All participants please standby, your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the CIBC Quarterly Results Conference Call. Please be advised this call is being recorded. To reduce the audio interference, please turn your Blackberry off for the duration of the meeting. I would now like to turn the meeting over to Mr. Geoff Weiss, Senior Vice President, Investor Relations. Please go ahead.

Good morning and thank you for joining us. This morning CIBC senior executives will review CIBC's Q4 2014 results that were released earlier today. Documents referenced on this call, including CIBC's Q4 news release, investor presentation and financial supplement, as well as CIBC's annual report can all be found on our website at www.cibc.com. In addition, an archive of this audio webcast will be available on our website later today. This morning's agenda will include opening remarks from Victor Dodig, CIBC's President and Chief Executive Officer; Kevin Glass, our Chief Financial Officer will follow with the financial review; and Laura Dottori-Attanasio, our Chief Risk Officer, will close the formal remarks with the risk management update. After the presentations, there will be a question-and-answer period that will conclude by 9 a.m. Also with us for the question-and-answer period are CIBC's business leaders, including Geoff Belsher; Harry Culham; Steve Geist; and David Williamson, as well as other senior officers. Before we begin, let me remind you that any individual speaking on behalf of CIBC on today's call may make forward-looking statements that are subject to a variety of risks and uncertainties. These statements may include material factors or assumptions that could cause CIBC's actual results in future periods to differ materially. For more information, please refer to the note about forward-looking statements in today's press release. With that, let me now turn the meeting over to Victor.

Thank you, Geoff, and good morning, everyone. This morning, CIBC reported a strong finish to 2014 with all of our businesses delivering solid results. Adjusted net income was $3.7 billion, up 2% over 2013 and earnings per share were $8.94, an increase of 3% over last year. We delivered a return on equity of over 20% and maintain a strong Basel III Common Equity Tier 1 ratio of 10.3%. In fiscal 2014, CIBC returned approximately 60% of capital generated by earnings to our shareholders, while maintaining capital ratios that among the highest in the industry. We achieved these results by staying on our stated strategy of deepening client relationships and investing in our core businesses. Looking forward, our priority is to build further strengthen our businesses by focusing on our culture, our clients and our shareholders. We are committed to continuing on our path of delivering consistent sustainable earnings and to growing our bank both organically and through targeted strategic acquisitions. During 2014, we delivered several notable accomplishments. In Retail and Business Banking, we continue to be a leader in innovation being the first Canadian bank to offer check deposits using smartphones. To-date, over 2 million checks have been deposited by our clients using CIBC's eDeposit app. We introduced the new credit card with unique two-button technology that combines credit and reward functionality, with our Double Double Card in partnership with Tim Hortons and Visa. In addition to this innovative card, our Aventura travel rewards card has been a big hit with our clients. We have also made a substantial investment in technology in our retail branch channel to improve productivity and customer service, to deepen client relationships and to promote cross-selling. In 2014, we completed a national rollout of the first phase of a new branch-based technology platform that…

Thanks Victor. For my presentation, we’ll refer to the slide that are posted on our website, starting with slide six, which is a summary of results for the quarter. So we’re very pleased with our strong fourth quarter results and the solid contribution from all of our business lines. Adjusted net income for the quarter was $911 million, which resulted in adjusted earnings per share of $2.24. In our Retail and Business Banking segment, strong volume growth in core products drove solid results. Strong revenue in wealth management was driven by asset growth due to favorable market conditions as well as record net sales of long-term mutual funds. We’re also very pleased with the performance of our U.S. based businesses, Atlantic Trust and American Century Investments. And notwithstanding a challenging environment, Wholesale Banking produced another quarter of solid results executing on our client focused strategy. Credit performance also continued to be favorable and we increased our quarterly dividend by $0.03 per share this quarter. We had a few items of note during the quarter, the more materials ones being a charge relating to the incorporation of funding valuation adjustments or FVA into the valuation of uncollateralized derivatives of $0.21 per share and expenses relating to the development of our enhanced travel rewards program and in respect of the Aeroplan transactions of $0.03 per share. So this is the last quarter that we will be highlighting these expenses as an item of note. In aggregate, the impact of the items of note on our earnings netted to a negative $0.26 per share. Balance of my presentation will be focused on adjusted results, which exclude these items of note. We’ve included slides with reported results in appendix to this presentation. So moving to the details for each of our strategic business units,…

Thanks Kevin and good morning, everyone. So I'll be referring to the risk section, which begins on slide 14. You will see that our loan losses in the fourth quarter came in at a $194 million which is in line with the third quarter. So we had lower losses in credit cards in CIBC FirstCaribbean and these were offset by higher losses in the U.S. legacy real estate portfolio and lower release in the collective allowance for non-impaired loans. Turning to slide 15, we highlight new formations along with growth and net impaired loans by geography. Here you can see that new formations were down this quarter across both the consumer and business and government portfolio and gross impaired loans were down from last quarter, with decline seen across the Canadian portfolio and the Caribbean business and government portfolio. Turning to cards on slide 16, our net credit losses were $96 million this quarter and that’s down $6 million from the third quarter. Slide 17 shows our Canadian residential mortgage exposures. The insured portion of our portfolio is 67%, with 90% of the insurance being provided by the CMHC. The weighted average loan-to-value of our uninsured portfolio is 60%, and condos account for 11% of the total Canadian mortgage portfolio. Turning to slide 18, you can see our condo developer exposure and you will see that as at October, the 31st, our authorized loans to construction projects were $3 billion and our drawn loans were a $1 billion, which is unchanged from the last quarter. Lastly on slide 19, you see the distribution of revenue in our trading portfolios as compared with VaR, and we had positive results in all but two days this quarter. Our average trading VaR was $3 million and that’s relatively unchanged from the last quarter. I'll now turn things back to Geoff.

Thank you. That concludes our prepared remarks. We will now move to questions. Before we do as usual, I would ask that you please limit yourself to one question and then re-queue so that everyone has an opportunity to participate. Operator, can we please have the first question on the phone?

Thank you. [Operator Instructions] Our first question is from John Aiken from Barclays Capital. Please go ahead.

Good morning. David, in terms of the new initiatives that you’ve put in place to gather new customers and I’m thinking of the remedy of the GTAA's, as well as the Tim Hortons cards. Can you let us know how those have been progressing and as well what -- I know this is early days, but how successful you've been in terms of leveraging additional products onto these new customers that will come on board?

Good morning, John. So, I’d be happy to -- yes, we are making a number of investments as Victor commented in his remarks and we are quite happy with the returns we are getting out of them. So, I will speak to a couple of them and I will for sure touch on the Tim Hortons and the airport. So we started the beginning of the year with Aventura, where we put a lot of effort into redesigning that product and the marketing thereof. And we are now getting high single-digit growth in our credit card space. Mortgage is another one, early on where we said we are going to make sure our CIBC branded mortgages were strong, as we came out of the broker space, investing in mobile advisors, investing in productivity measures, investing in some of our frontline sales capabilities and now we are seeing mortgage growth of 12% relative to 3% to 5%, if you exclude the benefit of Firstline. Compass that Victor spoke of a big investment, we’ve cut the time to get deeper relationships in half and the level of depth that we are getting from those new sales as multiples of what we had in the business case, so that’s returning. And then you mentioned a couple of other ones that were important too, the Double Card with Tim Hortons is an important new relationship. That card has been received amazingly well by Canadians. And to your point about getting to depth, which is what we are looking to do as opposed to another single product relationship for new clients that are coming to CIBC through that card, which there are many and more than what we had anticipated in our business case, we are achieving over 50% with the additional products, actually over…

Thanks, David. And on the Aventura card, can you give us a sense as to what this has been and if that has been able to bring in new clients, or if this is just conversion of our existing CIBC clients onto the new card platform?

That’s a good question. We had a bit of conversion but actually not a tremendous amount and yes, it has been a source of new clients in part because we've been out there with a strong offer in a strong market. Percy the Penguin resonated with Canadians and because we have marketed, we marketed with promo offer. It has been a draw for new clients.

Great. Thanks, David. I will re-queue.

Thanks, John.

Thank you. The following question is from Gabriel Dechaine from Canaccord Genuity. Please go ahead.

Hi. Just a question for Victor, connecting some dots here. Your buyback activity has gone down and it’s well below your available capacity under our current program. And then you spent quite a bit of time in your opening remarks commenting about how well the Atlantic Trust and American Century investments have worked out for you? Just wondering if you are telegraphing anything there as far as your M&A activity in 2015 and then I got a quick follow-up.

I’m just telegraphing success in terms of the investments that we've made, Gabriel. So you asked about the buyback, I mean, I think about capital management, as we all do here at CIBC across the spectrum. And the first and foremost focus is to make sure that we are well within the dividend payout range through delivering consistency in sustainability of our earnings and we are right now at the midpoint of the range and we increased our dividend this quarter. The other two areas that we look at in terms of driving growth would be organic growth. And as you’ve just heard David outlined all of the initiatives that we have in retail, important initiatives to deepen the client relationship. We have similar investments going on in Wealth Management and in Wholesale to strengthen client relationships. That is a component of our capital deployment plan. And the remainder is used toward buybacks and acquisitions. So that's the way we think about it. I think it’s a smart, sensible way, very straightforward way. So onto your next question.

Consider M&A though, what’s the -- can you draw the parameters around what size of transactions wouldn’t be fully funded with excess capital versus what size of the transaction would be partially equity funded? And then as far as what assets you are potentially targeting, are you looking at 100% control, or would you prefer to go through American Century and partner with them and maintain your ownership level in any new acquisitions there?

When it comes to pursuing an organic growth opportunity, we are interested in the asset management sector and we are interested in the private wealth management sector, which includes private banking and we are particularly interested in the U.S. market because it is the largest and most fragmented in terms of opportunity. We have made two foundational investments there. When it comes to asset management, there are opportunities that American Century seeks out other asset management opportunities that we identify. We always work with them first to see if that’s a fit for their organization and if it is not, it would be something that complements it. But again, we work in tandem with American Century to strengthen our asset management presence in the U.S. When it comes to Private Wealth Management, we’ve got Atlantic Trust, which is a leading provider. It has $26 billion, which would put in the top 31 when it comes to the high-net-worth market in the U.S. But we know that we need scale there. We believe we need to add some banking capability there. So those are the two areas that we are most interested in investing in. When you look at the economic parameters, there is three things to consider, Gabriel. One is size and the size that we are looking at right now is in the $1 billion to $2 billion range and the reason -- and there maybe some tuck-ins that Atlantic Trust or American Century may do within their businesses that are below that, but we are looking to scale in our businesses, and therefore size is important. But the high end of size is probably in the $2 billion range. When it comes to valuations we’ve recognized that they are fairly robust in the marketplace today. But I think we’ve in the past and we will in the future exert discipline in terms of deploying our capital and we will always look at it over the medium term under CIBC ownership. We look to be accretive on most of these investments within a three-year timeframe. And finally when it comes to consideration, something that I think you asked as well. At the lower end of that $1 billion, we believe we can do that in cash. At the higher end, we may need to do some equity. But we would -- that would all be a factor of when we do things. So what’s most important to know that CIBC, there is lots of opportunity grow at home in terms of deepening our client relationships and inorganic growth is just another avenue to continue to grow our company.

Thanks for the fulsome response. If I could just sneak one more in there for David just on the cards, balance growth was flat quarter-over-year quarter, it’s not always a good indication of revenue because of interchange. But I saw couple of your big peers there, the main card players growing at double digits on an annualized basis this quarter. Is that really balance transfer stuff or what’s going on in the marketplace right now?

Hi, Gabriel. I will break the cards business into two categories. So in the travel side, we are growing now at high-single digits and that’s been a full clarity as you know for us over the last couple years. So that we’re through some change and happy with our broad offering of the Aeroplan and the Aventura product, it’s working. Now we are turning our attention to the non-travel cards segment. And we have work to do there, that’s counterbalancing our success on the travel side right now. And one of the products in that respect was the Tim Hortons Double Double card, which has come out of the gate quite strong and we’ve got more in the pipeline. So travel is in great shape and we’re now looking at the nontravel. And I think we’re on a path to revitalizing that business substantially as well.

The balance transfer initiatives or…?

It’s part of the business, but it's not really -- one of the things in Q4 relative to Q3 is, we had strong growth Q3 to Q2. Q4 to Q3, there is bit of seasonality there. So there is not any kind of -- other kind of factors of note in looking at that business. The momentum is building in the cards after several quarters of declines and the outstandings. This quarter year-over-year we’ve growth in the outstanding balances and that’s the sign of the momentum building at our cards business.

Okay. Thanks for all the answers.

Okay. Thank you.

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

Hi, good morning. It seems like the losses in the Caribbean or the loan loss in the Caribbean excuse me have settled down since charge taken a couple of quarters ago, whereas some of your competitors in the region are reporting heightened level of noise. So can you talk a little bit about how things are going in the Caribbean in the last couple of quarters, and perhaps what the near-term outlook for that region is? I know it’s still struggling from a GDP perspective, but do you think your loan losses have reached a level where they are at a roughly sustainable level?

Hey, Rob, it’s Laura. I will take that one and then if David wants to add on. So as you did mention in the second quarter we did take a significant provision in the portfolio, which did provide us with better coverage ratio. So this quarter the number that you're seeing does have some recoveries in it. I guess what I would say is that the portfolio continues to face challenges given economic conditions, but we do feel that our provisions appropriately reflect sort of the current economic situation there. I don’t know if David you wanted to add anything?

I think that’s a good answer, Laura. Thank you.

Maybe I am going to bug you anyway, David. I mean, the topline outlook I guess is still a challenging one, should -- I mean, is a sort of sideways revenue outlook the right way to look at the Caribbean right now?

Well, Rob, it’s a tough market there right now. The travel, lot of the economies there are dependent on travel. Travel really hasn't bounced back from '08, '09. Some of the nations in the Caribbean are feeling the pressure as a result. So yeah, it’s a tough economic climate in the Caribbean still and it really hasn’t significantly bounced back. So those actions that we will be taking to optimize our business and similar to what we've done in retail and business banking. In Canada, we’re going to be taking a strong client focus to the Caribbean, but there is no doubt the context for operating in isn’t markedly different from the last couple of years.

Thank you.

Thanks, Rob.

Thank you. The following question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.

Victor, I had quick question. I mean, another dividend increase, what message are you trying to give us?

Just simply doing the right thing as we look at our earnings and our earnings profile and we look at our shareholder base and we know that the return of capital is an important component of how we operate our bank. Sohrab, the second component is obviously having capital there to continue to grow our bank. So we know that income is important to our shareholder base. What we want to do over the medium term is also continue to invest in CIBC to aid the growth profile and that’s something that the management team, the leadership team here is very excited about. And we think we can do with great confidence.

Okay. So you said about a 60% in 2014, about a 60% capital return. Would you be happy if you had another 60% capital return in 2015 within buybacks and dividend?

Look the dividend payout ratio that we have is 40% to 50%. We are right now right at the midpoint. I think being at the midpoint or at the upper end of that midpoint is fine. And then the other component of capital return comes through buybacks and that’s how we get to our 60%. So I think that we want to do what's right for our shareholders and what’s right for our company. And there is always the three areas. We look at the return of capital, we look at organic growth, and we look at inorganic growth. If an inorganic growth of opportunity were to arise over the medium term, we’d say well then maybe we can rebalance that slightly, but the return of capital, the dividend payout range -- ratio is very important to us and to our shareholders who recognize that.

Perfect. Thank you. And if I can just quickly ask David, I mean nice set of results out of the segment that you run. Do you think this is reflective of the core operating power of that segment or do you think this was a bit higher than you would expect it to be?

Hi, Sohrab, thank you for the compliments, the team will appreciate that. Everyone is working hard to enhance our results. There is no doubt that the results coming of retail and business banking are strengthening. Our revenue growth rates relative to our peer group have moved quite a bit over the last few years. And I do think that there's more that we can do by taking our strong products and now putting in a different perspective on it, which is starting from a client first and looking to get to deeper relationships and all the good things that come for clients and for the bank and taking that approach. Now I guess one thing I would highlight similar to Q3 last quarter, we are investing and then make all this happen. So we are getting traction on our two core -- our two objectives. We only to one accelerate profitable revenue growth and the other is to enhance client experience. This quarter we’ve made great progress on both, but that’s being done through the inorganic investments that Victor has talked about. So yes, the quarter on operating leverage came in really on the good side of what that we might do. You are right they are good results. So I would reemphasize I guess what I said last quarter which is that we continue to invest. And then going into next year operating leverage will be negative in the first half say. And then as our investments kind of even out and revenue continues to grow, we will get to a -- we anticipate getting to positive in the second half. This year we said, we would be better than flat on operating leverage for the year and we were just for the impact to the Aeroplan sale. And we’ve highlighted we are still investing. So good quarter, but just sticking with what I said last quarter. So we will have some operating leverage pressure in the first half of next year. Thanks a lot.

Great. And just going to sneak one in for Laura. Laura do you continue to sleep well at night notwithstanding what’s happening around the world?

Yes, Sohrab, only my children keep my up at night.

Thank you very much.

Thank you. The following question is from Peter Routledge from National Bank Financial. Please go ahead.

Yeah. Hi. Thanks. Question for Victor. As well as retail business banking is performing and I don’t dispute that it’s doing -- it’s performing quite well. It provides 67% or roughly two-thirds of the bank's earnings. And if the credit cycle, which is probably as good as it gets right now, turns, that’s certainly going to be a challenge for CIBC. Is now not the time to be more aggressive on inorganic growth opportunities? You have very strong capital. Why not stop the buybacks and do something more transformational in businesses that have good performance, as well wealth and capital markets?

Peter, we’re investing in all of our businesses. So retail and business banking does deliver the majority of our earnings. We are investing in our platform because we believe that there is an opportunity to deepen client relationships, there truly is. I mean if you look at the penetration of our investment portfolios with our core client base, it’s low relative to what it can be. And the reason we’re investing in the technology today is because we want to make it a better experience for advisors and clients to deepen those relationships and be relevant to our clients. Having said that, the organic opportunities within wealth management and with wholesale as well. And we've got to continue to make sure that those franchises are robust, while we are operating at good scale in both wealth management and in wholesale at Canada. In Canada, we think that there is still opportunity to grow. And therefore we’re investing in those businesses, but they’ll be organic investments. When it comes to deploying capital for acquisitions, we try to take the word transformational out lot of our lexicon because it’s not what we’re trying to do. We’re trying to build a very strong bank for the long-term. We’re trying to look at companies that could fit our culture and will contribute not only to the strength of our culture but also will contribute over the medium term to our bottomline. That stuff takes time. And when the right time comes, we’ll make those investments, but there is so much opportunity at home today that we need to continue to focus on that element of our franchise as well.

Five years from today, what would you like the earnings mix at CIBC to look like. Particularly, do you still want or would you still be satisfied with 60% plus coming from retail business banking?

Well, I think having a strong retail and business bank is core to what CIBC does. And that if we do this well, we can continue to have retail and business banking contribute the majority of earnings, but the overall earnings pie will increase. I think where you will see the largest shifts in terms of international earnings will be primarily in wealth management. So that will continue to pivot outside of Canada and be mostly focused on this continent. And you’ll see the portion of wholesale earnings that follow our clients from Canada into the U.S. and into the markets that we operate also contribute to that as well. So there will be more international earnings, but we’ll have a very strong retail and business banking.

And then just a quick question for Geoff Belsher. The corporate and investment banking revenue line is actually looked to me in anyway to be pretty strong. What's driving that and how much of that strength is coming from your U.S. real estate platform?

So again, we had very solid results in both the corporate bank on the corporate lending side and also we had a very good quarter in the underwriting and advisory. So again, it was very solid mix. Again, our U.S. real estate portfolio continues to perform very well. They had very solid results. We’re seeing the CMBS business starting to come back. So again, we have very good spreads in that business in the U.S. real estate lending business. We also have high utilization rates on the loan, so we’re very encouraged with that business.

From the CMBS business, what kind of growth are you going to get this year do you think?

We think it could be material. So we think it could be very much double-digit growth in the CMBS business. So we see a material increase likely coming this year in CMBS and U.S. real estate business.

And how big a contributor is that to wholesale banking overall?

It’s a material contributor. Our U.S. real estate finance businesses, again we don’t disclose I believe specific numbers, but it would be a material contributor.

We’ll notice it if over the next year.

Yeah. Hopefully so. Yes.

Thank you.

Thank you. The following question is from Sumit Malhotra from Scotiabank. Please go ahead.

Good morning. My first question is for David Williamson. And David, it has to do with net interest margin in the segment. Not only for CIBC but for the sector as a whole, it seems like despite the drop in rates NIM has held up very well. I wanted to get the outlook for your business in particular, considering not only the rate backdrop but some of the moving parts you have. And specifically, has the benefit from the mortgage broker exit, essentially run its course for margin? And at the same time, are you starting to get some pick up as the credit card initiatives, the new ones are coming on board?

Hi. Sumit, so you are right. Our NIMs have been stable for a while now, but you're absolutely right, there is always details in behind that. So the FirstLine runoff and conversion over to CIBC was retaining half the book, that is a lift. So that’s kind of helping us each quarter, that’s not huge, but it’s a net tailwind for sure. That is being offset in part by now. We are net, net growing in mortgages. So we've got a mix shift. Mortgage is being an important product but not the highest spread product. So although, the conversion of FirstLine into our CIBC brand and mortgages is helping. The fact that mortgages as an asset class in general is going up for the rate it is as bit of a offset to NIMs. The cards business, as for that earlier question, so travel is really coming on, the non-travel we still have work to do. So our overall balances in cards is not yet really much of a factor, but I anticipate it will given the success of the Double Double card. We’ve got more in the pipeline coming in and the travel now is fundamentally a different direction than what it’s been the last couple of years. So those are a couple of the factors. But going forward, I’d stay with our guidance that we’re expecting NIMs to be stable over the year -- over the near-term. The other factor, I guess is also interest rates and factors are still a bit of a headwind. It’s -- as lower interest rates continue to flow through both especially in Business Banking, that's deposit heavy.

Thanks for that. And my last question is also for Geoff Belsher. Going back to your businesses, specifically the underwriting and advisory fees line? You talked about some of the initiative specifically in the U.S. that are working well? But when I look at the 14% growth that business have this year, it certainly seems like in the last couple of months some new issue business domestically has been impacted by the trend in commodity prices? Now, mining has been a challenge for four years. But when you think about how helpful energy has been to all Canadian Bank Investment Banking revenue side of business? How does that look to you in 2015?

It’s a good question again. So when you look at energy, that's around let's say 11% of our Wholesale Banking business, when you look at all the different products, but half of that amount come from our lending book and that's very stable revenue? So, the other half of that comes from various capital markets products, including equity new issues and advisory, and while we do anticipate that the equity new issue business in energy is going to be down. We expect that to be offset by strong commodity revenues and we also expect some good advisory revenues that some of these energy companies look to swap out assets. So, all in all, we think the change in the energy business is quite manageable to context of our overall business.

Just to be clear, if I look specifically, let say underwriting financing activity, leave M&A, leave trading, leave lending out of the equation, if I say, energy with pipeline infrastructure included in that category? If I say it’s 20% to 30% of underwriting? Am I in the ballpark?

Well, again, if you look at just pure energy without the infrastructure all stuff, it would probably be a little bit more than 30% of underwriting.

Okay.

But, again, there's give-and-takes, we’ve seen the real estate market starting to come back on the REIT side. We’ve seen pretty strong issuance in the part and utilities market. So these markets have gives and takes all the time. And again, when we look at our overall business, we think that the extent that there's some weakness in the new issue business and energy then there's other mitigates to that.

Thanks for your time.

Okay.

Thank you. The following question is from Steve Theriault from Bank of America Merrill Lynch. Please go ahead.

Thank so much. First, just the quick follow-up for David on cards again. You’ve got exclusivity on the Double Double Card that has the reward button on it? Just wondering how long is that exclusivity and do you expect to use that technology for some of the new card offerings you hint to that earlier as you build out your non-travel card offerings or not necessarily?

Hi, Steve. Yeah. It’s a multiyear exclusivity. We are in stages of just extending that out a bit further right now. So it’s multiyear exclusivity, which is exciting, because it’s a technology as you’ve highlighted that does have different applications. The initiative in the non-travel we’ve got the pipeline right now is not a multi-button, but we do, like the folks on the Double Double, it’s a big initiative and that’s the energy is really on launching that and having it be successful. So the next one down the pipeline on that I have a very clearly in my mind, but we are still on launch mode for the current one. So exclusivity for Double Double, which is great as far as that offering innovative and keeping it exclusive, but you are absolutely right, there is ideas that we have to use that technology in other applications.

Okay. Thanks for that. And then for, Kevin or Laura, on page seven of the regulatory supplemental, I noticed that the real estate secured a personal lending risk weighted assets associated with that line, have been quite stable around $7 billion, but saw popped up over -- to over $9 billion in Q4? So just wondering if that has anything to with the perimeter changes that you mentioned earlier Kevin or is there something else in terms of structure changes or I am not sure what impacting that line?

Yeah. Steve, it’s Laura, so that had to do principally with model parameter updates that we did in that space.

So is that adjustments to probability of default or loss given default assumptions that going to the advanced ARB calculation?

Yes. It is.

Okay. Is that something that you reviewed, I mean, that’s been quite stable for some time, is that just a one-off in terms of the frequency that you update that line, because it have been looks at fairly stable for at least last year and a half?

Yeah. I wouldn’t say, one-off, we do annual reviews of all of our different portfolios and parameter a so that was just a part of that process.

Okay. Thank you.

Thank you. The following question is from Doug Young from Desjardins Securities. Please go ahead.

Hi. Good morning. Most of my questions have been asked. But I guess, Victor, maybe you can go back to the -- your thought process in M&A in the U.S.? And just wanted to confirm that I heard it correct that you would prefer to do the Asset Management type acquisitions first through American Century partnership there? And then I am just trying to get a sense of your preference between Asset Management and Private Banking, we know Asset Management valuations have been fairly robust as you indicated and from a fragmented perspective looks like Private Banking is a better opportunity from a growing perspective, but its not a $1 billion to $2 billion acquisition, there is a lot of smaller type of firms out there? So just trying to wrap my mind around that and I have a follow-up question?

Sure. So they are both attractive segments. American Century will probably, opportunities through American Century are largely be tuck-in and strengthening of their existing capabilities. One thing we don't really want to do is build out a multi-boutique asset manager. If there is something that we feel really strongly about that doesn't fit with American Century that might be a complement to it, but that would be it. In terms of the Private Banking piece and strengthening our Private Wealth Management platform, we do think that scale matters. And we have received lots of overtures from Atlantic Trust client saying that, your strong bank will be great if you had some capability down here that we could bank through you. So that we see as a positive as well. So they are both attractive Doug, I don't lean to one or the other. We look at it over the medium-term, what helps us built a stronger more robust presence in the U.S. marketplace.

When you think of timing, Victor, I know it’s a tough one to ask and answer it but is this something that you feel compelled to act upon sooner than later or you talked about discipline and kind of the ability to wait, is that more the way that you're approaching this?

Well, you look at everything over the medium-term here. That's how we are thinking about it as a leadership team. There are some interesting companies that I would say have some level of scarcity value because of their unique attributes. We’d say if the culture fits as the math works, we would do those. If it doesn't work for now, we just take our time, not because we have leisurely time available because we have lots of opportunity continue to grow our business in Canada. And that is a fact. You look at our retail and business bank, our wholesale franchise and our Wealth Management franchise. While we are strong in our home market, there is still plenty of room to grow.

Okay and then just on wealth, it seemed like sequentially, you had good asset growth, you had great net flows but earnings kind of came up sequentially it looked like your non-interest expense kind of popped up and I think that's related to compensation. Just trying to get a little bit more detail because I didn’t see the leverage in the wealth side this quarter that I would've anticipated given the asset growth that we saw?

Well I’d pass that on to Steve Geist. You haven’t heard his voice. He’s here too. So he can give you the answer to that Doug.

Thanks very much and hello Doug. The Q4 earnings were flat to the last quarter as you note with overall good growth year-over-year. We did have in Q4 some higher compensation related accruals as well as some Atlantic Trust integration costs that increased expenses that we’re expecting wouldn’t repeat. If we backed Atlantic Trust out of the Q4 numbers, you'd see some stronger operating leverage and positive operating leverage there.

And can you quantify what that amount was?

Apparently not.

Okay, all right. No really thank you very much.

I am new to this.

Thank you. [Operator Instructions] Thank you. The following question is from Meny Grauman from Cormark Securities. Please go ahead.

Hi, good morning. You definitely talk about technology a lot. It's been an ongoing theme. And I'm wondering if you view technology as a sustainable competitive advantage for CIBC, one that you are developing or is it really just kind of the cost of entry just what you need to do business in 2014, 2015?

Well let me just give you the process to how we think about it. As our bank actually has as innovative streak within it that dates back to the first bank to put PCs in the branches to the first bank to launch PC banking, to the first bank to launch online banking in our country and the first bank to launch mobile banking. That is sort of in our DNA. As you hear the narrative from our business leaders, the technology reinvestments we are making now are to modernize our bank. In Retail and Business Banking, I think David was quite articulate in outlining what he's doing there. In Wealth Management, what we've been focused on is making it easier to do business with us so less document laden, more digital in terms of approach, less paper, which makes it friendlier for advisors and for our clients. And we've been investing in our wholesale bank in terms of strengthening the platform there. And some of the investments that we’ve made have allowed us to establish a leadership position by making it easy -- easier for our clients to do business with us and quite frankly by making it more profitable to do business with us. With that, I’d hand the mike over to Harry Culham who is our Co-Head of Wholesale Banking in overseas capital markets to talk about that.

Sure. Hi Meny. What I would say is that the two components to serving your clients a lot better in capital market area is really our technology and talent. And we've made a lot of progress in both those areas over last number of years. Technology has been a focal point in terms of investment. We have new systems in place across capital markets, across product, and this allows for innovation and also speed to market for our clients. So we are going to continue to invest in technology. It is very, very important to serving our clients in more meaningful way.

Thank you very much.

Thank you. The following question is from Stefan Nedialkov from Citigroup. Please go ahead.

Yeah. Hi guys. Its Stefan from Citi. I got two questions. The first one is for Laura. Laura, sorry to bring you back to the risk-weighted assets. In the credits RWAs, as we saw, there were some model updates, which pushed RWAs higher. But there was also an offsetting other adjustments, which looks quite high relative to previous quarters. Can you just give us some color on what that downward adjustment is due to? And the second question I guess for Kevin on the liquidity coverage ratio, Kevin, can you give us some color how far away are you from the requirement of around 100% and just a timeline as to when you’ll get there, if you are not there already? Thank you.

Okay. Stefan, I’ll start. So as it relates to your risk-weighted asset question, I guess, under the heading of other. So that is really related to time decay. It’s really reduction in the tenor of our exposures. So that’s why you’re seeing the lower risk-weighted assets.

So that’s basically due to the natural run-off of the books, rather than any proactive decline in the tenor. Is that how I should take it?

That’s right.

Okay. Thank you.

Stefan, with respect to liquidity coverage ratio, we will start reporting that in Q2 based on our calculations. Right now, we’re in a good shape. So don’t anticipate any issues in that regard whatsoever.

I see. Thank you very much.

Thank you. The following question is from Darko Mihelic from RBC Capital Markets. Please go ahead.

Hi. Thank you. Just, Laura, can you provide some details on your oil and gas portfolio? Why is that actually so volatile, when I look at the balances as well? You don’t have any net impairs there either. At what point would you have stayed low? And lastly, why is the fair value adjustment for CIBC so high? Is there any information capture in that? I mean, does us tell us something about how you trade, how you fund, just curious on that? Thank you.

Okay. So, I will take the first question and leave the FVA to Kevin. So, I’m not sure on your volatility question, so I'm looking at our FFI on page 19. So, I don’t know that I see that much volatility. You are looking at exposure. So you can expect sort of quarter-over-quarter you will see moves and there is seasonality as you know on the oil and gas space, as it relates to when people are doing their drilling programs and whatnot. Anyhow as it relates to oil and gas, you can see we are at $5.2 billion. So that's about just under 2% of our overall loans and it’s about 8% of our business loans. So, I’d make a few points. So, we think our names are quite diversified domestically and internationally about 80% of our authorizations in this space base are two investment grade companies. I’d say almost half of our clients are actively engaged in hedging. So that if we have a short duration of a rapid decline in prices is manageable. And as you are pointing out in your question, it's really a sustained period of decline that would be more challenging for our clients. That said, at CIBC, we are quite prudent in terms of how we extend credit in the space. We regularly review stress test our portfolio and we do stress test, not just for short declines but for sustained price declines as well. And when we look at our portfolio and we do a sustained price decrease and really shock the book, losses would be quite manageable under either scenarios that we look at and I would point out that, we have not had losses in that space this quarter.

And, Laura, of the 20% that’s not investment-grade, are those -- can you give us some colors as to what kind of company those are?

Yeah. So if you look at the breakdown of our book, so E&P, so exploration and production is about 60% somewhat percent of that number. And then it splits sort of between the smaller and larger E&P type companies. And I would point out, as you know the sector within oil and gas that tends to get hit first is the services sector and that only comprises 4% of our overall book.

That's helpful. Thank you.

Okay. It’s Kevin. So with respect to FVA, I think it’s any particular reflection of our trading strategies and it’s hard to tell. It’s impossible to tell from our perspective what our peers are doing. I mean, there are number of factors that could drive the difference because there are some methodology changes depending on how you treat FVA versus the DVA. I think some banks have applied scaling factors. I would tell you that our approach is being to be conservative. We think it would be appropriately reflecting pricing. We feel that we’ve are purchasing in the most appropriate basis. And also moving forward, we don't anticipate any significant volatility in this number. We will price and hedge these risks on a portfolio basis, so that volatility moving forward will be low as well. So, I’m not sure exactly what our peers have done. Also some of them some reserves in prior quarter as well. So that could have impacted it. But we are very comfortable with the charge that we have taken and I feel that it’s appropriate.

Okay. Thanks very much.

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

I will be quick. For Kevin, we know that there is at least one important tax change coming up next quarter. Rather than asking how much of your profits in domestic retail relate to creditor insurance, can you give me a sense of what you’d expect the tax rate to do from this quarter to next quarter, either in domestic retail on a total bank basis? Would it be about a 100 basis point increase or anything there?

Yeah. Sure, I think our tax rate this quarter was actually unusually low. And that was more of a factor of some one-time credits that came through, Mario. So we were low 15s. We think that we would probably operate more in a 16% to 18% range and that’s what I would look at moving forward.

But specifically the change in taxes related to creditor insurance that on its own, does it have an impact on the tax rate in domestic retail for example?

I mean, I certainly wouldn’t want to get into specifics of any particular issues that maybe out there. But I would say that particular item for us on the tax rate basis is not going to have a material impact moving forward. So that’s not what’s driving this rate issue.

Okay. Thank you.

Thank you. The following question is from Brian Klock from KBW Securities. Please go ahead.

Good morning. And just one follow-up question, energy-related for Laura. Can you give us the mix on that energy booked in, how much of that $5.2 billion is in Canada versus the U.S.?

Yes. Hello, Brian. I’d certainly do that. So, we would find that about 35% of it would be in the U.S.

Great. Thank you very much.

Thank you. That concludes the question-and-answer session. I would like to return the meeting to Mr. Weiss.

Thank you, Operator. Well, that concludes our call. If anyone has any follow-up questions, please call on our Investor Relations department. Thanks again for joining us this morning. On behalf of the team at CIBC, I'd like to wish everyone a happy and safe holiday season and New Year. Have a great day.

Thank you. That concludes today's conference call. Please disconnect your lines at this time and we thank you for your participation.