very quick, especially in the interest of time. Just wanted to pin down on a couple of things though, that I heard this morning. First, Tayfun, in your answer to the question regarding corporate, one thing you left out was the expected earnings per quarter, if you can just give us a hand with that? And then on the question with respect to the marks that we're taking in capital markets. If I heard correctly, it sounds like the levered lending loan book was around $4 billion. Can you just confirm, when I look at those marks versus those indices that are out there, do your marks include fees accrued or not? Thank you.

Hi Darko, it's Pat. First, on the leverage lending loan book, the sizing that I gave is for the loan book in particular. And on that loa0n book, we only take provision for credit losses. Now the markdowns that you're talking about, the $88 million apply to the underwriting book. So that's a very separate book, and that is where I sized that at just over $4 billion. So think of those as two very separate things. One takes PCL and the other one takes mark-to-market losses that flow through Dan's business. And I think that was your question or no. Did I answer it?

Sorry, I went on mute. Are there fees accrued in that mark or not?

Apologies. The answer to that is yes. That's inclusive of fees.

Okay. Thanks. And then just over to Tayfun on the corporate.

Yes. On the corporate side, Darko, this quarter clearly was a little bit of an aberration. So, we probably will go back to the average of the prior two quarters in the near term, and then we'll give you guidance for 2023 when we get to year-end.

Okay, great. Thanks very much for squeezing me in just. End of Q&A:

So, that's all the time we have for questions. Back to you Mr. White.

Thank you, operator, and I want to thank all of you for your questions. I hope you're not running off the call because before we close, I do want to take a moment to recognize Pat Cronin, who recently announced his intention to retire after nearly 30 years with BMO. Throughout his career, Pat has made, as I think you all know, a significant impact across our bank, including having expertly steered our COVID-19 response and our risk function through the complex credit and market environment and all of these calls that have defined the last few years. He's a trusted adviser, and he's one of the strongest bankers I have ever worked with. I look forward to introducing Piyush Agrawal, our incoming CRO, and to you next quarter. And I'm going to conclude with the key themes, as I always do, credit performance remains strong. We have significant allowance coverage that enables us to protect and grow the bank. Number two, overall results were fundamentally strong with year-to-date PPPT growth of 14% in our P&C business is taken as a whole. Expenses remain really well managed, particularly given the inflationary pressures, and we're committed to delivering positive operating leverage for the year. And lastly, we're going forward from a position of strength with our advantaged mix, and we believe, it's set to perform in any environment and deliver consistent financial performance. So thank you all for participating in the call, and we look forward to speaking to you again in December.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.