Canadian Imperial Bank of Commerce (CM) 2002 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the CIBC third quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. You will be invited to participate in a question-and-answer session. At that time, please press the 1, followed by the 4. This conference is being recorded, Wednesday, August 21, 2002. I would like to turn the conference over to (Cathy Hummer), senior vice president of investor relations at CIBC. Please go ahead.

Thank you very much. Welcome to the third quarter webcast and conference call. Here to speak today about third quarter results are John Hunkin, chairman and CEO, Tom Woods CFO, and Wayne Fox. Following their remarks, we will open for questions. In the room to help answer are David Kassie, Joe Benum, head of retail markets, (inaudible) and Dan Ferguson, head of credit risk management. Please identify yourself before asking your question. For those in the room, please remember to depress your microphone switch. I would ask you to take note of forward-looking statement in the slide presentation. Some of our comments may include forward-looking statements that are subject to a variety of risks and uncertainties. Actual results may differ due to a variety of factors detailed in quarterly reports. Thanks for your attention. Over to John Hunkin.

Thanks. Good afternoon, everyone. I believe that we have clearly made some significant progress in our various businesses over the past several years. Also, it is very clear results for this quarter and for the year to date are unacceptable. Not withstanding very strong results in retail operations, which I will speak more about in a moment, further weakening in markets, diminished activity and further asset write-downs in merchant banking contributed to lower adjusted earnings of $222 million this quarter, or 49 cents adjusted.

This clearly is not indicative of what we believe the true earnings power of CIBC to be. In a period of economic uncertainty and general market volatility, we are very focused on the things we can control. Last quarter, David Kassie talked about the initiatives underway to reduce capital allocated to lending and merchant banking. These initiatives, along with determination to lower operating expenses in our corporate and investment bank, will be a high priority in the immediate future. Successful execution of these initiatives, combined with continued focus on effective management of balance sheet resources and vigilance in managing market risks are the necessary ingredients to ensure continued and long-term profitability for CIBC World Markets. On the retail side I am very excited about these businesses.

Earlier this week Joe Denam and (inaudible) updated our senior management team on results and prognosis near retail banking. As you will have noticed over the past several quarters many initiatives underway are already producing excellent results. Revenue and growth in the combined retail banking activities outpace the other banks in 2001 and gain in the first half of 2002. We have made clear progress on the expense front. Our retail mixed ratio improved from the worst of the group in 2000 to middle of the pack in relatively short period of time.

Joe and Jerry have set ambitious financially for their businesses when we provide updated targets for the bank as a whole later this year, we will review them in detail. Our retail results in third quarter were again strong. Our retail businesses contributed high returns on equity at 43%. Card revenue is up substantially from a year ago and we remain dominant cord provider in Canada. Mortgage market share continues its favorable trend, uncommonly good performance in this business. Deposit growth continues year-over-year and market share is up 1% from a year ago, another large win in a difficult market. The integration of Powell and Merrill Lynch progressed on schedule. Dual licensing strategy has been successful

755 of our Imperial service financial advisors are duly licensed to sell all securities. Funds managed for FA have increased by 20% from one year ago. And we continue to be pleased with the development of our Canadian Amicus operations. Total customers in Amicus overall increased 9% this quarter to 1,172,000. In the U.S., we continue discussions with strategic partners that would assist in mitigating expenses going forward. I believe it is a little too early to become optimistic on the economic side. There are some signs there are improvements in corporate performance. However, overall, I think we are in sort of a wait-and-see mode in that front.

Wayne Fox will speak in a moment about our credit portfolio and David Kassie is here to respond to questions. Both will elaborate on the conservative approach we have taken in lending and merchant banking. CIBC is well positioned for upswing in the capital markets. In the meantime, we will continue to take action across our businesses to further protect our earnings in the short-term and enhance our growth prospects in the mid to longer term. We are focusing on growth opportunities in our core retail businesses, continuing to be disciplined in our capital allocation process by directing greater proportion of capital to our high growth retail operations.

Staying committed to the plan we announced last quarter to reduce the amount of capital allocated to merchant banking and the corporate loan portfolio by one-third over the next three years and taking additional steps to keep our cost structure under control while continuing to invest in technology and other programs critical to our success over the medium to longer term. I would like to turn the podium over to Tom Woods.

Thank you. Good afternoon, everyone. I am going to take you through a dozen slides on the deck, as I usually do. Slide 4, you will see the recorded earnings per share were 41 cents a share. Adjusted EPS which excludes integration cost for the Merrill Lynch businesses we acquired in December, costs incurred pre-September 11th, where there is (inaudible) about insurance coverage and proceeds from asset the EPS is 49 cents. Operating EPS, third measure we use, further excluding Amicus investment was 64 cents. Each of these EPS numbers is on accrual basis, cash EPS is 2 cents per share higher in all cases. Beginning this quarter, as you may have noticed in the material that went out and back to the start of 2002, CIBC expensing the cost of stock options and stock appreciation rights.

This had 2 cent per share drag on EPS year-to-date, but 7 cent benefit in Q3, as in Q3 the share appreciation rate benefit offset the expense impact of the options cost. So, our entire 2002 numbers will expense stock options and will reflect the change in share appreciation rates.

At the bottom of the slide, Wayne Fox will elaborate on metrics in detail to summarize at the bottom of the slide. Slide 5 summarizes how we assess the quarter. On the left-hand size on the positive side, continued good performance in retail banking in wealth management. Our balance sheet remains strong. Our cost, even after adjusting for reduction in incentive compensation, were below Q2 and 2 and a half percent above Q3 last year. On negative side revenues and capital markets were down. I will take you through the results of each business in detail later.

Going to the first of five business groups on slide 12, in retail products, revenue of 625 million, which you see in the bottom right-hand corner, was down 22 million from Q2, primarily due to higher commissions paid from this group to distribution groups by the lends products business. I will describe that in a moment. The first line, cards revenue of 308 million was up from Q2 and up 14% versus Q3 of last year. Within cards interest income makes up half of cards revenue, was down from Q2, as 4% higher balances were not enough to offset the reduction in spreads. The other main component of cards revenue is called interchange, that is revenue we earn at point of sale. It was up versus Q2 due to three more days in the quarter. Current market share in Q3 continued to be a strong number one, as John commented at 21.7% of outstanding, the same as Q2 and 31.8 purchase of purchase volume, down from 32.3% in Q2.

Direct mail campaign from U.S. competitors offering low interest rates for balance transfers are troubling in Canada. We have benefited from people returning to CIBC Canada. For the next few quarters revenue is flat to up from the near record level of Q3 in cards. Loan balances and purchase volumes are driven by the economy and spreads by short-term rates. The higher rates, the lower our spreads. Revolver rates tend to go up. That will be a positive for the current business. Turning to mortgages on second line. Revenue was the same as Q2 and up 5% from a year ago. In Q3, balances were up 5% versus Q2, higher cost of hedging activity offset this.

Spreads were flat in the quarter versus Q2. Mortgage balances were up 17% from Q3 last year, as residential share increased to 13.8% in the quarter, versus 13.6% last quarter and 12.8% a year ago. The strength of the mortgage product continues to be multi-channel, multi(inaudible) approach customer service reps, dedicated mortgage specialists and president's choice financial and first-line mortgage brands. We introduced new fixed rate product in the quarter called better than posted mortgage after successfully piloting it with our employees. Our approach will model that of better than prime variable rate mortgage to capitalize on market shift back to fixed rate product, should interest rates continue to rise.

We are bullish on the revenue outlook near term for mortgages, although spread compression could offset volume increases. Third line retail lending products revenue looks low this quarter, 124 million, because of the large upsurge in personal lines of credit in overdraft protection sold. Revenue in upfront sales commission is transfered to distribution businesses in wealth management when the products are sold. Retail lending products revenue benefits when the lines are drawn. Apart from this, net interest income was up in the quarter. 2% higher balances and the three-day effect offset lower spreads.

Market share on term loans increased 16.5% in Q2 to 16.7% and on lines of credit fell from 14.2% to 14%. The outlook for this business is good going into 2003. Balance increase should offset margin compression. On slide 13, you see the net income for retail products of 166 million, versus 196 million in Q2. Revenue was down by 22 million, which I just took you through. Expenses up 13 million, due to expansion in mortgage business, both in staff and technology, as we try to build on recent market share gains. Loan loss provisions were up 7 million, adding up to 42 million pre-tax or (inaudible) versus Q2.

Turning to second business group retail markets on slide 18. Revenue of $564 million, which excludes gain on sale of west indies holding shown in the footnote, was up from 513 million in Q2. The first line retail banking that is our customer segment for all retail branch banking customers, except the 15% under Imperial service reported under wealth management. 60% of retail banking revenue was deposit spread. The rest was sales, commissions and trailers from the product group. Q3 revenue was record 302 million, up from Q3. About half of the pick-up is flip side of what I described earlier under lending product, higher sales of overdraft move commission dollars into the retail banking group. The other half of pick-up was strong deposit balance growth, up 3% versus last quarter and 16% versus Q3 of last year. Wider spreads up 4% versus Q2 and three more days in the quarter.

Consumer market share was flat in Q2 at 17.8%, but up from a year ago. Second line, small business banking also had a record quarter at 188 million, versus 171 million in Q2 and higher deposit volumes, wider spreads and commission from the product groups, as well as three-day effect. West indies revenue was up 68 million, down a million from Q2, excluding 13 million gain on sale of small holding on the life insurance company there, acquired six years ago to leverage it into strategic alliance. In the business, higher spreads offset lower balances, resulting in flat quarter. We work with regulators (inaudible) and expect to close before the fiscal year-end. As stated in previous webcasts, we will have a dilution gain in excess of 100 million, which will benefit year-end. On slide 19, you see retail markets net income of 67 million, up from 50 million in Q2. This was due to 51 million higher revenue, as discussed, offsetting 23 million in higher expenses, primarily higher technology and marketing spend. The outlook for domestic businesses is positive for the next few quarters, west indies will likely continue to be affected by lower levels of tourism there.

Turning to third business group, wealth management, on slide 23. In private client investment on the first line, which is our full-service stock brokerage business in Canada and U.S., revenue of 336 million was down 11% versus Q2. Canada represents about 60% of the number, down 14%, and the U.S. down 6%. The trade counts were up versus last quarter. Lower share price offset this. Consequently, the impact was negative on net basis versus Q2 and in Canada numbers were pulled down by lower mutual fund and fee-based revenue. Private client assets under administration was down 6% in Canada and 10% in the U.S. versus Q2. Not down as much as the market as new gathering offset market deterioration. The integration of Merrill Lynch private business continues to go well and successful conversion of the tech and operation systems occurred on July first weekend. Integration charges in Q3 were less than expected at 44 million. We see this number dropping to (inaudible) million in Q4. Despite the weaker market, we believe we will beat the originally dilution expectation of 44 cents per share this year and that the acquisition will be accretive in 2003.

The outlook for private client will be market dependent. Our franchise continues to get stronger, particularly in Canada. The second line Imperial service is the customer segment in retail banking operations consisting of top 15% of our customers. Revenue was 176 million, versus 164 million in Q2. 50% of the revenue here comes from deposit margin, which accounted for most of the increase, in spreads and balances were higher in the group. Outlook for Imperial service over the next several quarters is positive, particularly at rates and therefore, deposit spreads increase. Finally wealth product revenue was up 4 million to 166 million, driven by wider spreads on GIPs after several quarters where spreads contracted. We haven't seen migration, as you might think in the fixed income or cash. MERs have held up well. GIP market share remained 16%. Mutual fund held steady at 8.3%, measured among all originators in Canada. The outlook for wealth products is positively, particularly in gip. Continued weakness in equity markets would affect mutual fund businesses despite good growth we are seeing there.

Slide 24, you see wealth management's net income of 84 million, excluding integration charges shown on the footnote. Revenue was down 6%, as I reviewed. Expenses, ex-Merrill Lynch integration was down 9%. Initiatives in the business continue to take hold. This allowed net income to increase over 13% despite lower revenue. Our fourth business group World Markets appears on slide 32. For the first line, capital markets business, consisting of sales and trading operations, revenue of $279 million was lowest since Q4 of 1999. The equity component represents 60% of this number and was down 10%. Debt component was down 25% versus Q2. Within equity, revenue from equity products continue to be below high levels reported throughout last year and into Q2 of this year, due to fewer opportunities for structured deals and poor performance, especially in the U.S. of strategy in a market seeing volatility swing dramatically, often into the high 40s. Volatilities are as high or higher than throughout the fall of 1998 and highest we have seen since 1997. For those of you less familiar with volatility measures, you divide the number quoted by about 15 to get the daily volatility. So, when someone quotes volatility of 45, that is equivalent to daily of up or down 3% everyday.

Our agency equity business performed well this quarter with Canada up and the U.S. down marginally. On the debt side, revenues were down 25% from Q2 to lowest levels we have seen since 1999. Significantly wider credit spreads and fewer issue related products structuring opportunities were the main reason for the decline on debt side. Market share and debt origination increase Friday 13 to 14% in the quarter and equity trading from 11.1 to 11.9 versus Q2. Equity trading fell from 1.0% to 0.9%. Outlook beyond will be market driven, particularly as it relates to equity volatility. By historical standards, this quarter is about as challenging as it can get. Until we see signs of more market stability, we will be cautious in management of our risk positions. Wayne Fox can comment on that.

upon second line, investment banking and credit revenue, up 278 million, 21% lower than Q2. In the U.S., which accounted for just over half the revenue, mna was up, revenue from equity, high yield, structured leasing, credit and securitization were lower than Q2. In Canada, equity and credit were flat and mna was flat versus Q2. Europe had a strong quarter with loan syndication up versus Q2. Strength was not enough to offset North America. Market share fell in Canada in the quarter. We are ranked number one in equity year to date. In the U.S. (inaudible) flat in mna and fell in high yield. In all cases the amount of volume in the market was small compared to Q2. Looking ahead, the pipeline across the board is not terribly robust. It is hard to forecast better Q4 than we saw in Q3. However, this can change if we see signs of market turn.

The third line merchant banking showed negative revenue for first time since Q4 of 1999. In Q2 we had substantial gains to off thereto set asset write-downs, that was not the case this quarter. We had gains of 54 million. We had write-downs of 154 million and net funding charges of 15 million. So, positive 54 million, write-downs 154 and funding charges we assigned to the business of 15. So, write-downs were lower than the 268 million in Q2, it was absence of divestiture opportunity that is drove the negative number this quarter.

Predicting the future in the short term is no easier here than for world markets other businesses. It may feel the worst is behind us, we continue to take a conservative approach in our quarterly asset valuations, the market environment remains challenging. Finally, commercial banking, midmarket lending and advisory business in Canada continues to deliver consistent revenue. This quarter 113 million. Loans and deposit balances were down, offset by higher spreads in advisory fees. Last quarter the outlook for this business is good for the near term as revenues will offset the drop-off in interest income from planned reductions in the portfolio we have identified. Slide 33, shows world markets loss this quarter of $76 million.

The 133 million decline from Q2 is driven by the following, 429 million less revenue. 212 million lower expenses, almost all of which was related to incentive compensation. 104 million in lower loan losses versus Q2. World market employee count was 29,039 at end of Q3, down 6% from fiscal 2001 and 11% from the end of fiscal 2000.

Turning to our fifth business group, Amicus, on slide 38. The loss of $54 million in Q3 compares to $64 million in Q2 for EPS of 15 cents per quarter, 3 cents in Canada and 12 cents in the U.S.. You may recall in December of last year we showed net loss in Amicus of 53 million, due to lower interest rates and less than expected fee income, the net loss for 2002 is expected to be somewhat higher than that 53 million, likely in range of 57 to 60 million. We see interest rates trending higher and expect to be earnings positive in Canada by Q4 of next year. In the U.S., we built 41 pavilions in the quarter to bring total number to 341 in the U.S. and 211 in Canada. We now have 177,000 customers in the U.S. and 995,000 customers in Canada. We have nearly 8.4 billion of funds in management of Amicus, (inaudible) in the U.S.. Discussions continue with perspective investments/business partners in the U.S.. As stated, we expect to have this revolved by end of fiscal year. Our objective continues to be to have EPS in Amicus no worse than 67 cents we had in 2001 and considerably less in 2003.

That concludes my review. Over to Wayne Fox.

Good afternoon. Thanks, Tom. As Tom pointed out specific provisions for third quarter totaled $290 million, down by $100 million from Q2 and 250 million from Q1. Business and government credit specific provisions totaled $193 million, also down 100 million from Q2. Consumer credit provisions were unchanged at $97 million. Q3 corporate losses were attributable to the telecommunication sector with credit card losses driving consumer specific provisions. Consumer credit performance continues to benefit from advancement in underwriting and higher risk account management activities, particularly in the credit card sector.

The general allowance remains unchanged at 1.25 billion and 95 basis points of risk weighted assets. Overall, our allowance for credit losses total 2.55 billion and provides conservative ratio of 111% of growth impaired loans. Based on anticipated future trends we continue to expect total loan loss provision for fiscal 2002 year in range of 1.45 to 1.5 billion consistent with guidance we provided last quarter. Given our year to date performance, the difference is our fourth quarter provisions should total 230 and 280 million.

In this regard, approximately 55% or 501 million of year to date corporate provisions relate to combination of Enron, global crossing and Teleglobe, indicating remainder for nine months to date have been 404 million or April 135 million per quarter. This experience combine wide consumer loss experience continues to be factored into full-year guidance.

Net loss and acceptances before general allowance totaled $145.9 billion at quarter end, up $5 billion compared to 2001. Residential mortgages as shown on left-hand side of the slide, experienced increased growth in third quarter and continue to represent largest product exposure at 65.2 billion, up 2.5 billion from Q2. Personal loans also continue to grow, increasing 466 million during the quarter. Credit card outstandings experienced increase in growth, up 475 million in the third quarter.

Business and government loans and acceptances reduced by further 612 million in Q3 taking year to date reduction to 4.1 billion since the fiscal 2001 year-end. As of the end of Q3, retail assets represented 66% of total net loans and acceptances as compared to 61% at July 31, 2001. This continued shift in our portfolio is reflective of our strategy to shift credit mix in favor of retail in conjunction with ongoing focus on balance sheet and capital management.

We continue to view corporate credit diversification as important objective and continue to place greater emphasis on portfolio management to groom the portfolio to improve our returns. Our business and government portfolio continues to be reasonably diversified from industry perspective, as evidenced by break-down shown on the current slide. Business services is the largest industry segment at 5.5 billion, or approximately 11%, as displayed on the right-hand side of the slide. This is reduction of approximately 300 million quarter over quarter.

Reflecting reduction in corporate credit book year to date, largest industry reductions are in the financial institutions and retail sectors. The next two slides provide detail with respect to our outstanding credit exposure to companies whose primary business is power generation and/or have a material energy trading business generally as byproduct of operating pipeline business. Our total exposure to these groups of companies was 2.5 billion as of July 31, of which 53% were rated investment grade.

Given that it is relatively common for companies to regularly access portion of credit facilities by way of financial guarantees and letters of credit, we confirm our reported total exposures include $576 million in guarantees and letters of credit, indicating outstanding quarter-end loans and BA were less than $2 billion. Double exposure within the U.S. is 59%, with Europe and Canada aggregating 39% and the rest of the world exposure, all of which based in Asia, limited to 50 million. By far, the most substantial credit strains within the defined sector occurred in U.S. market for a number of well publicized reasons.

The current slide decomposes (inaudible) exposure to U.S. car generators at energy trading sector in a number of different ways. The U.S. credit exposure is one-third investment grade quality and two-thirds non-investment grade. 61% of the U.S. exposure is domiciled at asset-owning operating level with 39% at the holding company level, generally represented by publicly listed company, which regulated and non-regulated businesses. We have hedged approximately 159 million of U.S. sectorial exposure, reducing out right exposure to 1.35 billion, covering approximately 45 different credits. With respect to telecommunication and cable, our Q3 exposure totaled $4.5 billion, increase of 381 million compared to Q2 and below fiscal 2001 year-end total. 246 million of the increase is related to two investment grade quality (inaudible) based in Canada and Europe with remainder of the increase attributable to North America cable T.V. sector.

Net impaired telecommunications and cable loans totaled 254 million at quarter end, up over the last quarter. As of July 31, we had 181 million in specific allowances against the telecom and cable portfolio, when combined with 508 protection and hedges serve to reduce exposure from 4.5 billion to approximately 3.8 billion. The current slide recaps the amount of credit protection we purchased on outstanding corporate loans and acceptance of July 31. Of the 2.3 billion purchased, products at 250 and oil and gas 243 million, are the largest hedged concentrations after telecom and cable. And the overwhelming majority of credit protection is from single a rated or better counterparties.

Portfolio management continues to actively manage down the non-core corporate loan portfolio. This quarter was less active than prior quarter due to less liquidity in the market and tightened pricing. Still, this quarter's activities include loan sells of 56 million at cost of approximately 1 cent per share. In total, 2.3 billion or 4.7% of outstanding business and government loans and BAs have been hedged. For this year, the business and government portfolio has reduced by 4 billion dollars. The amount of credit protection has been increased by 2.3 billion. Importantly, our credit derivative protection book, including single name in both transactions, including Imperial 1 and 2, is currently in the money by $150 million.

Our gross impaired loans increased by 147 million, to 2.9 billion. The three largest new growth impaired credits recognized in Q3 were privately owned European telecom at 163 million, GT telecom Inc. at 33 million and privately owned U.S. telecomo at 36 million. July 31, 2002, net impaired loans were negative 216 million, as shown on the bottom right-hand side of the chart, reduction over Q2. As percent of total loans and acceptances net impaired loans were negative 15 basis points at end of Q3. Business and government net impaired loans increased by 75 million, while consumer net loans decreased by 13 million during the quarter.

99% of the 999 million in net impaired loans July 31, were related to business and government credits representing 2% of total business and government loans. 63% of the new classifications incurred in the business government portfolio with Europe accounting for 46% of this amount, at 420 million, corporate credit new formations were 56 million more than Q2 and 341 million lower than in Q1. From industry perspective, largest levels of new corporate classifications from the (inaudible) represented 73%. Look at consumer loan portfolios.

Major consumer loan portfolios, including credit cards, continue to perform well. Credit card delinquency rates decreased to lowest level in two years. We experience benefits of counter origination and risk management tools. The level of net impaired residential mortgages shown on the right-hand side of the slide, continued to decrease during the past quarter to 148 million, as 23 basis points of the mortgage outstanding reflecting current strong employment situation and strong housing prices. Net impaired personal loans increased 4 million over prior quarter, reducing negative 140 million of the July 31.

Now, turning to market risk. In trading portfolios, this graph displays trading revenue against the daily value at risk. The line at bottom of the chart shows measurement taken. Risk has been broadly stable through the quarter. The retainer (inaudible) revenue and please note on no occasions did losses exceed the value at risk. Another way of looking at performance is to look at distribution of trading revenue. As you can see in Q3, 73% of our trading days provided us with positive revenue. Two add historical perspective, this graph shows risk over the last two and a half years. Risk continues to run well below historical levels. Please observe, in late '99, risk was between 23 and 26 million, whereas in the last quarter, it averaged 11 million.

This graph shows that we have also significantly reduced interest rate risk over the past two years. This risk results from differences in repricing dates of assets and liabilities on and off the balance sheet. Since early 2000, we have reduced this risk by 40%, consistent with our strategy to reduce directional position in the asset liability gap. Finally, this slide displays risk-weighted assets since the end of 1998, which have declined 13.6 billion. However, behind these figures please note since 1998, wholesale weighted risk assets have declined by 27 billion dollars. Wholesale credit related 16 billion, trading 8 billion, and derivatives 3 billion. Retail risk weighted assets increased by approximately 13 billion, primarily due to strong growth in mortgages, credit cards and personal loans. This is in keeping with strategy to redirect capital in favor of our retail activities.

Q3 risk weighted assets increased 1.6 billion due to strong growth in retail mortgages and loans. With those comments, back to Cathy.

Start with questions here in the room.

It is my guess senior management all over the world struggle with the balance between fluctuations to meet quarterly targets and also at the same time try to reward people and retain talent. I am curious if you can give us color surrounding the decline in your bonus accruals this quarter and discussions that went on regarding that decline?

I will give you, if you will, the overview comment and then David, maybe you want to comment with regard to world markets in particular. I mean, our approach to compensation probably doesn't differ a lot from most people in our business. You know, we want to compensate poor performance and that is how we have been looking at our compensation.

We accrue generally at a rate that will more than accommodate the bonuses that we will award at the end of the year. We want to make sure we have accrued enough. Based on our assessment of the performance year to date, we felt that we could reduce the bonus pool by the amount that we did. So, you are right, it always is a challenge in terms of what is fair and reasonable and what will meet not only expectations, but also retain people, going forward. At this point in time, we think we are adequately accrued. David, do you want to comment further?

Sure. Within World Markets, which is the majority of the compensation, we come at it from a variety of perspectives. We have bottoms up approach. We have accrual approach by business and trying to manage within the context of certain ratios. It has become evident through three quarters of this year, that we had accrued more than we would require, given the results within the ratios and the exercise that we have done to date. Obviously the year is not over yet. We will have to see what occurs. But, it is a result of that analysis that put the numbers where they are.

In your opinion, is there enough over accrual to carry you through next quarter if revenues stayed roughly at same levels? Or at some point does there have to be a catch-up to follow the accrual from this quarter?

You mean the reverse of that?

Well, it sounds to me you are saying there had been over accruals so this quarter you felt you could accrue lower levels. Should we take this level and forecast it forward for next quarter assuming revenues stay roughly the same or at some point will you have to increase your accruals?

Just to elaborate on what David was saying. We accrued at levels we thought we would require. In Q3, it became clear our targets, unless we have a market turnaround in Q4, were not going to be met, we were able to reduce the accruals from Q1 and Q2, which I think is what you are getting at Heather. Have a similar reduction in Q3 and furthermore, a number I want to be sure everyone understands, that the SAR reconduction is in the number at $50 million. If you were to try to decompose and figure out if we have the same revenue in Q4, you have to look at Q3 accrual and say that roughly $70 million of reduction in Q3 was in effect a cloth drawback of Q1 and Q2, plus reduction of 50 million from SAR. 120 or 130 million roughly, you can come up with roughly where we sit today in Q4.

Okay. That is great. Thank you.

We should have had him answer in the first place.

(inaudible). You are clearly making progress in Canada consistent with senior experiences like (inaudible) we saw in the U.K.. Is it fair to say that if you don't find a partner in the U.S. franchise by the end of the year, you will cut your loss and withdraw?

We are considering all possibilities. And clearly on the spectrum of possibilities, that is one. What we have committed to do at this point in time is to make a decision before the end of this fiscal year on how we plan to go forward with Amicus in the United States. We are having and continue to have a number of discussions with possible partners, possible people who can help us move that forward in the United States.

I would have to say that we are - we have obviously - it has been all of this year, we have been working at this. We are very close to being in a position where we hope we will make a decision. But, I don't want to speculate on what that decision is going to be.

Today would you say chances are over 50% you would withdraw?

I wouldn't say that because I don't want to say that. I can say this and it may be helpful. I would be confident in saying the dragon earnings next year will be less than 50% of what it is this year.

Fair enough.

And I mean, obviously hopefully, even better than that. I would be - I would say 50% reduction I feel confident with at this time.

Okay. Thanks.

Just to follow-up on that. In terms of the realm of possibilities, there is a partner, there is closing it down and then is there another realm of possibilities in between you would be prepared to run Amicus U.S. on a static state? Is that also an option?

Well, I mean, the problem with all these situations is unfortunately, you know, what you would like and what I would like is a black or white. It is this or this. Of course, usually the world doesn't operate this way and there is a range of possibilities, some of which we might not have thought when we entered first looked at this.

Clearly we have to accomplish one of two things. We have to be satisfied if we are going to move forward, we can move forward in a way that will be good for shareholders. You know, otherwise, we will have to look for other alternatives. And I don't think I want to enumerate what all that - you know, there are a number of alternatives that we can undertake. What I can tell you is just to repeat, we are close to getting to a decision. You know, I think David is spending a good part of his time on these issues. I feel, as I say, I feel confident we are going to get to a decision this quarter.

Okay. David, you talked about delivering an operating earnings or allocation between retail and wholesale 70/30. I am trying to get to that given the strength of retail numbers. On the page 2, you monitor the ratio, the retail and wholesale. Obviously this quarter at 144% -

That is not the way we wanted to get there.

If I look at retail at 397, 144% of 276, which is the operating number that you use. If I were to divide by .7, you know, the bulk of business delivered about 170 million of (inaudible). So, just trying to understand how does the retail business move from what was using the numbers, the loss in the quarter through that? Is it merchant banking has to come back? Trading? Where does this make-up come from? Is it just the capital market has to come back to the level of 2000? I guess, if I can get a better handle on that.

I will ask David to comment further. I mean, clearly a gain. Using this year's or this quarter's results, I don't see them as indicative of what world markets can produce at all. So, I will let David, but before David comments, I also made the statement consistently on this subject that clearly to achieve what we want to achieve, there is going to have to be more than organic growth, notwithstanding the fact I think we are making substantial progress in our retail businesses in Canada.

Also, I would just say on that subject, for a moment in terms of looking at the cost picture. We have been spending a lot of money on retail activities in terms of both project expenditures on technology and also I think in this quarter, at least, marketing budgets were higher. One thing I want to make clear to you. We are not neglecting our retail business as a result of the fact that overall our earnings have come off. We don't intend to do that. We intend to continue to invest in those businesses as we have been doing consistently for the last three years. David, you want to comment more on World Markets?

Sure. Is the question about where is more earnings power?

No. In fact, I think retail earnings look fine. It is then to get World Markets to create your mix, where your leverage points? Obviously credit improvement appears to be one key. But, basically it is the threefold one, as discussed at the last meeting.

We are taking loan down from a loan holding perspective materially over the next several years, if not faster. If we get there, we may keep going. So, I think you are going to see a lot less loan losses from us in the future and less volatility. We will have less economic capital in the business. That may mean some year to year give-up in revenue to reduce capital. But, the benefit is less volatility and less absolute loan losses. That is number one.

Number two is merchant banking. Again, we will take down in terms of the component of the mix. Because notwithstanding, we have had a good run until this quarter. It is when you have that, you have a fair degree of both absolute and relative volatility. That is something, again, we want to bring down in terms of the relative position. But, I can tell you this, we have done an analysis of our business, even at these low levels of capital markets revenues in particular in the U.S., but to a certain extent in Canada. We have done that analysis overlaying reduction in capital reduction giving effect to what we are talking about on the lending side and merchant banking side and what spits out of it is EVA neutral profitability model at the bottom of the cycle, even at these levels.

So, that is not a forecast. That is giving ourselves the comfort that this business model works, even in very difficult circumstances. So, I don't know if that answers your question, but it gives me and my senior management team the comfort we have a model that works at the bottom of the market, with a lot less loan loss volatility in those numbers.

I have a few questions. Let me start with one on Amicus, also. Recognizing that Amicus U.S. remains a drag, has its performance going relative to plan? Also, to original economics that supported these investments in the first place, in other words, do you still believe in the original IRR expectations that you had for these initiatives? I have some others after that.

I will start and hand over to David. The original economics compared to what we have done in the last year or so, the main differences are number one, interest rates. The predicted spread that anybody looking at a banking business, two or three years ago thought they might achieve, versus what is actually achievable in this kind of value proposition. It turned out to be much narrower than we have been able to achieve because of low absolute levels of rates. That has been compounded in our case because of the much slower pace of loan product build-up, in part because of our own risk controls, which we rolled out pretty slowly. But, prudently. As a result, deposits grew, even deposits didn't grow at the rate we thought. The loan side certainly didn't.

Those are the two or three main reasons why. The appeal of the product we think and David can speak to this, still remains. We have two very good partners with very large volumes of walk-by captive traffic. That is the franchise, if you will, are the main reasons we have fallen short.

Okay. I have a couple of other questions. First of all, one number question. Your misc revenue that 130 million dollar number in your accept elementary is quite a bit lower than it has been the past while. Can you just give us some color as to what is happening there?

Why don't you go on to the next one. It will take me a minute.

The other comes back to the question of incentive comp. What I am wondering is in your merchant banking business, there is a portion of the merchant banking revenue that ordinarily has been shared with the participants or partners in this business as part of your variable comp. What happens when you have write-downs in merchant banking to that variable comp?

Sure. Clearly there is nothing to share.

But, is there reversal of -

In terms of accrual there are reversal. On net basis, we are positive for the year, as on merchant banking. Net revenues are still positive for the global, and I guess other positions, as well. Philosophically, if I can answer generically, first of all, we do look at all aspects of contribution from various lines of business and individuals in doing that. Obviously, when it is positive, we try to reward them. When it is negative, frankly, they are not going to get anything for a negative result and may be impacted if they have shared on the upside. They will probably share on the downside, as well. In terms of the actual accruals, the way the accruals work, you don't end up with negative accrual.

Is it paid on an annual basis?

Oh, yeah. all the incentive comp that you saw, that reductions that you saw are part of the big - you know, the annual bonus pool. I think the other thing I should point out on that, there are very few, there are a few, but very few areas at CIBC where the bonuses are tied, are a direct drive, as such. Rather, businesses perform their accruals to a general, a major pool. Now, there is a major pool within world markets and pools within the rest of the bank. But, it is designed to create sufficient funding to provide for discretionary bonuses at the end of the year based on performance.

There are many times, I think it is fair to say, within the bank, some parts do well and others don't do as well. There always has been - there is never to my knowledge, except as I say in a few specific areas, where we don't manage the pool like as David said, one year someone might have a great year and another year, not as great of a year. Often the pools are shared across areas. So, it is not as quite as cut and dry as this may appear.

It is not cut and dry. In merchant banking, it has been more cut and dry than in some other areas.

No.

Maybe on -

There is a co-invest program, but that is different than what we are talking about, which is the bonus accruals. That was back to a fund. That was a result (inaudible). So, people put up their own money. That is a different - their own money and they participate that way. This is the losses. There is nothing to participate in.

In terms of bonus accrual, not direct.

On the supplementary in the middle of the page, worp30 million versus 187 Q2 and 182 Q1. Both Q1 and Q2 were high because of the mortgage securitization programs. On this particular income statement, those fees appear under other. If you go back, Q4, we were well below Q3. That is the main reason. Entry of third party billings. We do processing for third-party customers. That is one reason. There are a bunch of other things, but the two main reasons.

Reclassification?

No, in Q2 and Q1, the mortgage gains on the pools had large fees, which appeared in the Q1 and Q2 number. As a result, the absence in Q3 meant the 130, which consists of dozens of accounts that mortgage gain doesn't appear in the 130 because we didn't do same scale of deals.

Thank you very much.

Two questions. First of all, I would like to congratulate you on joining the ranks of the companies getting compensation. This relates to slide shown on page 54, which is (inaudible) trading exposure. It is higher than I would have guessed. I want to make sure we are what I was thinking about or what you were thinking about are the same issues. The investment grade in Canada and Europe, does that include corporations like Hydrogebec and Won and these types of things? I can't think of a lot of stuff in Canada and Europe that would be worrisome for energy trading and round trip and all the types of things we worry about.

They include companies other than crown corporations. There is some very modest ground corporations, utility exposure in the Canada number. There are Canada power companies, other than those owned by the crown.

So, I guess - so, you have included a whole bunch of things that are utility type generation of power?

Companies involved in the generation of power, as principal business and/or with the bias toward the U.S., as we discussed. Companies that are significantly involved in trading of energy, may not be involved in generation of power, but generally involved in trading of energy because of adjoining business pipeline ownership.

Follow-up on that. The second one is a broad question. When I listen to your review of the future, John, in terms of next year. You said the Amicus loss, you are confident will be reduced by 50%. You have a gain on the west Indies in Q4. You have the Merrill Lynch integration costs which are going away. You show close to 9% and yet, as you look ahead, looks as if you stepped back from buying shares. I wonder how I reconcile those two things when you think the world is getting quite a bit better and the stock price - I wonder why you are not buying back more stock?

Couple of reasons. First of all, we tended to take a conservative view in terms of our capital ratios. We have wanted to maintain a strong position. And I could give you - I can get very optimistic about next year, depending on what someone can tell me about how the economy is going to be. I mean, I think you can get very optimistic about significant improvement in loan loss provision. I think you can get more optimistic again, about our whole merchant banking activity both in terms of reduced write-downs and in terms of up-draft in values in our overall book.

Right now, at this point in time, certainly between now and the end of the year, I have a - we have a more conservative view in terms of what is going on. That is all that reflects is that view. Certainly we have sat down and taken a look at where could we be next year. You know, depending on what scenario you want to roll out, it could be very exciting from a stock price perspective.

But, at this point in time, we want to be here. We are also, as you all know, under review for - by Moody's in terms of potential downgrade and while we feel very confident that Moody's will decide that our earnings are sufficiently strong to maintain our rating, we think it is also important at the single A-rating to maintain strong ratios. So, there is really a combination. Wayne, if you want to add to that?

No, just reiterate the comments that the larger reason is the credit review, as you well know. Canadian banks are being looked at in the context of the earnings power and their earnings volatility in this environment. We are subject to that review. That will take place in Q4. We want to make sure we are in a strong position to defend that rating. It's important reputation issue, at the very least. It is something we don't want to give up at this juncture. We are confident we can maintain the ratio, but don't want to put ourselves in the position to take any chances on that review.

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Should we go to the telephones?

Ladies and gentlemen, if you would like to register a question, press the 1, followed by 4 on your telephone keypad. I will hear a prompt to acknowledge your request. If your question has been answered and you wish to withdraw, press the 1, followed by 3. If you are using speaker phone, lift the handset before entering your request. Our first question comes from Jamie Keating from Merrill Lynch.

Thank you very much. Couple of communication-type questions, if I may. Can I confirm, you actually are closing on the tour merchant bank portfolio or where does that deal stand? on the Arthur Anderson -

Oh, yeah. Where does purchase of the (inaudible) portfolio stand?

Right.

In progress. It is a relatively small number in the grand scheme of things. The color on that is it happens to be in the enterprise software area, which is an area of focus for our franchise. I think it has had an attractive price and attractive point in the cycle and the price reflects that. It is - not that big of a number in the grand scheme of things.

David, is that the rational of why we are working the portfolio down, you are willing for a smaller number on that? If that is the rationale are other transactions being considered? How do you reconcile with the goal of trying to get a billion dollars of exposure off the books?

First of all, none that we know of in terms of other portfolios like that. This was a bit of a one-off circumstance. And in terms of reconciling it with desire to get capital down, we are not going to stop this activity. It is still core to our strategy. But, we are just going to invest slower than we divest, both in terms of funds and fund commitments, as well as direct investment. When I look at the portfolio and what will naturally come off over the next several years and the pace of investment that we are undertaking currently, I don't think we will have a problem getting to the reduction we are talking about and adding the fund equation part of that where clearly we are doing - we won't be doing and are doing less funds and smaller amounts than we were previously. Those two factors should get us to where we want to be several years from now.

Thanks. David, one broad question. Last quarter we got a prerelease for higher earnings number. This quarter we didn't get a prerelease for lower earnings number. I wonder if we could discuss how you came to conclusion this quarter to not prerelease?

Jamie, it is Tom speaking. We would prerelease in the case where we felt the you should underlying performance of the broad business was different than the market expected. We felt this quarter that certainly among the retail businesses, as John has gone through and I went through, those businesses performed well. The capital markets business is probably performed worse than the Street expected. The Street expectations were down from the previous quarter. The merchant banking business was really the one area that caused the earnings to swing. We felt that as people looked at that, many of whom both analysts and investors in previous quarters, when we had high private equity sales adjusted our numbers down. Not to say people will adjust them up this quarter, but felt that was the main swing factor in our numbers.

So, that was the main reason we didn't prerelease, even though on an adjusted basis, the numbers were lower than street expectations. The main reason is the opportunity for divestitures just wasn't there.

Thanks, Tom.

Our next question comes from Mel any Ward of RBC Capital Markets.

Will your tax rate trend higher toward the average of the other banks? I see it starting to increase now?

Most of the other banks are in the low 30s, 32 or 33. It is hard to know what strategy the other banks may have that might cause their's to change. We don't see ours going into the low 20s. 28 to 30 is where we see it with the strategy we have in place. 28 would be a good number going forward for the next couple of years. 2004 and 2005, tax rates in Canada are coming down, so that should keep them down, as well. High 20s is where I see it.

You have a line of security losses of 156 million. I assume that the merchant banking is 116. What about the other 40?

The 116 is net revenue, which includes - may not have caught it in my presentation, including 54 million of gains. There are other small numbers in there. 156 is just the loss component of that. You get to 116 by netting off the positive of the gains.

Okay. Thanks. What are your airline exposures?

Dan Ferguson responding. In terms of our key airline risk exposures focusing on the U.S. specifically, we do have a 27 million dollar equivalent lease exposure to U.S. Airways. It features in our numbers for the third quarter, both in terms of impairment of the full amount, as well as impact on the provision. Our only other U.S. airline exposure is to the Canadian subsidiary of major airline for under $10 million, Canada. Otherwise, our exposures are through asset-backed transactions to principally the European flag carriers, nothing else of significance in the U.S.

Thanks. One last question on credit protection. You have bought 2.35 billion. What have you written or sold in the credit protection?

I will have to get back to you with that nothing. It is not relevant relative to the number we purchased. I will get back to you with the precise answer.

Our next question comes from Neil Matheson with Standard Life Investments.

Really for David. When you look over the last several quarters - I mean this quarter is particularly weak, but over the last several quarters, revenues generally in World Markets are down sort of again, roughly about half from their peak. Now, Global Crossing, I imagine I am sure is part of this. I am pretty sure it is not all of this. I know it is difficult operating environment. It strikes me downturn has been harder for CIBC World Markets than the Canadian peers and U.S. peers, as well. What are the specific areas, David, to which CIBC is exposed and CIBC is most heavily involved, which would help to explain this and might help us to understand in what kinds of conditions the world markets could do better.

Couple of observations. I think at least in part that is a fair observation, certainly compared to Canadian cam pat riots, we are coming off our higher peaks. There are apples and oranges there, if you look back. In terms of specific areas, as I look at it in particular focusing on Q3, clearly equity structure products, which has been a very profitable and remains profitable business for us, but it had absolutely superb results going back into 2000, and certainly to a large extent, 2001. Its Delta has been very large. That is not so much about whether equities are going up or down. It is about the opportunity in what I would call normal volatility ranges to do transactions and put in hedging strategy in place. And this year just has been very difficult to do that. So, that would be one of the areas that has had a large delta and peak of 2000, the corporate investment banking/equity area in the U.S. in terms of revenues would be by far the biggest Delta in our numbers coming off of those peaks of the trend.

The question was when do revenues revert, I guess it would be not necessarily in voyant markets, but in more stable equity markets, we would tend to do better.

So, in terms of the - I appreciate the volatility part because it is interesting, some people are reporting higher revenues as volatility rose and that wasn't the case for World Markets. On the corporate investment banking side, is it again, revenues are down, yours may be down more. Is there a specific market need? Is it in the high-yield bond area? That has been dismal this last quarter, as well as the last couple of quarters. Is that again, a key area for you guys?

It is one of them. The finance area, basically around financial sponsored activity is one of our - one of the focal points of our franchise. You know, while I can tell you the backlog is pretty reasonable both in North America and in Europe, transactions take longer in this type of market. Financing is more difficult. The pace of activity just slows down compared to where it might have been if you are looking back over several years. The other aspect of it is - while we are pretty low on the market risk side, if you are exposed directly or indirectly to either loan or high-yield positions that are being marked this last quarter, it is not going to be happy circumstances. You are going to take a negative mark when you have the type of announcements you have had and the type of credit spread you have had.

Maybe we will get that back in a better market. That is part of the picture, as well.

Okay. That would come through on the trading line, I presume?

Yes.

Thank you very much.

Our next question comes from Steve Cally can have TDN. Please proceed.

As we get toward the end of next quarter, what would be useful in regard to Amicus, some of what was provided in your December presentation would be a break-out of Canada and the U.S. to evaluate the [STWO-] if something does materialize? It is just a request. Number one question, on slide 56 of your presentation, on the telecom exposure, I think your net telecom exposure at the end of last quarter was 3.8 billion. It has been 1 quarter since you made the announcement you were planning on reducing corporate loan book by a third. I am disappointed to see net exposure increased this quarter. Can you explain why? That is number one.

Dan Ferguson responding to the question. Reflective of some of the color that Wayne spoke to in his prepared remarks, the key reason for the increase was two new credits, both in the eye-lac area, both in the investment grade of the risk area, one in Canada and one in Northern Europe. Both of which we expect to be short-term credits in light of the purposes for which they were borrowed and capital markets activities related to them. While we were and are sensitive to the increase in the gross exposure numbers, when we factored in aspects around credit protection in the like, we thought they represented acceptable risk return, credits to put on the books.

Okay. On slide 57, your credit protection adds 508. Was that number disclosed last quarter?

Yes, it was.

What was it last quarter?

Give me a moment. I believe it was about 475, approximately.

Great. Part of the good news story is retail. You have added quite a few bodies. Your expense ratio has gone up slightly, but not significantly. Is there more leverage? You seem excited in the introductory remarks in regards to retail. How much more market share do you think is attainable for CIBC, if you can quantify it? Otherwise, provide some verbal remarks in terms of potential there?

David, it is tom. Maybe I will start. The current market share, I think it is fair to say - I don't want to say our approach is just to maintain. With the market shares even maintaining that level of dominance obviously will produce good numbers. That is certainly the strategy. We may well try to rule out other products in addition to Amex numbers. I would like to see share go up. The question is how much more can it go. On mortgage side, we are very bullish. In a market where getting 10th of a point is a good achievement. We have taken a full point in the last year and spending more money on people in tech, as I said. We are close to being number one in the business. That is a business where we have a lot of energy based on the products we have coming out.

On the lending side, we are optimistic. We - it sounds like motherhood to say this. We are infiltrating (inaudible) starting to take effect. Retail loans are being shocked more. The technology they have to back it up and the risk support you have got is very important. I would be optimistic on the retail side. The deposit side, we have taken a point over the last year with wave in PGA accounts. I think there is opportunity there, as well. If I had to rank them, mortgage is number one, probably deposits and loans tied for second and cards if we gain maintaining, would be very good. Anything you want to -

I think it is a good summary. The only other point is we have alternate channel that is help us with the products within mortgages. We are selling other products through the channel. When you look at our total deposit market, that includes Amicus.

You are getting (inaudible) alternative channels.

Thanks.

On the wealth management side, one important thing to remember is that right now, wealth management is proceeding with tremendous headwinds in terms of market conditions. So, there is a lot of upside in we get any help from the environment, not withstanding that, we believe we will continue to make progress you have seen in the last few quarters and expect that to continue. But, there is very, very rapid upside available in wealth management because of the larger asset-base that we have as a result of (inaudible) and the Merrill Lynch acquisitions.

Our next question comes from Susan Cohen. Please proceed.

The level of trading risk is lower this quarter and has been trending down. Is this a permanent strategy? If so, what kind of implications does this have going forward?

Wayne Fox speaking. I think it is reflective of our concern of the near-term environment. I think everybody commented this morning on the volatility of the adverse conditions. I am impressed by those who stepped into the breech and done well in the volatile environment. We want to (inaudible) and live to fight another day. I wouldn't characterize it as permanent, it is a natural response to the difficult environment. I would say that the trading room managers have done well when you look at this relative to what went on in the Q4 '98 environment. We had similar volatility and liquidity. So, from my part, I think they are normal survival instincts that prevailed. They are doing the right thing. There will be opportunity to use (inaudible) earlier remarks, when we get more normal conditions, their response would be to get more proactive in tomorrows of adding risk to their businesses.

Ladies and gentlemen, reminder, to register a question, please press 1 4 at this time.

our next question is a follow-up question from Jamie Keating of Merrill Lynch. Please proceed. his line has disconnected. I show no further questions at this time.

Anything else? Michael.

Just a couple. I don't know if I haven't seen it or what, but you look at third quarter and saw a credit. You have the nine month number, what would the number be for the first two quarters?

Page 1 of the supplementary, if you go there. Yeah, page 1 of the supplementary, you see for Q1, negative 16, meaning stock went up that quarter. We have about 5 million SARs outstanding. You see it is flat in Q2.

I missed that. One other question. Going back to the energy power generators and energy traders. Could you outline for us how much of this growth is actually nonperforming? And what allowance you have against any of the nonperformers here?

The net impaired exposure within the sector is $20 million, approximately.

What is the gross?

Gross is not much more than that, approximately 25 or so. Modest impairment within the sector.

Okay. Just in terms of the migration here. To try to understand this a little better, you have a billion dollars of U.S. noninvestment grade exposures here. Where these loans or credits that were put on that were initially noninvestment grade or are they credits that have migrated to in the past little while to noninvestment grade?

In this particular case, there is a mixed story. There are companies, including companies performing satisfactorily within the space that were noninvestment grade when we put the commitment in place. But, it is also the case given your question, that there are a number of companies where when we put the initial commitment in place, investment grade quality, both due to such by both, external agency and risk rating systems, which have moved into noninvestment grade between negative migration focusing over the last three quarters.

Any way you could give us ballpark idea of what portion - what that split would be?

Rough approximation, but in this sector, working with roughly 50/50 approach would be broadly correct, given the materially of downgrades that have occurred over the last three to four quarters.

Thank you very much.

We thank you all for coming. And all these both here and on the phone.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a good afternoon.