Perspective Perspective Benj amin Tal December 2015 CONFIDENTIAL - PDF document

11/27/2015 Perspective Perspective Benj amin Tal December 2015 CONFIDENTIAL BoC’s Cut Did Little to Accelerate Household Borrowing Household Credit - Household Credit Average m/ m % Growth 0.50 m/ m % chg, 0.45 % 3-mo moving avg 0.40 0.45 BoC eases 0.35 policy 0.40 0.30 0.25 0.35 0.20 0.15 0.30 0.10 0.05 0.25 0.00 0.20 Avg Jan-Jun Avg Jan-Jun 2014 2015 13 14 15 S ource: Bank of Canada, CIBC CONFIDENTIAL - 1 - 1

11/27/2015 We Are Not So Special Change in FX Rate vs. US$ Since Jan 2008 20% 10% 0% -10% -20% -30% -40% -50% -60% USD/ CHF USD/ CNY USD/ HKD USD/ JPY USD/ NZD USD/ AUD USD/ EUR USD/ CAD EK USD/ MXN USD/ NOK USD/ INR USD/ BRL USD/ S S ource: Bloomberg, CIBC CONFIDENTIAL - 2 - Canadian Manufacturing Labour Pay Now Lower Hourly Compensation in Mfg (US$/ hr) 40 35 30 25 20 15 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15E USA Cda (in US$) S ource: BLS , S t at ist ics Canada, CIBC CONFIDENTIAL - 3 - 2

11/27/2015 Canadian Manufacturing: Inventory/Shipments Ratio Average C$ Sensitivity Clot hing Primary Metal Computer/ Electronic Petroleum/ Coal Transport. Eq. 36.6 Textile Mills Machinery Textile Prod. Fabricated Metal ALL Wood Nonmetallic Mineral Plastics/ Rubber Food Paper Printing & S upport 48.6 Furniture Elect Eq/ Appliance Chemical Bev. & Tobacco Misc. Leat her/ Allied Prod. -0.5 0.0 0.5 1.0 1.5 S ource: S t at ist ics Canada, CIBC CONFIDENTIAL - 4 - Share of Services 90 % 80 70 60 50 40 30 20 10 0 in Employment in GDP in Exports S ource: S t at ist ics Canada, CIBC CONFIDENTIAL - 5 - 3

11/27/2015 Share of Services Exports in Gross Exports 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2000 2005 2008 2009 2010 2011 Direct Service Exports (StatCan) Value Added S ervice Exports (OECD) S ource: S t at ist ics Canada, Conference Board of Canada, OECD(TIVA), CIBC CONFIDENTIAL - 6 - Value-Added Services in Gross Exports (TPP Members) Singapore New Zealand U.S. Japan Australia Canada Malaysia Mexico Vietnam Chile Brunei 0% 20% 40% 60% 80% Year: 2011 S ource: OECD(TIVA), CIBC CONFIDENTIAL - 7 - 4

11/27/2015  Perception  Data  Sub-prime/Alt A  Overbuilding  Interest Rate Sensitivity  Fraud CONFIDENTIAL - 8 - Cumulative Increase in House Prices by House Value Toronto Vancouver (Detached, past decade) (Detached, past decade) 95% 250% 90% 200% 85% 150% 80% 75% foreign 100% investment? 70% 50% 65% 60% 0% 0.51.52.53.54.55.56.57.58.59.5 0.51.52.53.54.55.56.57.58.59.5 more expensive less expensive more expensive less expensive S emi Decile S emi Decile S ource: Brookfield, CIBC CONFIDENTIAL - 9 - 5

11/27/2015 Ratio of Housing Starts to Household Formation 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 CAN: Avg last 10 yrs US : Avg 10 yrs leading to the recession S ource: S t at ist ics Canada, Conference Board, US Census Bureau, CIBC CONFIDENTIAL - 10 - Completed and Unabsorbed Apartments GTA 3000 units 2500 2000 1500 1000 500 0 92 94 96 98 00 02 04 06 08 10 12 14 S ource: CMHC, CIBC CONFIDENTIAL - 11 - 6

11/27/2015 Standing Inventory 2,500 2,000 1,500 1,000 500 0 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 S ource: RealNet , CIBC CONFIDENTIAL - 12 - Completed and Unabsorbed Apartments by Developers – An Uneven Distribution Unsold units by Developers 300 250 4 Developers 200 31.9% Rest 150 68.1% 100 50 0 S ource: RealNet , CIBC CONFIDENTIAL - 13 - 7

11/27/2015 Private Lending Mortgage Originations as a Share of Total Originations (Ontario) 4.5 % 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Based on number of mortgages Based on dollar outstanding S ource: Teranet , CIBC CONFIDENTIAL - 14 - 8