紐約梅隆銀行 (BK) 2003 Q1 法說會逐字稿

Welcome to the Bank of New York's first quarter earnings conference call.

Today's conference is being recorded.

The information and materials contained in this conference call and webcast and any related materials are owned or licensed by The Bank of New York Company, Inc.

It may not be copied, displayed, retransmitted, published, broadcast, modified, or otherwise used for the public or commercial purposes without the express written consent of the Bank of New York Company, Inc., and the relevant information providers.

If you would like to ask a question at the conclusion of today's presentation, you may do so by pressing "star 1" on your touchtone phone at any time during the presentation.

Now John Roy, head of Investor Relations for The Bank of New York Company, Inc.

Thanks for joining us this morning for The Bank of New York's first quarter earnings call.

Before we begin, let me remind you that our remarks may include statements about future expectations, plans, and prospects which are forward-looking statements.

The actual results may differ materially from those indicated or implied by the forward-looking statements.

As a result of various important factors, including those identified in our 2002200210-K.

Forward looking statements in this call speak only as of today, April 16th, 2003.

We will not update forward looking statements to reflect facts, assumptions, circumstances or events which have changed after they were made.

Now I would like to turn the call over to Tom Renyi, Chairman and CEO of the Bank of New York company.

Good morning and thank you, John.

With me today is also Bruce Van Saun our Chief Financial Officer.

We welcome you to The Bank of New York Company's first quarter earnings call.

Bruce will start off by offering some comments regarding our first quarter results which we releases earlier this morning, and again it's April16, in order to provide additional insight into our performance and strategy.

I will then provide some comments on credit and new business wins and also provide some update on our Pershing acquisition, which we intend to close in the second quarter.

Bruce?

Let me start off by making some general remarks about the quarter.

After the positive tone of the first two weeks of January, geopolitical events have weighed heavily on the global equity markets, affecting price volumes, levels and capital markets activity levels.

As a result, first quarter was more challenging than we anticipated when presented to you in December.

I'm sure these stats are familiar to you but let me recount a few.

Combined total trading volume for the New York Stock Exchange and NASDAQ were down 11%, while equity price levels were lower as the S&P was down 4% for the quarter.

M&A activity was down 50% for the quarter and equity issuance was down 28%.

Given this difficult environment as well as certain changes in our expense base in 2003, such as lower pension assumptions and expensing of stock options, we reported first quarter EPS of 41 cents, a bit lower than where we hoped to be but not surprising in light of what we were up against.

Nonetheless, there were a number of bright spots in our businesses.

First, our security servicing fees were relatively stable, in spite of the head winds, due to the diversity of our business model.

Our fixed income length businesses continue to perform well including corporate trust, government securities clearance, global collateral management, wholesale distribution services, and domestic mutual fund services.

Fees from our fixed income businesses largely offset the market-related weakness in the equity length businesses, particularly equity execution services and depository receipts.

A second bright spot was that our other fiduciary related businesses were up on a sequential quarter basis.

Global payment services increased sequentially by 3% primarily due to higher funds transfer volumes in the quarter.

Private client services and asset management increased sequentially by 3% as continued strong demand for alternative investments and for retail investment products such as annuities and mutual funds more than offset lower asset prices.

Foreign exchange and other trading also rebounded this quarter up 27% due to a modest recovery in the FX markets and a good quarter for our other trading activities.

Interest rate Risk Management did particularly well as client hedging activity increased and our fixed income execution business also did well given the environment.

A third bright spot was expense control.

We continue to manage expenses tightly while maintaining our key investment initiatives.

Core expenses were essentially flat reflecting tight headcount control a staff drop by over 125 people in the quarter, excluding two small acquisitions.

And, lastly, a fourth bright spot was that our credit provisioning achieved targeted levels at $40 million for the quarter.

And Tom will provide a credit update shortly.

Looking at the P&L categories in more detail, our net interest income was down $28 million on a sequential quarter basis, in excess of 6%.

Our spread was off seven basis points sequentially and our yield ten basis points.

The decrease in that interest income primarily reflects a full quarter's impact of the November cut in the fed funds rate, which drove further spread compression on our deposit base.

Increased pre-payments and lower reinvestment yields in our fixed income portfolio also contributed to the lower spreads.

The flat yield curve at the very short end of the curve also hurt spreads on our floating rate loan book, as loans repriced during the quarter.

Aside from the impact of the environment on spreads and yields, we also continued to reduce our corporate credit exposures, which combined with refinancing activity reduced average loans outstanding by $1.4 billion for the quarter.

One other factor, not to be overlooked, is the day variance of two days between the first and 4th Quarters.

Our interest rate positioning continues to be relatively neutral P&L-wise to changes in interest rates in either direction.

While this decline in sequential quarter net interest income was sizeable, it was in line with our own projections.

At this point we expect net interest income to rise in the next quarter for several reasons.

We have increased our level of fixed income investments to factor in higher prepayment assumptions without changing our risk posture much.

We expect client activity to be higher, and we will have a positive day variance.

With respect to expenses, the category that showed the largest increase was salaries and employee benefits which increased by $44 million versus the 4th Quarter.

However, much of this change was due to a lower pension credit, the commencement of stock option expensing, and the fact that the 4th Quarter included an adjustment for reduced incentive compensation which was tied to performance.

We continue to remain very focused on expense management, given the environment, and are seeking to balance the need to maintain investment initiatives critical to long-term positioning and growth, with the requirement to protect near-term profitability levels.

Turning to the balance sheet, total assets of 79.5 billion came in a little higher than the 4th Quarter, but more in line with our historical levels, as quarter-quarter-end customer deposits increased to more customary levels.

Our capital ratios were all within our targets.

The tier one ratio was 7.88%, total capital was 12.64% and the TCE ratio was 5.51%.

We will remain disciplined with respect to the balance sheet given the $9 billion balance sheet coming over with Pershing.

As we indicated in our January 8th call we have suspended all stock buy back activity in 2003 and possibly into 2004 until our capital ratios have been restored to levels following the acquisition.

While we did announce a small acquisition in the first quarter we do not expect to do sizable acquisitions until Pershing is integrated and our capital ratios are back at targeted levels.

However we do expect to continue with smaller fill-in acquisitions throughout the year.

The insurance recovery process relating to the world trade center disaster is going as we had projected.

In the first quarter we incurred $13 million of disaster related expenses which were offset by an insurance recovery.

On a life to date basis we now have reflected $657 million of recoveries and received $400 million of advances from the insurance companies for a current net receivable of $257 million.

We continue to remain confident that the net receivables recoverable under the terms of our policies.

To sum up, in spite of a very challenging market environment, our results are reflective of the pal in our business model and strong expense discipline.

While we are holding our own in the near term, we still believe there's excellent upside to an improved operating environment in the future.

With that, I would like to turn it over to Tom.

Thanks, Bruce.

Let me start off with an update on credit, an activity where we continue to reduce non strategic and outside exposures in order to make our credit costs less volatile going forward.

The quarter showed a return to our targeted run rate for provisioning with credit costs of $40 million dollars and slightly lower NPA's.

Obviously, we need to produce results like this on a consistent basis in order to claim any success, though we are determined to do so.

And we continue to demonstrate measurable progress such as corporate exposures being reduced by over $1.5 billion dollars and telecom exposures being reduced by over $100 million.

The pace of economic recovery remains to be the key factor impacting NPA's for the remainder of this year.

Looking at some of the trouble spots that we discussed at the end of the year, there has been some clear improvement, particularly with telecom and energy companies which have shown better liquidity in the secondary markets and better access to capital markets including equity, in some cases.

The energy companies in particular have been able to use their solid asset bases to good advantage.

Airlines have continued to have a rough time as a result of the war and now SARS, but we are able to take a proactive measure in the 4th Quarter when we added $100 million to our existing reserves for potential losses to U.S. carriers in addition to writing off our UAL exposures.

American Airlines clearly have been in the headlines of late and let me reiterate some of the things we have said in the past that if in fact American Airlines has to file bankruptcy it will not impact our P&L.

At this point we don't see the emergence of any new hotspots and we believe that we are currently well reserved for anticipated loan losses.

We could see charge-offs out pacing provisioning but only if we are confident that a turn in the credit cycle has taken place and that it is sustainable.

Now let me provide an update on the Pershing transaction.

As you know in January we announced the acquisition Pershing, the premier global clearing organization.

For a cash purchase price of $2 billion, with financing split roughly 50/50 between equity and debt.

We are on track with the necessary regulatory approvals, currently targeting a May 1 closing, with June 1 being our fall back.

Our highest priority this year, certainly in the security servicing area, is to make this a successful integration.

We have, in fact, devoted some of our key management tier, many of you know Joe Velly who has been involved in trade execution and I have asked him to specifically focus on trade execution and brokerage clearing business and of course to specifically include the Pershing integration.

We remain confident in achieving the targeted cost savings and the revenue synergies in our model.

We will begin converting our clients on to the platform right after close and expect the conversions will be completed sometime in the fall.

And now let me turn it back to Bruce for an update on the financing aspects of the Pershing acquisition.

Bruce?

From the financing perspective we wrapped up the equity component in late January through a forward sale of 40 million shares.

This had two principal benefits we locked in the equity price assumption in our model the forward sale minimized earnings solution prior to the closings.

On the debt side we've had benefit of historically low interest rates and in March we issued $400 million of subordinated debt.

We will finance the rest between now and the closing and expect to be able to access the market at very attractive rates.

Tom?

Okay, Bruce.

Now let me turn back and shift gears to new business.

While the overall market environment has been lack luster, we continue to grow through market share gains and we've had a number of notable successes in that first quarter such as the mandate for Morgan Keegan Trust to provide global custody securities lending for $8 billion in assets.

We won a global mandate from Torchmark Corporation, our relationship with Chubb demonstrating our strength in servicing the insurance industry.

We continue to win business in the UK market such as the 2b pound transfer mandate from Artemis Funds and a pension from Kimberly-Clark.

And we continue to expand our relationship with ING adding our separate account outsourcing services for an additional $7 billion in assets.

Even in the what seemingly more bund cross border market we've got some new ADR appointments such as Telecom SA, the South African communications company and Tokyo Financial Group.

Industry consolidation has also created new business opportunities throughout the securities servicing world.

In particular, the sale of the Deutsche Banc custody business is forcing those clients to go through a conversion process putting this client base into play.

We have seen many RFPs and are aggressively targeting many more potential opportunities.

And although it's still early in the game, our coordinated marketing effort has already shown some very notable successes.

We have won 29 new mandates representing over $165 billion in custody assets.

These wins represent both domestic and international clients many of whom were already well known to us and some of which we were already doing a little bit of business with.

At this point, conversions are beginning to take place and the revenue impact will phase in throughout the remainder of the year.

These new mandates run the gamut of our services, custody, master trust, securities lending, asset management, fund accounting, execution services, cash management, collateral management, and securities clearing, the entire variety of services that we offer.

Now, we expect to make more formal announcements where appropriate in the weeks and the months ahead.

In addition, we still have a large number of pending names on our high-priority target list.

We continue to see new RFPs and expect decisions to be made over the next one to three quarters.

Our approach has been targeted, systematic, and effective, and I'm optimistic that you will continue to see us winning our share of these new opportunities.

Now, in closing, let me offer a few take aways.

We have two very specific initiatives this year.

First, we continue to reduce our credit risk profile by reducing non-strategic and corporate exposures.

And, second, make the integration of Pershing a success.

We are confident in accomplishing both.

Certainly our ability to complete and acquisition of the Pershing size and importance is something that we have had a long track record in, integrating these kind of acquisitions, large and small, and we remain confident in achieving the cost savings and the sin energies we forecasted if not a bit more.

This quarter again demonstrated the benefit of our diversified businesses despite a very difficult market environment; our core businesses continue to exhibit considerable stability, as our fixed income businesses have largely offset the weakness in our equity link businesses.

We're also pleased, clearly pleased, with our new business success in the quarter and are upbeat about our prospects for further market share gains over the coming quarters.

It is this focus on top-line growth that is so critical to regaining positive EPS momentum, yet we are simply not waiting for the turn in the markets.

Our tactical initiatives are pretty straightforward and, importantly, quite familiar to us and our staff, and they are to continue to protect critical technology investment and maintain and strengthen service quality levels through stable and consistent approach to staffing levels throughout a business cycle.

As I have said many times before to many of you, headcount is really the headquarters of all costs, and we take great care in controlling it.

The numbers that we gave you earlier today and in our December analyst meeting I think gives evidence to that focus.

The fact that we are--that our quality indicators are improving today gives evidence that a consistent, stable, and well-trained staff is a key to success, regardless of the business environment.

Now, as you would expect of us, we have several specific initiatives underway reviewing business methodologies to become even more efficient than we are noted for.

That, and we are, in fact, doing that, and still allowing us to spend capital on our technology and on our people.

All of this is being done with a view to keep us competitive both in terms of service levels and cost-structure.

Now, that concludes our prepared remarks, and now I would like to open it up to take some questions.

Thank you.

At this time we are ready to begin the formal question and answer session.

To ask a question, please press "star 1."

To withdraw a question, please press" star 2."

You will be announced prior to asking your questions.

One moment while our questions register.

Our first question comes from Ruchi Madan of Smith Barney.

Hi a couple questions.

First, do you think you could somehow size the revenue associated with the $165 billion assets under custody and secondly you said that there are still a lot more pending, and I'm just wondering if you think that the business already won is most of what you think you will win or a small portion of what you think you will win.

I think for the latter point, there are still quite a few RFPs outstanding, as we said, and there are more coming in.

The decision making-making process in terms of the Deutsche Banc clients is really under way so we continue to pursue them throughout the course of the year.

We do not see that this is necessarily the majority of the expected RFPs or certainly the mandates that are being won.

With regard to the revenue associated, we have not indicated that, and I'm not sure it would be very useful, Ruchi, in that it really depends upon the type and nature of the services that we're offering in that $165 billion of mandate.

Okay.

And then the other question is about Pershing.

I think you said that the expected revenue for this year would be $875 million.

I am just wondering if you have changed that view because of the lower trading volumes in the first quarter?

I think the overall Pershing has converted over time to more of a fee-based model so I would say their first quarter obviously was impacted somewhat by the environment, but I'd say we are not changing our view on that 2 to 3 cents dilution at this point.

Obviously, when we get closer to closing, we'll see where the markets are, but at this point I think they're holding their own.

Okay.

Thank you.

Our next question comes from Brock Vandervliet of Lehman Brothers.

You may ask your question.

Thanks.

You intimated that the March dynamic would improve somewhat in the second quarter.

Can you frame that out a little bit, in terms of the club act that we might expect and could you also talk about how much of the commercial loan run off you may choose to offset with the investment securities buildup?

Thanks.

You know, clearly, prepayments were running on a fixed-rate portfolio at quite high levels in the first quarter.

We anticipate that to taper down a little bit.

Nonetheless, we have invested ahead of those prepayments a bit, so our average fixed income securities portfolio ought to be higher in the second quarter versus the first, without taking any real greater interest risk.

So we ought to see a benefit from that.

What was the second part of your question, Brock?

I think it was with regard to how much of the offset of the decline in corporate loans could be made up by the increased investment in the securities portfolio?

A good part of the reduction is in the broker/dealer and loan category which was off on an average basis a bit in the first quarter, and a lot of the exposure reductions are still coming on the unfunded side.

So there's not a direct linkage, really, to the size of the investment securities in the plan for the second quarter to the corporate exposure reductions, so we're not planning a big bulk up, really, on investment securities, and I would expect that the average loans number would probably be roughly in line with where it was in the first quarter.

Got it.

Thank you.

Okay our next question comes from Mike Mayo of Prudential.

You may ask your question.

Hi.

Hi, Mike.

Is the impact from the stock options and pension all in this quarter, or will there be another uptake in the second and 3rd Quarter?

The pension credit is all in, in the quarter.

The stock options, there might be another $4m pre-tax impact in the second quarter.

You'll get a full-quarter effect in the second quarter.

Okay.

But then that's pretty much it?

Then you'll hit the run rate for the rest of the year.

Okay.

Secondly, can you talk about the trends, the fixed-income link businesses and the equity-link businesses, maybe from what you're seeing this month so far, are you seeing this change a little better is it still pretty much the same, when it comes to processing businesses?

You said the fixed-income link businesses were up, the equity-link businesses were down with the equity markets having been a little bit better here and fixed income markets having backed up some.

I would say it's a bit of a choppy situation.

The sentiment and tone seems better, the geopolitical uncertainty seems to have lifted a bit, but we are not seeing a dramatic turnaround at this point, so I think it's a little early to declare victory.

I would agree that the tone seems better so we are cautiously optimistic on the equity side.

Certainly on the trade execution side I think we'll be will be the first to see a revival, if you will, in level of activity.

I think it's far too early with regard to establishing any trend lines on the equity-link businesses.

We don't see anyone really actively pursuing coming to market or reestablishing any corporate actions that have been put on hold.

I think it's still far too premature and will probably take months, if not a couple quarters, for us to see anything in that vein.

But the more responsive activities we have to amore positive view in the environment will be the execution and brokerage businesses.

All right.

Thank you.

The next question comes from Tom Macandless of KBW.

You may ask your question.

Good morning.

Both of these questions I have are really clarifications.

Comments with - good morning.

The comments with respect to second quarter net interest income partially attributable to increased client activity.

I guess the question that begs to be asked is that with or without Pershing and is that based on just current conversion schedules of the new business that you've won?

It's without Pershing, I'm speaking without Pershing and if you kind of go back and look at customer -- it's not necessarily tied to new conversions but there's a bit of seasonality.

There's a little more trading and customers are more active historically in the second quarter.

Last year our net interest income increased by about $11 million from the second quarter versus the first quarter, and part of that is just greater activity on the part of the clients.

Great.

And then the second question that needs to be clarified, with respect to the assets under custody business that was won I think approximately $165 billion and/or 29 mandates, that's in general; that's not exclusively business won from State Street or Deutsche Banc GSS, is it, or how much of that would be derived from Deutsche Banc GSS?

Tom, all of those mandates were former Deutsche Banc clients.

Thank you.

Please press "star 1" to ask a question.

Brian Harvey of Fox-Pitt Kelton, you may ask your question.

Thank you, good morning.

Good morning.

Can you update us on the guidance for this year, if you're talking about that?

I remember last fall you talked about a range of $1.75 to $1.90, on an operating basis?

And my second question was just about the non-performing assets, if you could kind of talk about some of the [off-loads] that you had this quarter.

Our posture on guidance is really that we go through the outlook for the year in great detail at the beginning of the year, and we talk about, we give a range, and then we talk about the various factors that would factor into whether we're at the high end of that range or the low end of that range, and then throughout the year we'll give you an assessment of, you know, where we see those factors, and then you can draw your own assessments as to where we would be and where that would put us in the range.

So a long-winded way of saying we're not updating guidance at this point, but we clearly see that the year has started off outside of the range of the planning assumptions, which we said we thought that the low end of that range was, you know, 0% to 5% growth in volumes in the equity markets and price levels in the equity markets being a fundamental underpinning of that.

Whether things turn and catch up, it remains to be seen.

That's something you can draw your own conclusion on.

With regard to the NPAs, there was a fair amount of underlying activity, with regard to using, of course, the secondary markets.

We have indicated that --I indicated in my prepared remarks that we did see some strengthening of prices in the secondary market, and we took advantage of that, clearly, to exit some of these credits.

We also noted, I believe, in our press release that there was one retailer that did come on NPA in the quarter and we were pleased that we can absorb that and still show at least a slight decline in the NPA.

So there is, I think the positive signs is that there are, well, clearly as you would expect, clearly, this is a lagging indicator in terms of the lagging economic cycle.

We still see some things coming on.

On the other hand, there is a burgeoning liquidity in the marketplace that we have been able to take advantage of by having already aggressively marked many of these to market.

And that was related to the telecom and the power utility industry?

Yes, and a variety of other things that we have talked about.

Retailer credit.

Yeah, retailing credits, insurance credits.

There are a number of notable credits throughout tow and '02 that we took action against and I think we have been able to resolve them very appropriately.

Okay.

Thank you

Our next question comes from Ken Usdin of UBS Warburg.

You may ask your question.

Thanks, good morning.

Two questions for you.

One are we kind of on the run rate basis for the securities gains going forward, can you up date us on what the unrealized amount is at this point?

Yeah, the unrealized is kind of a in a range depending on where the markets are on any given day between 260 and 300.

And I think, you know, the natural actions we take to reposition ourselves should trigger securities gains kind of at this level in $7, $8 million, around that.

Okay.

Do you have a little more detail, please, on the FX and trading line?

That line was pretty strong over the quarter.

Was it attributable to the pickup in FX and also is that, the IRR hedging products, is that kind of sustainable revenues or is that kind of like was it overly strong in this quarter?

Yeah, I would say it was less FX.

There was a little pickup in FX, but the interest rate derivatives business did well.

It had been somewhat depressed in the 3rd and 4th Quarters of last year, and I think there was just an increase, generally, in hedging activity, as there was some uncertainty in the quarter as to whether the Fed was going to cut again or not, and so we benefited from that.

We also have a fixed income execution business where we trade corporates and municipals, and that was also fairly active in the quarter.

So we hope it's sustainable.

It partly depends, though, on client activity and their decisions on hedging.

Okay, great.

Thanks.

Our next question is from Dan Orlo of Numera .

You may ask your question.

Two sort of generic strategic questions.

One is after you add Pershing does it make sense to think about a morrow bus prime brokerage offering at some point down the road?

And, second, do you have any updates on your plans regarding Japanese -- a more robust Japanese facility?

Thank you.

As it relates to prime broker, prime brokerage, Dan, I think we have commented in the past and our position remains the same, that we can do an awful lot of support activity without having to take on the credit risks and the balance sheet that a prime brokerage operation would entail.

So at this juncture our design here, our strategic design, would not be to advance into any prime brokerage activity.

As it relates to Japan, we do have an operation there now, and we've had numerous discussions with a variety of existing indigenous providers to supplement their activity, just as we've done in Europe, and have been able to take action in Europe.

We would still certainly consider doing very much the same thing in the Japanese marketplace, just given the environment today we are doing a lot more talking than taking action at this juncture, though.

Great.

Thanks again.

Okay, Dan.

Our next question comes from Ruchi Madan of Smith Barney.

A couple follow-ups on the Deutsche Banc business.

First are you having to milk any pricing concessions to win the business?

Is there general pricing pressure as a result of all the RFPs out there and then I'll come back with the other question.

I don't sense that there is an inordinate amount of pricing pressures.

Obviously, we have to be competitive against the incumbent, but I don't think that, we're certainly not doing this as it relates to -- we're not winning these businesses based on price.

If that's the specific question, the specific answer is no.

I think clearly we've been able to present ourselves with again a very consistent and stable environment here at The Bank of New York.

Okay.

And then, secondly, you said that the business being won is various types of business, but can we assume that the majority is custody, since that's most of what Deutsche Banc's business was?

Yeah, I think that's the basis of the business, but the add-on services such as fund accounting and securities lending FX is associate with that, but, yes, you're right, the baseline business is custody.

Okay.

Great.

Thanks.

our next question comes from Brock Vandervliet of Lehman Brothers you may ask your question.

Tom you ended your prepared remarks by saying there were initiatives underway to evaluate the business processes, maintain your competitiveness.

Is that part of ongoing operations?

Are you for shadowing something more significant?

No, I think, Brock, we're not -- we're not -- that's not a foreshadowing of anything what I would call significant.

I think what I -- the message I tried to deliver with that is that notwithstanding our reputation as being a very efficient shop, we clearly are looking at and have taken on some outside consultants which is a bit unusual for us, but we know that we have given some challenges to some people who walked into our shop saying that they know they can do some things for us, and we're going to give them a shot.

And on a -- kind of a profit-sharing basis, so we've got a lot of - you know, our focus today has always been controlling our headcount, that is as I said is the basis of all other costs.

All other costs cascade from that.

So we've been able to be very, very stable in that environment.

Having said that, today's company, The Bank of New York today, is in fact a far more complex operation than it was even five years ago, and as we have built up the franchise and as we have developed interrelated, integrated services, we are looking at our business methodology, that the integration of those businesses, to see if there can't be some ways that we can take out some non-personnel, non-non-technology costs, and I think we've got a very good shot at that.

I've been very pleased with what's been offered so far.

Now we're going to execute that over the remainder of the year.

Good.

Thanks for the color.

Okay.

Maybe we can take one or two more questions

John Coffey of Citigroup, you may ask your questions.

Yes, good morning.

I notice you're beginning to break out the spread of equity linked and fixed income linked assets under custody, roughly, I guess, 25/75.

Could you speak to the revenue breakdown between those two products?

We have not offered that in the past, John, and so it certainly is not that 25/75 split would not necessarily be the same though on the revenue side.

Clearly, the equity link services offer an inherently greater profit margin.

How about the growth in the fixed income-related revenues, have you thought about maybe giving us some sense of that?

Well, we'll certainly take that inconsideration.

Let's -- we're trying to -- John, our overall effort here is kind of a -- let me fall back to one comment I made just a bit earlier, I think to Brock, was that we are a more complex organization than we have been in the past, just given, again, the assemblage of our franchise, and we have an intention of simplifying that effort, the way we convey ourselves to the public, and especially to the street.

So you will see more under -- have a better understanding of where is the basis of our assets, our business, and where the revenues are coming from, but we're not there yet, John.

Okay.

Appreciate it.

One more question, one last question, please?

Our final question is from Ken Usdin of UBS Warburg, you may ask your question.

Thanks, one follow-up.

Hi, Ken.

On Pershing you mentioned that you could do at least as well if not better on your expected synergies, I was just wondering if you have better clarification of whether that would be on the expense side or the potential revenue side?

And also connected with that if you have any better clarity on where you're expecting anymore of those synergies to come from that would be helpful.

Certainly the sin energies referred to are improvement on both sides.

We do see the -- certainly on the expense side, we have been able to accelerate some things.

We've been even able to start some things today.

We've had a good relationship with CSFB in terms of being able to do certain things that we would be allowed to do before close.

We've even enhanced on the revenue side, Ken, we've been able to enhance the services that we offer to Pershing's clients today.

We have already begun doing some FX work with Pershing, so that we had not anticipated being able to do until after the close, but we really have been able to start that already and begin to have momentum, so that specifically would be one thing, specifically, that we have been able to point to.

But in each and every case, as we've gotten in to it, we at the very least confirm our diligence during the bidding process and feel quite confident that we will be able to deliver.

Okay, great.

Thanks.

Ken.

Thank you.

I think that wraps up the press conference or, rather, conference, with regard to the first call, to the first quarter asset performance and we appreciate your attention and interest and again we will continue this format going forward.

John?

See if you have any questions on a follow-up basis, please contact John Roy today or myself.

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