Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Mario Mendonca - Genuity Capital Markets.
Mario Mendonca - Genuity Capital Markets
A question first on the explanation, I believe it was Russ, you’re providing us the explanation on why there was a 33 basis point increase in the margin year-over-year. I’m not sure if it was in your comments, but in the text, it was the securitization of lower margin mortgages. Am I correct? First of all, that was a portion of the increase?
Russ Robertson
Yes.
Mario Mendonca - Genuity Capital Markets
What caught me a little bit off guard is most of the banks and maybe BMO is a little different here, most of the banks, really in retail, they really account for the securitization activity on a managed basis, so corporate really picks up the difference. Is BMO different in that respect?
Russ Robertson
No.
Mario Mendonca - Genuity Capital Markets
No. So why is it then that the securitization activity would have affected the retail margin?
Russ Robertson
Wee make whole on the revenue side, but the balances are removed from the loan books sitting in retail.
Mario Mendonca - Genuity Capital Markets
So retail is not then on a managed basis?
Russ Robertson
I misinterpreted managed, but we do make whole on the revenue. We don’t reclassify the balances back to the balance sheet of retail, which is here I guess your view of what managed would mean.
Mario Mendonca - Genuity Capital Markets
I guess what I’m saying, so the denominator of the calculation, you’ve removed the loans. So the denominator of calculation goes down, but you’ve made the revenue whole.
Russ Robertson
Yes, Frank we’d like to jump in here.
Frank Techar
Yes, Mario, the business is kept whole, but we reflect the revenue in NIR not in NI. So we do eliminate the balances from the calculation of them NIM, but there is no securitization revenue or keep whole revenue that is reflected in the NI as well. So for purposes of NIM calculation, securitization has no impact on the net interest margin in P&C Canada.
Mario Mendonca - Genuity Capital Markets
It has no impact?
Frank Techar
Well, it has no revenue impact. The denominator is affected by the elimination of the balances that are secured.
Mario Mendonca - Genuity Capital Markets
Sorry Frank, you just said that the NIM is unaffected by it, but in your text you’re saying that it was increased, because of it. So I’m really confused now.
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