Citigroup Inc
NYSE:C
Citigroup Inc
In the bustling world of global finance, Citigroup Inc. stands as a towering figure, weaving its influence through an intricate tapestry of banking services that transcend borders. Born from the fusion of banking giants in 1998, Citigroup emerged as a formidable player by marrying the retail banking prowess of Citicorp with the expansive reach of Travelers Group. This union not only strengthened its commercial banking capabilities but also expanded its fingers into the lucrative realms of investment banking, wealth management, and securities services. At the heart of Citigroup's operation lies its dual functionality: serving the financial needs of corporations and individuals while managing a substantial share of international transactions and investment activity. With an extensive network spanning over 100 countries, Citigroup generates revenue by channeling funds into avenues such as consumer banking, which caters to day-to-day financial services, credit cards, and loans, and institutional clients, providing solutions including treasury and trade, markets, and investor services.
Strategically, Citigroup maneuvers through a financial landscape governed by both acute risks and rewarding opportunities, banking on its diversified structure to bolster resilience. Its Global Consumer Banking unit captures everyday consumers, offering retail banking and credit card services, crucial in driving stable revenue inflows. Meanwhile, its Institutional Clients Group engages in more sophisticated banking activities like investment banking and advisory services, a segment that becomes a powerful engine of profit by facilitating securities trading, and underwriting, and providing strategic financial advice. This multi-pronged approach has enabled Citigroup to capitalize on economies of scale and a broad client base, leveraging its expansive global footprint to remain nimble amidst economic cycles and regulatory shifts. As a custodian of trillions in assets under administration, Citigroup continues to play a pivotal role in lubricating the cogs of global commerce, while navigating the complexities and challenges inherent in the financial sector.
Earnings Calls
Atrium Mortgage demonstrated solid performance in Q3, reporting an EPS of $0.26, consistent with Q2 and up from $0.25 last year. YTD EPS reached $0.79, the second-best in its history. The mortgage portfolio grew to a record $926.3 million from $908 million. A robust loan repayment of approximately $150 million is expected in Q4, following a drop in Stage 2 and 3 loans by 18%. As a result, Atrium increased its monthly dividend by 3.3% to an annualized rate of $0.93. The average mortgage rate dropped from 10.93% to 10.52%, aligning with recent interest rate cuts, although market conditions remain uncertain.
Management
Jane Fraser is a prominent financial executive known for her role at Citigroup Inc. She made history by becoming the first woman to lead a major Wall Street bank when she was appointed CEO of Citigroup in March 2021. Before her promotion to CEO, Fraser served in various significant roles within the company, which she joined in 2004. Fraser has held key leadership positions within Citigroup, including CEO of Citigroup Latin America and CEO of the U.S. Consumer and Commercial Banking and CitiMortgage. Her diverse experience within the bank also includes her roles as CEO of the Private Bank and Global Head of Strategy and Mergers & Acquisitions. Jane Fraser was born in Scotland and earned a Master of Arts in economics from Girton College, Cambridge, and an MBA from Harvard Business School. Before joining Citigroup, she worked at Goldman Sachs and McKinsey & Company, where she gained substantial experience in the financial sector. Throughout her career, Fraser has been recognized for her leadership qualities and her work towards promoting diversity and inclusion within the financial industry. As CEO, she focuses on steering Citigroup through digital transformation while addressing regulatory challenges. Her appointment as CEO marked a significant milestone for gender representation in finance.
Mark A.L. Mason is an accomplished executive in the financial industry, currently serving as the Chief Financial Officer (CFO) of Citigroup Inc., one of the world's largest financial services companies. Mark Mason was appointed CFO in February 2019. In this role, he is responsible for the financial management of the firm, including financial reporting, planning and analysis, treasury, tax, investor relations, and capital management. Before becoming CFO, Mason held various significant positions within Citigroup. He served as the CEO of Citi Private Bank and was Chief Financial Officer and Head of Strategy and M&A for Citi's Institutional Clients Group. Mark Mason also played a critical role as the Chief Operating Officer of Citi's Institutional Clients Group. Prior to joining Citigroup, Mason worked at Lucent Technologies, where he held several financial positions, and he also worked at Marakon Associates, a strategy consulting firm. Mason holds a Bachelor of Business Administration degree from Howard University, and an MBA from Harvard Business School. Throughout his career, he has been known for his strategic thinking, financial acumen, and leadership skills, contributing to Citigroup's growth and stability. His extensive experience in various financial and strategic roles has made him a key figure in navigating the complex financial landscape for Citigroup.
Anand Selvakesari is a prominent executive at Citigroup Inc., serving as the Chief Executive Officer of Personal Banking & Wealth Management. In this role, he is responsible for overseeing the strategic direction and operational management of Citi's personal banking and wealth management businesses globally. This includes managing retail banking, wealth management, and related services, focusing on providing a seamless and innovative customer experience. Selvakesari has a long-standing career at Citigroup, having held several key positions within the company. Prior to his current role, he was the Head of Consumer Banking for Asia Pacific, where he managed the consumer franchise across 17 markets in the region. His leadership was instrumental in enhancing digital capabilities and driving significant growth in Citigroup's consumer banking operations. With a background in engineering, Selvakesari started his career at Citi in India and has accumulated extensive experience across diverse markets, including Asia, Europe, the Middle East, and Africa. His career trajectory is marked by a commitment to driving digital transformation and leveraging technology to improve customer experiences and operational efficiencies. Known for his strategic vision and ability to drive change, Anand Selvakesari continues to play a crucial role in shaping Citi’s approach to modern banking and wealth management, ensuring alignment with contemporary consumer needs and expectations.
As of my latest update, there is no publicly available biography of an individual named Andrew J. Morton who holds or held an executive position at Citigroup Inc. It's possible that he may not be a publicly recognized figure within the organization, or he may not have held a prominent role that is well-documented in publicly available sources. For more detailed or specific information, you might consider checking Citigroup's official releases or press statements.
Andrew Mason Sieg is a prominent figure in the financial services industry, currently serving as the Chief Executive Officer of Citi Global Wealth, a part of Citigroup Inc. He joined Citigroup in 2023, bringing with him a wealth of experience and a strong track record in wealth management. Before his role at Citigroup, Sieg spent a significant portion of his career at Merrill Lynch Wealth Management, part of Bank of America, where he held various leadership positions over the years. Sieg is known for his strategic vision and expertise in wealth management, focusing on integrating digital advancements and personal client relationships. Throughout his career, he has been an advocate for innovation in financial services, emphasizing the importance of adapting new technologies to enhance client experiences and support advisors. He also stresses the importance of diversity and inclusion within the financial sector, aiming to create an environment where diverse talents can thrive. His leadership at Citi Global Wealth involves overseeing the wealth management division, aiming to provide comprehensive financial services to clients across the globe. Under his guidance, Citigroup's wealth management segment is expected to expand its offerings and continue its focus on delivering tailored solutions to meet the complex needs of high-net-worth clients. Andrew Mason Sieg's career reflects his commitment to advancing the field of wealth management through a blend of technology and human-centric service, positioning him as a key leader in the financial services industry.
David R. Bailin serves as the Chief Investment Officer (CIO) and Global Head of Investments at Citi Global Wealth, a division within Citigroup Inc. He plays a critical role in overseeing investment strategies and offerings across Citi’s private banking and wealth management platforms. Bailin is responsible for defining the firm’s investment philosophy, ensuring the alignment of its products and services with market opportunities, and guiding clients in developing and managing their investment portfolios. Prior to his role at Citi Global Wealth, Bailin held several significant positions at reputable financial institutions. He has extensive experience in the investment industry, working in senior roles related to wealth management and private banking. His expertise is well-regarded, and he frequently provides insight into global economic trends and investment strategies. Bailin also contributes to fostering a culture of innovation and excellence within Citigroup’s investment arm, and he is involved in articulating the firm’s investment perspectives to a global audience through various channels. He holds an undergraduate degree from Amherst College and has built a robust career through his strategic vision and leadership in financial services.
Robert (Bob) Walsh was an executive at Citigroup Inc., where he played a significant role in the company's operations and strategic direction. With a career spanning several decades in the financial sector, Walsh brought extensive experience in banking and financial services. Before his time at Citigroup, he held various leadership positions within the company, contributing to areas such as corporate banking, risk management, and strategy development. His expertise was instrumental in navigating the complexities of the global financial landscape and supporting Citigroup's mission to provide comprehensive financial services to its clients worldwide. Throughout his tenure, Walsh was known for his forward-thinking approach and commitment to fostering a culture of innovation and efficiency within the organization.
Achintya Mangla is a senior executive at Citigroup Inc., where he has played a significant role in the bank's operations and strategic initiatives. He notably serves as the Co-Head of Banking, Capital Markets, and Advisory (BCMA) for Europe, the Middle East, and Africa (EMEA). In this role, he is responsible for overseeing and managing the bank's investment banking activities across these regions, which includes various functions such as mergers and acquisitions, capital raising, and advisory services. With a career spanning over two decades in the banking industry, Mangla has garnered extensive experience in global markets and has been integral in driving growth and innovation within Citigroup. His leadership is characterized by his commitment to fostering client relationships, promoting strategic partnerships, and leading significant transactions in the EMEA region. Before assuming his current role, Mangla held various key positions at Citi, which helped him build a robust understanding of both regional and international financial markets. His contributions have been crucial in strengthening Citi's presence and competitiveness in the investment banking sector.
Tim Ryan is an accomplished executive with extensive experience in financial services and public policy. He serves as a senior leader at Citigroup Inc., one of the largest financial institutions in the world. Before joining Citigroup, Ryan had a distinguished career that included various leadership roles. Ryan previously served as the President and CEO of the Securities Industry and Financial Markets Association (SIFMA), where he played a key role in representing the U.S. securities industry. Additionally, he held the position of Vice Chairman of Financial Institutions and Governments at JPMorgan Chase & Co., offering strategic advice across a range of financial sectors. He also has experience in public policy from his time as the Director of the Office of Thrift Supervision in the U.S. Department of the Treasury, where he was involved in regulating the nation's savings and loan industry. Throughout his career, Ryan has been recognized for his expertise in financial regulations, risk management, and economic policy, making him a respected figure in the finance industry.
Jennifer Landis is a key executive at Citigroup Inc., where she has significantly contributed to the bank's strategic and operational advancements. As a senior leader, she plays a crucial role in shaping the company's policies and initiatives. Her expertise spans various facets of financial services, and she is known for her strategic insight and leadership skills. At Citigroup, she has been instrumental in driving diverse projects that align with the company's goals, including technological innovation and customer-focused strategies. Her work emphasizes the importance of maintaining robust financial practices while fostering an inclusive and forward-thinking corporate culture.
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Welcome to the Atrium Mortgage Investment Corporation's Third Quarter Results Conference Call. [Operator Instructions] A reminder that this conference is being recorded, Thursday, November 14, 2024. Certain statements will be made during this phone call that may be forward-looking statements.
Although Atrium believes that such statements are based upon reasonable assumptions, actual results may differ materially. Forward-looking statements are based on the beliefs, estimates and opinions of Atrium's management on the date the statements are made. Atrium undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates, opinions and other factors change.
I would now like to turn the conference over to your host, Robert Goodall, CEO of Atrium. Mr. Goodall, please go ahead.
Thank you, and thank you for calling in today. Our CFO, John Ahmad, will start by talking about our financial results, and then I'll speak about our performance from an operational and portfolio perspective. John?
Thanks, Rob. The business continued to produce strong results for shareholders over the quarter. EPS was $0.26 for Q3, which is above $0.25 in the prior year and consistent with Q2. Overall, Atrium has produced year-to-date earnings per share of $0.79, which is down from the prior year, but when put into a historical context, our year-to-date 9-month performance is the second best reported in our company's history.
We are also pacing well ahead of declared dividends of [ $0.675 ] so far this year, which is based on an annual rate of $0.90. Our steady results and improving credit risk profile, which we'll touch upon later, has reported a 3.3% increase in our monthly dividend beginning next month to an annualized rate of $0.93 per common share. At year-end, our quarter end, our mortgage portfolio reached a record $926.3 million, which is up from $907.8 million in Q2 and $893.6 million at the beginning of the year. This is a record for Atrium. While growth is not our main focus at this time, the business continued to successfully execute its strategic plan of focusing on lower-risk sectors with disciplined underwriting. In particular, single-family loans continue to be a strong focus of the business, represented 43% of total principal advances in the quarter.
Real estate market activity continued to remain slow as both capital for investment and consumers both remain cautious given uncertain market conditions. Principal advances were $58.2 million over the quarter and repayments were $42.3 million, both measures being below historical levels. The rate on the mortgage portfolio did come down from 10.93% to 10.52% during the quarter.
This was largely driven by the fact that the Bank of Canada had two 25 bed rate decreases during the quarter, but we've also continued to focus on lower risk profile loans as well. Even though the portfolio rate came down, the rate on our credit facility also came down. Credit facility is priced off prime in the market for short-term core loans.
The weighted average rate on our credit facility came down to 6.96% over the quarter compared to 7.33% in Q2 and 7.48% in the prior year. In terms of funding, we continue to employ a low leverage balance sheet with shareholder capital representing 54.6% of total funding sources. Credit facility currently has a limit of $340 million. We took advantage of that excess capacity to pay off our $25.3 million convertible debenture on the first business day of the quarter since it matured on June 30, fell on a non-business day. Subsequent to quarter end, we also successfully completed an oversubscribed bought deal share offering in public markets on October 4.
Including the over-allotment option exercised on October 25, total gross proceeds of $28.8 million used to repay our credit facility. Accessing the capital markets to shore up our capital base helps solidify our funding capacity and liquidity sources, which remains important given market conditions and provide funding optionality for the business in the event that the market for convertible debentures is not optimal in the near future. Provision of $3.5 million booked this quarter reflects increased credit risk in the mortgage book, although our credit risk profile overall is showing signs of improvement. Q3 provision has decreased quarter-over-quarter and year-over-year.
And the percentage of mortgages in stages 2 and 3 have also increased from 17.8% at the beginning of the year, 14.8% in Q2 and is now at 14.0% at Q3. We continue to make significant progress in terms of resolving loans and default, but still making prudent provisions where necessary without sacrificing our steady returns to shareholders.
Overall allowance represented 323 bps at quarter end [indiscernible] and up from 253 bps at the beginning of the year. Stage 1 general reserve represented 98 bps of the total and remains elevated due to a soft, but improving macroeconomic outlook. Overall, this was another solid quarter for Atrium.
We continue to maintain our high-quality portfolio despite slow market conditions by focusing on our preferred lower risk sectors. Continue to make progress in terms of managing credit risk through prudent provisioning, resolving loans and defaults and we further solidified our balance sheet with a successful equity offering just after quarter end.
It reflects the resiliency of our business model as we have been successfully navigating headwinds in the gross market. We also believe lower interest rates and inflation will promote better market conditions going forward, albeit slowly.
This will help support a modest increase in our -- that being said, we will continue to tread cautiously from both the financial and credit risk management perspective as we move forward.
Rob, I'll pass it back to you for portfolio and business updates.
We had another strong quarter. Atrium generated basic earnings per share in Q3 of $0.26 for the first 9 months of 2024. Earnings per share of $0.79 is the second strongest result in our 12-year history as a public company.
We increased our loan loss provision in Q3 by $3.5 million versus $4.4 million last quarter. Quarterly provisions are gradually reducing as we deal with our Stage 2 and Stage 3 loans. As you all know, we have always been proactive in making loan loss provisions, which will protect future earnings. Overall, the portfolio increased from $908 million last quarter to a record $926 million in Q3. Single-family and commercial sectors have been gradually increasing over the course of 2024, which is consistent with our business plan.
Atrium's average mortgage rate dropped from 10.93% last quarter to 10.52% in Q3, mostly due to [ 225 ] basis point reductions in the prime rate of interest on July 24 and September 4, respectively. Total of high ratio loans, that is loans over 75% loan to value was $90.1 million, equal to 9.7% of the total portfolio in Q3.
This total is down $5.1 million from Q2 when the balance was $95.2 million. And the good news is that since the end of Q3, over 50% of that total has been repaid.
In Q3, the average loan to value of the portfolio dropped slightly to 64.1% which continues to be within our desired range. Atrium's percentage of first mortgages in Q3 increased to a record 97.3%. Construction loans were virtually unchanged at only 4.7% of the total mortgage portfolio. As construction costs have recently stabilized and short-term interest rates have dropped, we're becoming more open to underwriting construction loans although it will not be a major part of our portfolio.
Currently after the end of Q3, Atrium completed a highly successful common share offering for total proceeds of $25 million to further support the growth and liquidity of our business. In late October, the investment dealers also exercised their option to a 15% overallotment totaling $3.75 million, which closed on October 25. We're gratified by the overwhelming investor demand for this offering. Turning to defaults. In Q3, the total of Stage 2 and 3 loans dropped by $5 million to $129.7 million. In fact, our combined Stage 2 and 3 loans have dropped over 18% from $159 million just 2 quarters ago.
There was a lot of progress in dealing with commercial loans in default during the quarter, as you will hear. I'll briefly describe each of the loans. First is the Markham townhouse site that was once owned by State View homes. A $1.5 million balance, which was [indiscernible] by the receiver was fully released during the quarter.
Second loan is in North Vancouver and totaled $51 million. We've been speaking about this loan for several quarters. This is the 4.5-acre site fully approved for multi-residential buildings with a GFA of 300,000 feet.
The loan was repaid shortly after quarter end, and resulted in a reduced loss of $2.1 million. As a result, we had a net recovery of over $4 million. The next loan is a condo inventory loan in Vancouver totaling $12.9 million. This loan is secured by 12 newly completed residential units, and we also have an assignment of a $10.5 million first mortgage on a parcel of land last appraised at $29 million. We estimate Atrium's overall loan-to-value at just 53% and definitely do not expect to incur a loss. Commitment letter from a nonbank lender has been received, which is scheduled to repay the loan in full.
We are advised this should occur before the end of November. We have the legal right to list the condo units for sale if this refinancing falls apart. The last 3 loans are located in Greater Vancouver totaled $34.5 million and are connected to a single sponsor. There were 4 loans last quarter a one $4 million loan was repaid in Q3 through the sale of the property and another $11 million loan was repaid just last night.
So we're down to 2 loans totaling $22.8 million. In Q3, we got the legal right to list the 2 properties for sale. So we made a lot of progress on this file and believe that we have adequate loan loss provisions in place for the final 2 loans.
As mentioned earlier, we increased Atrium's loan loss reserve in Q3 by $3.5 million versus $4.4 million last quarter. Atrium's loan loss reserve totals a very healthy $29.9 million equal to 323 basis points on the overall mortgage portfolio. This is up from 203 basis points 1 year ago. It's worth noting that we continue to have a large general reserve on our highest quality stage 1 loans.
Strongly believe that we have adequate provisions in place which will protect profits for the future. And that statement is backed up by the net recoveries on the 2 problem loans, which were repaid this quarter. I expect an unusually large number of loan repayments in Q4 in part due to the repayment of the aforementioned loans and default.
As a result, we expect that Atrium's portfolio will decline in Q4. While we would ideally like our mortgage portfolio to always grow from quarter-to-quarter, loan portfolio -- loan turnover in the portfolio is an indication of a healthy portfolio, especially in the depressed market conditions that we are experiencing today.
My economic commentaries is as follows: The economic news in Canada was uninspiring in Q3. Canada's third quarter GDP is tracking at less than 1.5% which is below the Bank of Canada's forecast of 2.8%. The unemployment rate ended the quarter at 6.5% after hitting a 7-year high of 6.6% in August. Thankfully, CPI in Canada dropped from 2.7% in June to just 1.6% by September. As a result, the Bank of Canada reduced its policy rate in late October by 50 basis points to 3.75% and the consensus among economists is for another 25 to 50 basis point cut on December 11.
Most economists now forecast the Bank of Canada rate at 2.5% by the end of 2025. Lastly, during Q3, the Federal government announced an abrupt change in the immigration policy in late October. Number of permanent residents will drop from 485,000 this year to 395,000 in '25, 380,000 in '26 and 365,000 in 2027.
The Feds also intend to reduce temporary residents from 7.3% of the population to 5% by the end of 2026. This policy change could have a negative effect on both the growth of the overall economy and the real estate sector. By contrast, the U.S. economy is doing very well. Their economy grew at 2.8% in Q3, and the unemployment rate is only 4.1%.
Inflation has also accrued to 2.1%. The election of Donald Trump presents a more uncertain future for Canada, increased tariffs, renegotiation of the free trade agreement and a drop in the Canadian dollar are examples. Turning to the commercial real estate markets. It appears as though cap rates have topped out or at least they did so in Q3. According to CBRE, momentum is starting to build in the commercial real estate investment markets fueled mainly by a decline in bond yields. In the GTA and Vancouver, there was virtually no change to cap rates for the apartment, industrial and office sectors.
Industrial market slowed in Q3 with a national availability rate reaching a respectable -- a still respectable 4.4%. In Toronto, the availability rate rose to 4.2% and in Vancouver it rose to 4.1%. The office market in Canada began to stabilize in Q3.
Vancouver remained the tightest market in Canada with an 11.8% vacancy rate downtown and a suburban vacancy rate of 10%. In Toronto, the downtown vacancy rate was more elevated at 18.2%, while the suburban vacancy rate was 20.7%. Fortunately, the construction pipeline and the GTA now down to 3.1 million square feet, representing only 1.8% of total inventory.
Looking at the residential and multi-residential real estate markets and first looking at resales, the resale market had been slow for many months. But based on the sales results in October, it may finally be showing early signs of recovery spurred on by lower rates. In the GTA, October resales were up 14% on a monthly basis and 44% compared to the same month last year. New listings fell by 6.8% on a monthly basis, but are up 4.3% year-over-year. And the home price index in the GTA was up 0.1% on a monthly basis and down 3.3% on a year-over-year basis.
In Metro Vancouver, resales in October were also up 32% compared to last year. October sales were only 5.5% below the 10-year seasonal average after several months of being 20% to 25% below the seasonal average. New listings were up 17% on a year-over-year basis, and the home price index in Metro Vancouver was down 1.9% year-over-year and 0.6% compared to last month.
Turning to new home sales. The new home market remained very slow. There were 7,700 new home sales in the GTA from January to September of this year, representing a decrease of 48% compared to 2023. The number of high-rise and low-rise sales both declined year-over-year with high-rise sales falling more significantly. On a month-to-month basis, the benchmark price dropped by 2.1% to low rise and 0.6% for high rise.
In Vancouver, the Q3 figures are not yet available, but in Q2, Metro Vancouver's new multifamily home sales increased by 14% from the previous quarter, but decreased 13% on a year-over-year basis. Total of 46 projects were launched in the second quarter, introducing 4,545 new units of inventory with a respectable 38% reported as presold by quarter end.
To summarize, residential resales appear to have turned the corner and should gradually improve as interest rates drop, but the new home market remains fairly weak, particularly in the GTA and will take longer to recover. Fortunately, all levels of government appear committed to increasing affordability to assist with new home supply. Most recently, the Fed increased the cap for CMHC insured mortgages from $1 million to $1.5 million, and they extended the amortization period for new homes to 30 years.
We expect more municipal and provincial incentives to come over the next year. To conclude despite ongoing challenges in the real estate market, Atrium has continued to produce superior results for our shareholders. Our year-to-date earnings of $0.79 represents the second best 9-month result in our history. And our conservative 85% dividend payout ratio bodes well for the prospect of another sizable special dividend at year-end.
We have accomplished those results while maintaining our disciplined underwriting with 97% of the portfolio composed of first mortgages and 90% with a loan-to-value of less than 75%. In Q3 and the early part of Q4, we made substantial progress on the repayment of several Stage 2 and Stage 3 loans, which was the culmination of several work -- several months of hard work.
As a result, we expect that Stage 2 and Stage 3 loans as a percentage of the portfolio will drop sharply when we release our 2024 year-end results in February. Needless to say, we're comfortable with our current level of loan loss provisioning. Atrium has consistently outperformed its peers during market downturns when the benefits of our conservative underwriting are most apparent. Based on our consistently strong quarterly results over the last several years and recent improvements in our borrowing base, I am pleased to announce a 3.3% increase in our dividend from an annual rate of $0.90 on to $0.93 per share.
That's all for our presentation, but we'll be pleased to take any questions from the listeners.
[Operator Instructions] First question is SID Rajeev from Fundamental Research Corp.
The increase in focus on single-family and commercial mortgages. Is this a long-term trend or a temporary decision to align with market conditions.
It's a more long-term plan, but it also is a lower-risk type of sector, in fact, each are -- so we're particularly focused on it now. Single-family is a lower risk, lower return sector, single-family mortgages. So there's a limit to how large we'll get on it, but we have quite a bit of room where we are now.
Yes. So as you were saying, single-family is already one of the toughest markets, I guess, competitive. Your average lending rates decrease over time. And it is a relatively new segment for you. Which segment within single family, do you focus? Is it the higher end detached homes, condos or?
It's a mix of all of them. We're more concerned with liquidity, so we tend to focus on the major geographic areas. So we focus on the GTA, London, Ottawa, Cambridge, Kitchener, Waterloo, Hamilton. We don't tend to go to the smaller towns or rural areas because there's less liquidity, but our average loan would be -- I think it's about $600,000 to $700,000 or $600,000 to $750,000. So we're not going for jumbo loans or anything like that. In fact, it's a pretty affordable mix given the cities that we're focused on. .
Yes. And in terms of Stage 2 and 3 they totaled $130 million at the end of Q3. Are you open to giving some guidance on what this figure will be by the end of 2024.
No. But what we can tell you is at least $62 million, right, John, has come off already since -- and when I say come off and repaid since the end of Q3.
So that means we are going to see a significant decrease in loan loss provisions, at least in Q4 compared to Q3.
Likely.
[Operator Instructions] The next question is Graham Ryding from TD Securities.
Maybe I could start with the repayments that you're expecting in Q4. Can you quantify that? Is that the $62 million that you just referred to? Or do you have visibility on repayments beyond that? .
We've -- we track it to the extent we can for the entire portfolio. And it's as much as $150 million. So it's a big number. It was a small number in Q3, and it's a big number in Q4. .
Got it. Okay. But that's a gross number, right? Like you're obviously going to try to develop some originations to offset that in the quarter. .
Yes. My guess is it will take a few quarters to catch back up. Like that's a big number for us.
Yes. Okay. Understood. You mentioned a recovery of $4 million one of the arrears that you're able to work out or get repaid on -- are we going to expect that to be released back into earnings? Or -- is it still so much fluid in terms of how you're going to treat those ACLs on your balance sheet?
So we were fairly conservative this quarter. So we reallocated a lot of those net recoveries to other loans. So we're feeling very comfortable with how we provision. I guess that -- yes, I mean, that's what I'll say. I mean, we ended up at 3.5% -- was at 3.5% versus 4.4%. So it is coming down. We only had one new loan going to enter Stage 2 or 3 this quarter, and it was a small loan. So hopefully, that will be the same going forward.
Okay. But you were suggesting that there's a $4 million recovery happen?
Yes. And we knew those were coming before the end of the quarter. So that would have gone straight into probably Q3's results because they were firm deal. Just to clarify, that's not $4 million, it's $400,000, the $4 million, $4 million of net recoveries on provision what we have. That's what [indiscernible]. We reallocated it to be.
Understood. Okay. And then just how about your -- with these sort of regulatory changes around longer amortization periods for new purchases, what are you hearing from your sort of developer clients? Is this -- is this material? Or is there still more that needs to play out to get activity going on that front in terms of sort of lower rates on the construction cost coming down? Or maybe just some color on the mood from your client base.
Yes, it's still the latter. It's still a weak market, particularly in the GTA. It was actually compressed with the number of launches in Vancouver, 46 launches and 38% or 39% resales by the end of the quarter on those launches. Those are pretty decent numbers. And the GTA, it's a lot slower, but what's interesting is construction costs are coming down in the GTA and not coming down in Vancouver, and that's a reflection of the weaker market in the GTA.
So the lower industry and the lower construction costs, which I've always talked about is 2 things we need to revive the new home market. Those are starting to happen. And hopefully, the other thing that we need, which is a stronger resale market, hopefully, October is the first sign of that. Because I don't think anyone was expecting October resales to be as good as they were. 32% higher in Vancouver, 44% higher in Toronto.
I didn't hear anybody imagining those types of numbers. So hopefully, that's the first sign, but our view is the high-rise market in the GTA will have another tough year in 2025 and then probably start to recover. Economist always say, and I'm sure you've heard this a million times as well, but it takes 1 to 2 years for lower interest rates to sort of galvanize consumers to be more aggressive in their spending at it.
[Operator Instructions] There are no other questions at this time. I will now give the call back to Mr. Robert Goodall for closing statements. .
Okay. Thank you, and thanks for those attending the conference call. I hope you're pleased with the results and the increase in our dividend, which has been the first one in a while, I know we're really pleased with how the quarter went in many respects, not just the earnings, but the rather dramatic improvement in loan quality as well. For existing shareholders, thank you for your continued support. Have a good day.
Thank you all for participating. This conference call has now concluded. Please hang up.