Canadian Imperial Bank of Commerce (CM) 2002 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the CIBC fourth-quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session.

At that time, if you have a question, please press the 1 followed by the 4 on your telephone. As a reminder this conference is being recorded Wednesday, November 27, 2002. I would now like to the turn the conference over to Cathy Humber, Senior Vice President Investor Relations at CIBC. Please go ahead, ma'am.

Thank you very much. Good afternoon and welcome, everybody. We appreciate the fact it is a busy day for you all so we will try to wrap up our Q and A by 3:15. We will, however, be available to answer further questions at the end of the day. Speaking to you today are John Hunkin, Chairman and Chief Executive Officer, Tom Woods, CFO and Wayne Fox, Vice Chairman Treasury Balance Sheet and Risk Management. On hand to respond to questions are Dan Ferguson, DBP Credit Risk Management, David Kassie Head of World Markets and Gerald McCaughey head of [INAUDIBLE] management.

Before handing over to John Hunkin, I would remind our listeners that our comments today include forward-looking statements about CIBC's operations and business lines. As detailed in our release, these statements are subject to risks and uncertainties that might cause actual results to differ materially from the expressed expectation. You should consider these statements carefully and not place undue reliance on them. Thank you very much and I will turn the call over to, John.

Thank you very much, Kathy, good afternoon and welcome, everyone. 2002 was a challenging and ultimately a disappointing year for CIBC. A weak economic environment in the U.S., deteriorating capital markets, bad corporate behavior and global political tensions combined to make the year one of the most difficult I have seen in my 33 years. And CIBC had its own challenges. And I want to let you know we are very much aware of the issues that we are facing. We have taken several decisive actions to reduce risks and earnings volatility.

In October, we issued a press release identifying the key features of our fourth-quarter results and some of the actions taken. A provision against the closing of our U.S. electronic banking business, a number of restructuring initiatives, breakdowns in merchant bankings and other portfolios and a gain on the completion of our alliance with Barclay's in the West Indies and the creation of First Caribbean. As a result we reported fourth-quarter losses of $100 million and full-year earnings of $653 million.

Today, we are closing the books on fiscal 2002 and looking forward to what CIBC will be in 2003 and the years thereafter. We have set our financial objectives for the next three to five years. Among these objectives is a renewed commitment to further shifting our business mix: 70% in favor of retail and wealth, and we have made good progress in this front over the past three years, increasing our commitment to retail from the low 40% range in 1998 to the mid-50s range currently.

Our consumer businesses generated net income this year of $1.4 billion. Revenues of $8 billion are up 13% from a year ago. Many of the key decisions we have made over the past few years are paying off. Investments in training, technology, product development, and brand awareness, the acquisitions of Merrill Lynch and Tao [Phonetic], these integrations proceeded ahead of schedule and below budget. Market shares in key businesses, cars, mortgages and deposits continue to gain ground and President Choice Financial has met all of the high expectations we have had. We acquired over 1 million customers, up 40% from the end of fiscal 2001, and customer satisfaction levels continue to be very high.

In spite of the very difficult year for World Markets, we have had some successes. We ranked number one in mergers and acquisitions in Canada in 2002, in terms of number and value of deals. And we are year-to-date number one in equity underwriting in Canada.

In Q2, we undertook to reduce capital allocated to our large corporate loan book and to our merchant banking portfolio. We have reduced our operating cost base with further head count reductions and will continue to work at improvements in operating efficiency in World Markets and throughout the bank.

Our goal is to reduce economic capital from more than $5 billion to under $4 billion in the next three years in CIBC World Markets. The benefits of this action will be reduced earnings volatility and lower overall risk in our wholesale business. With the continued strong performance of many of our businesses, CIBC World Markets is well positioned to generate a more predictable and sustainable stream of earnings as markets recover.

We are focused on generating solid, steady growth, focusing on growth opportunities in our core retail businesses, continuing to be disciplined in our capital allocation process, 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 long term. We are committed to taking the steps necessary to get our performance back on track. I'll now turn it over to Tom Woods.

Thanks, John. I am going to go through some of the slides in the deck, not all of them, starting with slide 4. CIBC's fourth-quarter financial results were dominated by the issues we discussed in our prerelease on October the 21. This slide shows the actual results for these items versus the estimates we made on the 21st.

All came in close to the estimates with the main exception being the gain on the merger of our West Indies business that came in better than the estimate. Line 5 will help you compare the net income components in Q3 versus Q4. The first two lines show the NYAC effect of the restructuring charges and the gain on sale in Q4. The next four lines show the comparative operating earnings of our main business lines.

On slide 6, you can see it drove down further into the World Markets results. Breaking out the write downs that were taken in the CDO high yield and merchant banking books. And I will go into detail on these a little later.

Slide 7 helps reconcile our tax disclosure for Q4. On a reported basis, we had tax recoveries of $347 million. Excluding the unusual items, plus the portfolio write downs produces a tax rate of 18%. Still low compared to normal quarters. The reason for this is that even after adjusting out for the write downs, the earnings mix of our businesses was still skewed to low tax rate jurisdictions. Looking forward to 2003, in a more normal quarter, we would expect tax rate now of approximately 30%.

Slide 8 shows how strong our combined retail banking, wealth management and mid market banking has been over the past four years. We will be presenting information on this combined basis going forward so you will be able to more easily compare our performance to the other Canadian banks to include mid-market banking and retail. We, as you know, included and run it out of our World Markets business.

Slide 17, turning now to a review of our business line performance in Q4, you'll note that we have merged what we used to call retail products into the now enlarged retail markets group. Revenue and retail markets was up marginally in Q4 to $1.17 billion.

The first line, personal banking, is our customer segment for all retail bank banking customers except for those in Imperial Service. Revenue increased from $302 million in Q3 to a record $312 million in Q4, about 60% of personal bankings revenue was deposit spread and fees with the rest being sales commissions and trailers from the products groups. Deposit balances were up 1.5% on the quarter and 17% on the year.

The higher revenue this quarter was mainly attributable to fee income and higher FX revenue. Consumer deposit market share was 17.8%, flat on the quarter but up 0.5% versus a year ago.

Small business banking also had record revenue at $190 million with the increase over Q3 coming mainly from higher deposit balances which were up 2% on the quarter and 7% on the year. The outlook for personal banking and small business banking in 2003 is for high single-digit revenue growth. In the West Indies we began an equity account at the start up of a 44% share of First Caribbean International Bank, the merger of our West Indies operation with those of Barclay's. Two months into the quarter we begun the equity account. We were just slightly below the Q3 revenue run rate prior to the merger date and transaction costs pulled revenue down further even before the effective equity accounting for the last month of the quarter.

In 2003, we expect our share of First Caribbean's net income to fall a little short of our 2002 pre-merger run rate in the West Indies due to low tourism levels there, lower U.S. investment dollar rates and modest amount of immigration costs coming in front of a synergy that should pick up later in the year.

Cards had record revenue of $324 million, up 5% from last quarter and up 11% from Q4 last year. Interest income, which makes up well over half of cards revenue was up 5%, has balanced up 4% and higher revolve rates offset marginally lower spreads. The other main component of current revenue, interchange of the revenue we earn at the point of sale was up 2% in line with seasonally higher purchase volumes. Our current market share continues to be a strong number one at 21.5% of outstanding and 31.7% of purchase volumes, down .2 and .1 respectively versus Q3. For the next few quarters we see cards revenue flat to up, but loan balances and purchase volumes driven by the economy and spreads being driven by short-term rates, the higher short-term rates get, the lower our spreads.

Retail lending products revenue was higher at $137 million as retail loan balances were up nearly 3% on the quarter. Small business balances were up less than 1% and the student loan book continues to wind down. Spreads were up in both retail and small business. Market share on term loans increased from 16.7 to 17.3%. The outlook for this business continues to be very good as balance increases in our core book should offset any margin compression.

Mortgage revenue was up significantly from Q3 to to record $191 million. Most of the increase was due to gains on sale of mortgages to securitization vehicles, as well as hedging gains. The way we account for this causes revenue and mortgages to increase, more than offsetting similar charges in the other line at the bottom of the slide. Apart from this residential mortgage interest income, which is the largest component of mortgage revenue was up 7% versus Q3 as balances were up 4% on the quarter and 13% versus Q4 last year. Mortgage market share of 14.1% was up .3% from Q3 and up over a point from a year ago. Looking ahead, we don't expect to maintain this kind of revenue pace going into 2003, but we see good potential for continued market share gains.

Slide 18, net income and retail markets was $249 million in Q4, up $6 million from Q3, due to the $6 million in revenue increases that I just gone through. Offsetting each other however was $37 million in higher expenses, higher incentive comp relative to Q3 and higher technology and advertising costs, as well as $38 million in lower loan losses. So those two offset.

Turning to our second business group, Wealth Management, slide 23. In private client investment, our full service brokerage business, revenue of $305 million was down 9% versus Q3, with both Canada and the U.S. down the same 9%. Although price weighted trade volumes were down on the TSE about 25% and NYSE 15%, secondary market commissions for us represent only about one-third of our private client revenue and well below one-third in Canada. Apart from this new issue revenue in this group was down on the quarter and fee-based revenue was up.

Private client assets under a minute were down 1% in Canada and 3% in the U.S. versus Q3. In both cases not down as much as the market as new asset gathering substantially offset market deterioration.

The integration of the Merrill Lynch Canadian private client business we acquired in December 2001 is essentially complete and has been very successful. Integration charges in Q4 were less than expected at 21 million and will be minimal going forward. We have retained former Merrill Lynch investment advisors representing 93% of the group's revenue base. Earnings dilution from the acquisition was originally estimate at 44 cent per sare. Despite weaker markets in the last part of the year, our actual earnings dilution was 34 cents per share and we continue to believe it will be earnings accretive 2003.

With the former Merrill Lynch sales force fully integrated, CIBC has 1540 full-service brokers in Canada, number one in the country. In Imperial Service, our high-end retail banking advisory sales force, revenue in Q4 was down 4% from Q3 to $169 million. About 50% of revenue here comes from deposit margin. Deposit balances were flat on the quarter and spreads were marginally lower. Commissions and trailers in new product mix were somewhat lower as well.

Over 850 or 70% of our in branch advisors are now duly licensed to advise on and sell equities, bonds, third-party mutual funds and a full suite of CIBC deposit loan and investment products. No other Canadian bank has a duly licensed sales force and ours will grow to over 1,000 in 2003. The outlook for this business heading into 2003 is positive.

Wealth products consisting of our discount brokerage, mutual fund, GIC and asset management businesses with the weaker markets in Q4 all were down marginally except GIC's where spreads widened for the second quarter in a row after several quarters where spreads contracted. Assets under management were down 2% as asset accumulation came close to offsetting market declines. Although there were some shifts in our mutual funds from equity in our fixed income, our average MER was down only marginally. Our mutual fund share increased from 8.3% in Q3 and 8.5% in Q4. While GIC market share fell from 16% in Q3 to 15.6%.

CIBC was the only Canadian bank to have positive net sales in mutual funds in the quarter. The future outlook for wealth products should be positive, markets permitting especially in GICs where spreads apparently have bottomed out. Slide 24 show wealth management as net income of $43 million excluding the Merrill Lynch integration charges and restructuring shown in the footnotes.

Revenue was down $47 million, as I reviewed a moment ago, but expenses and costs were up 18 million despite lower revenue-based compensation, mainly because of higher technology and marketing spanned, as well as higher loss reserves in our U.S. private clients business.

For a third business group in World Markets is presented on slide 35. Capital markets revenue at $264 million with the lowest it's been since Q4 of 1999. The equity component, which represents about two-thirds of this number, was up 8%, but the debt component was down 20% versus Q3.

Although the first two months of the quarter were reasonably strong, October was weak. As you can see in the daily trading revenue chart in Wayne Fox's presentation. Within equities, revenues from equity structured products continue to be below the high levels reported last year and into Q1 of this year, however, revenue was up from where it was in Q3. A more stable equities market reduced liquidity premium pressure and was more conducive to new product marketing. Our equity agency business, however, was down versus Q3 both in Canada and U.S. in line with lower volumes on all the exchanges and lower new issue activity.

On the debt side, revenues were down 20% from Q3 as wider credit spreads and fewer new issues and related product structuring opportunities were the main reason for the decline.

Equity trading share in the U.S. remained constant at 0.9% and year-to-date market share and equity trading in Canada increased from 11.9 to 12%. Markets thus far in November have been better than in Q4 so this all goes well for a better Q1. Investment banking and credit products revenue as we indicated in our October 21st prerelease was down considerably to $150 million. As we indicated then, write downs to our CDO and high yield books totalled 161 million, 90 million worse than Q3.

Revenue from Canadian and U.S. banking, high yield, structure and credit and securitization was all lower while Europe had its second straight highest quarter. Market share fell marginally although we continue to rank number one in new issue equity year to date.

The U.S. market share rose in low issue equity and MNA but fell in high yield. Revenue booked in impending and investment banking was a better Q1 in this business than Q4.

Merchant banking had negative revenue of 209 million in Q4 on gains another income of 36 million and write downs of 245 million. I provided extensive detail in merchant banking during our October 21st prerelease webcast which is archived on our Investor Relations web site.

Commercial banking and mid lending advisory business in Canada continues to deliver a consistent revenue stream this quarter of 112 million. Loan and deposit balances were down marginally offset by somewhat higher spreads and advisory fees. The outlook here continues to be good for the near term.

Slide 36 shows World Markets' operating loss this quarter of $282 million. The $206 million decline was driven by the following in Q3: First, 250 million less revenue as I just reviewed, second, 126 million higher expenses, most of which was due to higher relative incentive compensation versus Q3 which you recall had a large year-to-date downward adjustment as well as higher cost of litigation. Third, 28 million higher loan losses and fourth, all of the above, offset in part by higher tax recoveries of $198 million. World Markets had 2617 full-time employees at the end of Q4 down 15% at the end of fiscal 2001 and down 21% from the end of fiscal 2000.

Slide 42, turning now to Amicus. We said in October 21st prerelease that we expected to take a restructuring charge of no more than $375 million to reformulate or close U.S. electronic banking business. As we announced on November 14th, we made the decision to exit the business and we have taken a restructuring charge of $366 million or $232 million after tax. The restructuring charge includes payments to our partners, Winn Dixie and Safeway, as well as the service providers, fixed asset write downs, leased payment on rental space and staff severance payments. Apart from restructuring, Amicus had a loss of $51 million in the quarter or 14 cents per share, 4 cents in Canada and 10 cents in the U.S. The Amicus earnings drag for 2002 as a whole, apart from the restructuring, was 65 cents a share, 19 cents in Canada, 36 cents in the U.S. The outlook for the Amicus earnings drag in 2003 is between 15 and 20 cents per share with the U.S. drag gone after Q2. In Canada we still expect to be earnings positive by Q4 of next year.

Longer term, we continue to believe that the illustrative financial scenario we presented on Amicus Canada during our webcast last December 7 was reasonable. Although we were careful not to call these projections, we still believe the assumptions referred to for the key drivers were achievable which should produce NYAT in this business of over $100 million by 2006.

Slide 43, as you know the main business of Amicus Canada is President's Choice Financial, with 212 pavilions and stores. PCF now have over a million customers, up 8% on the quarter and 40% on the year. A balance book between deposit and loans with funds under management is now in excess of $7 billion, up 58% on the year. PCF continues to acquire more than 25 new customers per pavilion a week despite the fact that 70% of our pavilions and stores have been operating more than three years.

For customers who like to bank electronically, PCP offers a better value proposition than traditional banking as well as offering loyalty points on [Loblas] products. Final slide 53 summarizes Q4 apart from the restructuring and other items I presented at the beginning.

In addition to the challenges we face this quarter on the wholesale area, this slide highlights three of CIBC's particular strengths. Good retail banking momentum highlighted by our dominant cards business and our strong market share gains and mortgages. Second, the wealth management strategy that is clearly differentiated by having duly licensed advisors in our branches and third as Wayne Fox will now discuss, a strong balance sheet. Wayne.

Thanks very much, Tom. Good afternoon, ladies and gentlemen. As Tom pointed out, our specific provisions for the fourth quarter total $280 million, down by $10 million from the third quarter and $123 million bet are than the fourth quarter of last year. For the year, specific provisions were $1.5 billion, up $400 million year-over-year and consistent with our earlier guidance.

Business and government credit specific provisions totaled $193 million, flat with the third quarter, while consumer credit provision decreased by $10 million for the fourth quarter. Year-over-year business and government credit specific provisions were $1.098 billion up $362 million with consumer credit specific provision totaling $402 million up $48 million from 2001. Fourth-quarter business and government losses were largely attributable to the telecommunication and cable and utility sectors which represents 80% of the business in government specific provisions.

In this regard, 527 million or 48% of our fiscal 2002 corporate credit provisions of approximately 1.1 billion were relate to a combination of Enron, Global Crossing and Teleglobe with the remainder of our provisions totaling $571 million approximately $143 million per quarter. Consumer specific provisions continue to be largely attributable to the credit card loan portfolio that represent 70% of the consumer opinion specific provisions. Overall consumer credit performance continues to benefit from the advancements in our underwriting and risk management account activities. General remains unchanged at $1.25 billion and year end 99 basis point, a 4-basis point improvement over the third quarter.

Overall, our allowance for credit losses totals 2.3 billion and a coverage ratio of 101% of growth-impaired loans at year end compared to 11% as of July 31. Our current view is the corporate credit market conditions over the coming year will remain reasonably challenging and we also anticipate the consumer credit losses will increase somewhat next year as we continue to grow our retail credit businesses. Accordingly, our guidances that we are currently forecasting fiscal 2003 credit specific provisions to reduce by 10 to 15% from the 2002 levels. That loan and acceptances, before general allowances, total 145.2 billion at year end up 4.3 billion year-over-year but $762 million decline from the third quarter.

Presidential mortgages as shown on the left-hand side of the slide continue to experience increased growth in the fourth quarter and still represents our largest credit product exposure at 66.6 billion up 1.4 billion from the third quarter and 7.8 billion year-over-year. Personal loans decreased in the quarter by 279 million, but were up 2.2 billion year-over-year.

Student loans totaled approximately $3 billion at the year end which is 508 million year-over-year reduction in keeping with our announced business strategy in that sector. Credit card outstanding continue to increase, up by 225 million in the quarter and 751 million or 11% since October 31, 2001.

Business and government loans and acceptances reduced by a further 2 billion in Q4 taking the fiscal 2002 full-year reduction to 6.1 billion. Since Q4 of '98, the business and government credit portfolio has reduced by $12 billion. As of the end of Q4, retail credit assets represented 67% of total net loans and acceptances, as compared to 61% a year ago and 58% as of October 31, 2000.

So to recap, we have shifted the percentage split of our loans and acceptances from 5842 to 6733 consumer versus business during the past two years. Thereby positioning our credit capital much more to our retail businesses going forward. This continued shift in our portfolio is reflective of our strategy to shift our business mix in favor of retail in conjunction with our ongoing focus on balance sheet and capital management.

We continue to view corporate credit diversification as an important objective and are continuing to place greater emphasis on more active loan portfolio management to groom the portfolio to improve returns and reduce risk. Our business and government portfolio continues to be reasonably well diversified from an industry perspective as evidenced by this slide.

Business services continues to be the largest industry segment at 55.5 billion or 11% of the portfolio before general allowance as displayed on the right-hand side of this slide. This is the reduction of approximately 500 million year-over-year. Reflecting the reductions in our business and government credit book year to date, other material industry reductions have been in the financial institutions, oil and gas, and telecommunication and cable sectors.

Specifically, with respect to telecommunications and cable, our Q4 exposure totaled approximately 4.2 billion, a decrease of 286 million as compared to Q3 and 423 million less than the fiscal 2001 year-end total. That impaired Telecom and cable loans totaled 628 million at year end up $374 million over the last quarter with 296 million of the increase relate together impairment of six credits to operating entities within the Adelphia group during the month of August.

As of October 31, we had 70 million in specific allowances against the telecom and cable portfolio, which when combined with 475 million dollars in borrower specific credit protection and hedges against extending loans and acceptances combine to reduce our sectoral exposure to 3.7 billion, down approximately 900 million year-over-year.

These next two slides provide detail with respect to our outstanding credit exposure to companies whose primary business is card generation and/or which have a material energy trading business generally as a byproduct of an operating pipeline activity. Outstanding loans and acceptances to this group of companies was $2.1 billion as that year end.

Please note in our third-quarter risk review, we reported that our sectoral exposure was 2.5 billion inclusive of guarantees and letters of credit which we consider to be an important part of this sector's credit arrangements; however, given the disclosure standard employed by other banks that continue to concentrate on loans and other acceptances, we have reverted to this standard in our Q4 disclosure to facilitate comparisons. The outstanding exposure of 2.1 billion is split 44%, 56% investment grade, non investment grade, 61% U.S.-based, 21% European-based, and 16% in Canada.

On the sub sectoral perspective, the largest credit exposure in this group within -- is with respect to power generation projects supported by power purchase agreements. This is closely followed by the diversified utility groups of companies. By focusing on the investment grade, non investment grade quality split, the more significant qualitative stress is noticeable in the diversified generation group of companies where 93% of the exposure is not non investment grade quality and the merchant generation sector, all over $87 million to non investment grade companies exposure.

Geographically, the current slide displays that our 1.3 billion U.S. credit exposure is 22% investment grade and 78% non investment grade, and that after hedges and credit protection, our net U.S. exposure is 1.1 billion of which $858 million is non investment grade. The current slide recaps the amount of credit protection we have purchased on our business and government portfolio EBIT year end. Of the 2.4 billion in credit protection against existing loans and BAAs, forest products, 279 million, utilities at 246 million are the largest hedged outstanding concentrations after telecom and cable at 475 million.

The overwhelming majority of the credit protection purchased is from single A-rated or better counter-parties.

Better portfolio management continues to actively manage down the noncore corporate loan book with less activity in the quarter due to tighter liquidity in the market and weaker prices; however, this quarter's activities included loan sales and purchases of credit protection of 39 million, a cost of approximately 2 cents per share. As that fiscal year end, we have 5% of our outstanding business in government loans credit-protected.

The current slide displays that through the combined impact of the previously-mentioned fiscal 2002, 6.1 billion reduction in business and government loans and acceptances, and the purchase of an incremental 2 billion in credit protection, we have reduced our outstanding net corporate credit exposure by 8.1 billion to 45.8 billion in the last year.

Our growth impaired loans decreased during the quarter by 17 million to 2.28 billion. The three largest new growth impaired credits recognized in Q4 are the previously mentioned six Adelphia communication operating credit, U.S. power generator at 129 million and a European wireless company at 109 million.

At October 31, 2002, net impaired loans were negative 13 million as shown on the bottom right-hand side of this chart, a reduction of 247 million over Q3, and 579 million as compared to the fiscal 2001 year end. A percentage of total loans and acceptances, net impaired loans were negative three basis points at quarter end.

Business and government net impaired loans increased by 287 million, while consumer net impaired loans decreased by 40 million during the quarter. Business and government net impaired loans before general allowances at that year end represented 2.6% of total business in government loans, 79% of the new classifications occurred in the business and government portfolio with the U.S. accounting for 76% of this amount. At 809 million, business and government new formations were 389 million higher than Q3. From an industry perspective, the largest levels of new corporate classifications were from the telecom and cable sector at 56%.

Now let's look at the consumer books. Our major consumer loan portfolio including credit cards continue to perform very well. Credit cards delinquency rates continue to decrease on a comparable basis excluding the recently acquired [Jennifer] portfolio. Including the [Jennifer] portfolio, delinquency experienced increased slightly in the fourth quarter but remained below Q4 fiscal 2001 levels. In addition, we continue to experience the benefits of implementation of more sophisticated account origination and management tools.

A level of net impaired residential mortgages shown on the right hand side of the slide increased slightly during the past quarter to 151 million and 23 basis points of net mortgage outstanding reflecting the strong employment market and appreciating house prices. Net impaired personal loans including student loans decreased 43 million over the prior quarter, reducing to negative 183 million as of that year end.

Turning to market risks, this graph displays the daily value at risk in our trading portfolios against our daily trading revenue. Note on know occasions did losses exceed the value at risk. Another way of looking at the performance of our trading books is to look at distribution of trading revenue. In Q4, 67% of trading days provided us with positive revenue. This graph shows the risk in our trading books over the past three years. Risk increased during Q4 as volatile market conditions were reflected in risk parameter. However, risk remains well below historical levels. In fiscal 2000, our risk averaged 20 million whereas this quarter it averaged 14 million. This graph shows continued stability in the bank structural interest rate risk at levels significantly below those two years ago. This is risk that primarily rules in differences of mature tease or repricing dates of assets and liabilities both on and off balance sheets.

Since early 2000, we have reduced this risk by over 40%, consistent with our strategy to reduce directional positions in the asset liability gap. And this last slide displays the risk weighted assets have declined by 19.9 billion since the end of '98. However it should be noted that wholesale risk weighted assets have declined by $30 billion with wholesale credit related by 18, trading by 8, and derivatives by 3, while retail risk weighted assets increased by 11 million, due to strong growth in mortgages, credit cards, and personal loans.

Q4, risk-weighted assets decreased by 5.3 billion, primarily due to the first Caribbean action and additions of wholesale credit activities and derivative products. That is the end of my presentation and Kathy, I will turn it back to you.

Okay. We are ready for questions now. Maybe we will start in the room and then we will go to the phones. Questions.

A number of questions. Net interest revenue in total excluding trading net interest revenue is up quite strongly in the fourth quarter. Can you explain what's going on? One other question I have is that in the past, you've had a portion of your variable comp that has been associated with your merchant banking. Was there any of that in -- in the fourth quarter? It looks like there wasn't any -- anything associated with that. How about I leave those two and I will come back with the others I have.

Not sure I know the answer to either of them, Michael. You say the noninterest revenue ex-trading --

Net interest revenue.

Net interest revenue. Margins actually haven't changed that much. I don't know if I have a quick answer for that, so let me come back to you. I wouldn't have thought that to be the case. Your second question was comp on merchant banking?

Yeah, ordinarily there has been a portion of it that's tied to merchant banking. And I am just wondering if there was any in the -- in the fourth quarter?

Well, the way we run our comp totals as we have discussed before is we accrue -- depending on business based on revenue, some businesses, we base accrue based on net income before comp and tax. Within merchant banking, we do accrue on revenue on a certain formula basis, but that is more than compensated by a sort of high-level review at the end of the quarter on judgment alley what is the appropriate amount of aggregate comp. It is fair to say it, like any other business, accrues instead of comp.

At the end of the day, a judgment is made and as you saw in Q3, we cut back incentive comp with the pace we'd been accruing in Q1 and Q2 pretty substantially. So there is no sort of hard wire, hard line incentive comp of any pool this year versus a more normal year. I don't know if there is anything to read into that, Michael.

Well, what I am really getting at here is not so much the incentive comp, it's the remaining nonoperating expenses of the waning. When you take out restructuring charges, when you take out incentive comps, if there was nor merchant banking incentive comp, it looks fairly normal.

If there was, and it would have been a negative number given the merchants banking, I would presume, then sort of your normal non interest expense looks like it was up very dramatically in the fourth quarter. So, I am just looking for a little bit of transparency on what's really going on here.

That's a different question and there is no linkage between comp on merchant banking to that. If you look at slide 52, this is the slide we provided for the last four quarter.

In an attempt to really get at your question, Michael, we do start with reported earnings, reported expenses of 2.73 billion in Q4, obviously he well you have up from Q3 given the large restructuring charges and take out all the unusual items and variable base comp so not just comp on any particular business as you are interested in merchant banking, but all variable comp, and you see comparable expenses two lines from the bottom from 1.59 to 1.62 billion. We look at it as tech spending just because we don't want to sort of penalize ourself for continuing to spend money on tech projects. Either way we are not happy with those increases. The two or three main reasons why those numbers are up, you will be able to piece it together if you follow through on my each of my four business commentaries are the following. Higher litigation of loss reserves, particularly in the U.S., private client. Higher tech spending which does get taken out on the last line. Higher direct mail and advertising within our cards and Imperial service business, in particular, and those are the three or four main reasons why they are up.

There is a few -- there is a -- more than the usual amount of one-time items that Q -- sort of Q4 attracts, but those are the two or three main things. The highest number being loss reserves.

Okay. And I still had some others. Built into your other other revenue, there is a commercial banking component for revenue from merchant banking partnerships and looks like your other other revenue is down very dramatically from the fourth quarter last year when you exclude things like your strategic gains and agency foreign exchange which is in there also. Can you tell us what's happened to the partnership contribution from merchants banking?

That's not a big number either. I am not sure what slide you are look at in the supplementary, Michael. Why don't you show me, what number are you looking at, Michael, then maybe I can help. That point is not a big driver one way or the other. You say other other, which --.

It's -- it's on -- it's in slide 4 of the sub pack, 308 -- this -- this quarter, but that includes 190 for the gain, the -- the gain on dilution, and it includes the -- the -- it includes your agency foreign exchange also. So when I take those out, you know, it's -- it's a lot lower number, but in the fourth quarter last year, it was a lot higher number. I am just wondering, you know, what's --

No, --.

Fourth quarter of last year was 17 million, right?

Ah --

A lot lower.

I mean, I think you are on the right track. Taking out the 190 brings that 308 down. You know, more or less in line, 30 million off the Q3 number. Q4, obviously, there was a lot going on in that quarter. I can't remember four quarters back what was in that number to be honest with you.

Michael, you are obviously interested in the detail this. Why don't we take this up offline and if there is anything material, we will put it on our web site for everybody else. I don't think there is anything that stands out there in that other other line. We need to give somebody else a chance.

The questions relate to slides 19 and 20, which are growth and net impaired. The net impaired came in better than you directed to on -- on the October 21 preannouncement. I think you said net impaired to be probably between 150 and 200 -- came in on negative. I am just wondering what -- what surprised you? It looked like there was large recoveries. I don't know if those are recoveries of sales, if Wayne could comment on that.

Are you confident you have classified everything that other banks have classified, others have talked about three or four big utility loans at the end of the quarter? And I guess just qualitatively, are you sure that everybody is short of on an apples-to-apples basis on qualifying loans?

Dan Ferguson responding. Good afternoon, everyone. Starting with the very last question in -- we cannot state with 100% confidence that each and every international bank or principal Canadian bank is categorizing loans in exactly the same fashion. Certainly, in the context of those credits which are subject to particular regulatory oversight in terms of shared national credit type processes, et cetera, in the United States, by way of example, you would anticipate that would be correct, but in the case of those jurisdictions or credit arrangements which aren't subject to the same formula approach, it would be incorrect for me to tell you it is confident that everyone is, you know, quantifying it exactly the same time in exactly the same way.

But returning to our specific situation, we are confident that we are appropriately classifying impaired credits in the sector or in -- in the book as at the end of the fourth quarter. In your very first remark, you -- you looked at the amount of recoveries and sales quarter-over-quarter and saw we have a positive impact there.

There was what I would describe as positive organic impact in terms of a bit more standard positive activity but a plus there that would represent most of the variance, Ian, was in the disposition slots merger of the Caribbean business, there was an amount of impaired credit in the third quarter that obviously through equity accounting no longer impaired in the fourth quarter.

The -- I guess what -- did something change for you to be off by a couple hundred million? It is obviously good to be better on net impaired, you about it -- I think Tom, it was 150 to 200 million of net impaired at the October 21 meet, looked at if it was quite a bit better. Anything late in the quarter that happened?

I think the -- I think directionally, there wasn't an account specific surprise, but generally speaking, going into the -- certainly giving the type of guidance we were giving in late October, we wanted to air on the side of conservatism and generically speaking, some of the types of surprise that is come out is as people report final numbers, et cetera, we did slightly better. But it wasn't an account specific basis.

How much of the Caribbean. How much of the reduction of -- was due to the Caribbean just being removed out of the 443 million of the status [ INAUDIBLE ] It would be in the order of 150 or so.

And I hear what you say on the -- you are not being able to say with a high degree of certainty, you know, everybody is classifying similarly, but, you know, others have talked about two or three big utilities, large power names that went down at the end the quarter. Are you comfortable that you were treated, from what you can make as an outside person, that the classifications are similar? Just by way of just general clarification.

Unless -- unless our client has either publicly disclosed liabilities and/or entered into a formal bankruptcy proceeding, either voluntarily or involuntary, we don't provide the name-specific disclosure which is why Wayne referenced the accounts he did, but he did reference the fact that our second largest impairment after Adelphia was a U.S. power generator, and I will say in the context of the two major failures that have occurred in Europe in the course of the fourth quarter or calendar third quarter, I guess, we were not involved with either of those two credits.

Thank you.

John, you mentioned in your introduction that you hope to move the business next to 70/30, move the business mix. I remember way back when, a couple of years ago you were talking about shifting the business mix and you indicated would you need an acquisition to get to those levels. Do you still believe that? And if so, give us a little color.

I think clearly an acquisition would help in that, but we are determined to shift our business mix, and I think that given the action that David Kassie is taken and reducing capital in that business is we said we would be prepared to live with a lower but more stable earnings base in -- in World Markets.

So part of this, you know from we continue to build our -- our retail business, as we intend to, and if the wholesale business is not growing at the same pace, I think we do have a chance of getting closer to that 70/30. But certainly, we will be looking for, you know, opportunities to add to our -- our retail businesses as we did with the Merrill Lynch and bringing in the rest of Tao [Phonetic] which has been a very successful operation so far. Let's go to the phones and then we will come back to the group here. From the telephones, any questions?

Thank you. Ladies and gentlemen, if you would like to register for a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, place the 1 followed by the 3.

If using a speaker phone, please lift your handset before entering your request. One moment please for the first question. The first question comes from Jamie Keating of Merrill Lynch. Please proceed with your question.

Hi there, guys. I wonder if I can ask Wayne just for little color on the single-name exposure policy, where we sit on it, and now it -- excuse me -- if it's changed at all or if not, how it is applied across all the products, specifically understood how you feel whether there is any exceptions at this point and how many to what extent there are.

Dan Ferguson responding to the question. With respect to the -- the policy concentration limits, over the course of the early part of the third quarter, we did promulgate further reductions in terms of our hard credit hold policy limits which are graded by quality of risk rating, ie. the higher the risk of the account, the lower the appetite from a policy limit perspective, and that was done both for risk reasons, but consistent with the continued focus both on a reduction of capital and a ever-increasing focus on underwriting and distribution of risk.

We do have exceptions to concentration policy limits. They tend to be dominated by the higher quality-type accounts. They tend to be reflective for the most part around short-term transactions where the clients are making a substantial acquisition, assisted by some bank financing, and where we have a tangible plan either through the distribution or secondary trading or replacement by capital market facilities to reduce those -- those levels.

Certainly, in the context of the rating agencies, understandable interest on this point, we -- we have been very focused on reducing both the number and dollar amounts of those concentrations, and we have been making good progress in the past couple of years, and we intend to continue to progress down that path over the next two to three years.

I guess I would appreciate if there is any chance to get an idea of what percentage progress you may have made. If you can't give us a dollar amount, just in terms of how much they have come down.

They are directional, but would say in the order of about 35% in that range, Jamie.

Thanks, Dan. Could I just quickly ask of Tom, unless it has already been explained and I missed it, the margin in the quarter, a loan spread. Measure of right-of-ways. Looks pretty good. Can you just comment or give us a little more color on the mix impact or otherwise? I apologize if it is redundant and I missed it earlier.

Yeah. Jamie, Michael was trying to get at this. The published NIM is 194 up from 182. You know, I said every quarter, published NIMs don't mean anything. You have to take out the fixed assets, even the trading assets and add back securitization to get a sense of what's really going on. When do you that in Q3, it was 260 and in Q4, 261.

So basically nothing has changed. I mean, the BA went up in the middle of the quarter and came back down. As I said, in my presentation, within you look through business by business, the card spread went down a bit, GICs went up, personal loans went up, mortgages and deposits were pretty flat. Not much of a story on spread for us at all this quarter.

Thanks a lot. I appreciate it, Tom.

Thank you. The next question comes from Michael Knoll of Bloomberg. Please proceed with your question.

Hi, how much did you pay to Safeway when you exited that relationship?

Hi, Michael, Tom Woods. We haven't -- we haven't broken down the individual numbers, Michael. We have disclosed, as you may have heard me say, a total restructuring charge of $366 million. But we haven't -- we don't plan to actually break that down any further.

Okay. Can you give a sense of -- of the percentage maybe or around there or something around that of -- how -- what -- what share of that 366 would be payments?

No, we really aren't going to get into that sort of level of detail, Michael.

Okay. Thank you.

Thank you. The next question comes from Melanie Ward of RBC Capital Markets. Please proceed with your question.

Thanks very much. I wonder if we can get an update on the merchant banking portfolio, 2.5 billion at year end. We have a couple of quarters of course with write downs. Can you remind us what where you are goals are in '03 for the size the portfolio, where you would like that to go and how you see that performing?

David Kassie is here and he can elaborate. I will remind the group as you will know Melanie in Q2, David announced over next three years our objective was to take that portfolio down by 33%. We don't have, you know, year-by-year, quarter-by-quarter goals.

What we have said as you heard me said on the 21st, we have no plan to sell assets and become -- and be seen in the market as a distressed seller. So David, I don't know whether you want to add anything to that?

Yeah, at that time I think I made those remarks in last -- this year in Q2, the portfolio was in the order of approximately $3 billion. As you can see now it is around $2.5 billion. So our goal being a third is to get the $2 billion, but it was over three years. And a lot of it just has to do with bulk sales, bulk sale opportunities.

We did do three trades this -- during the last 12 months, two larger ones and one off. And we are working on several initiatives, and if we can get them done at a good price, then you will see a lot of progress this year. And if we can't get them done at a good price, then we will wait for a good price.

So we are pretty confident we will hit our objectives over the three-year period, but we are not going to sort of lose money when we think we can accomplish that goal over the period we stated.

Great. Thank you. And I have a question as well on the trading revenue versus risk slide. Wayne, you had talked about one-third positive days -- two-thirds positive days and one-third negative days. Do you expect that to change going forward?

I would like to think that the hit ratio would get a little higher, Melanie. This has been a difficult environment for the trading fraternity. But I think they have actually performed quite well given the circumstances. We would like to think that we can do a little better than that as -- as a hit ratio.

So I think if you were -- if you made that inquiry of our trading room partners, that's what they would say.

Thank you.

Thank you. You have a follow-up question from Jamie Keating from Merrill Lynch. Please receive the question.

If this was disclosed again, I apologize. Written credit protection versus purchased. I wonder if you can just update us?

Dan Ferguson responding. So the question is, could we please disclose credit protection that we've written through our credit portfolio management group. As that the -- as that the year end, we had written outright protection in -- in the order of approximately U.S. 400 million dollars and that would be on 60 credits. They would be dominated by large -- they are all very large principally involved in pharmaceuticals, large food retailing, and industrials.

Our approach in this area is to not take on more than U.S. 25 in any one name, and we focus on those names being of investment grade quality according to our internal rating, the public debt ratings, and the KMV expected default factor index.

Sorry. Thanks, Dan. Can I just get a sort of geographic indication as well perhaps, Canada, U.S. or otherwise?

It would be approximately 80% U.S., 10% Canada, 10% Europe.

Thanks a lot.

Thank you. The next question comes from Susan Cullen of Dundee Securities. Proceed with your question.

Thank you, certainly this year you did down sizing in your U.S. banking operation. Do you feel that the point that you have right sized that operation or is there any risk of further down sizing going forward?

David Kassie. We feel that we have for the environment that we are in. I mean, clearly from there was a material decline from where we are, even now, then we would have to look at that again along with the rest the industry, but our planning was around 2002 revenue levels and no better, and basically a model that said we want to be no worse than break-even in every business.

So that's how we have constructed the configuration that we have right now.

Thank you.

Thank you. Ladies and gentlemen, as a reminder, if you would like to register for a question, press the 1 followed by the 4 on your telephone.

We are going to take another question from the room here.

I have two questions on the -- on the retail side. I think you said that you expected your provision for consumer credit quality next year to go up slightly. But if you look at the provisioning in retail markets in quarter, it was down quite a bit. I am curious if you can talk about that.

And also, just a technical question. If I calculated the margin correctly in the retail banking division, it looks like there was quite a bit of compression. I am not sure if that was the Caribbean rolling off or not, but I am curious if you can address that as well.

Dan Ferguson responding to the first question. In terms of the -- the quarter -- the quarterly seasonality, our provisioning on the retail books is portfolio modeling scenario-driven. And effectively, through the first three quarters, it is effectively a mechanistic exercise -- mechanical exercise, sorry.

Then in the fourth quarter, we want to ensure a complete true-up with respect to that provisioning. And in the case where the environment has been good there are a case where our own management tools have been successfully implemented as Wayne has highlighted, we have effectively a positive variance in terms of actual versus model. But that -- that to be fair would be effectively an annual dynamic, but it is recognized in the fourth quarter.

As Wayne highlighted, given the sharp incremental growth within our retail credit portfolio within the past two years, given our business objectives around that segment in terms of building the retail business, including the credit products, we think it is appropriate from a -- from a forecasting guidance perspective to indicate that all of the things being equal simply through an accretion in that portfolio, we would be expecting some degree of increased provisioning to occur in the normal course.

From the margins, Heather, I would have to sit down with you and go through it with you, but I see retail margins essentially flat 260 to 261. West Indies wouldn't have been a reason for that. It only fell off for one month of the three months and is very small. It would have had a negative effect but not material. Maybe we should just follow up.

Quentin and then Michael.

Ed, just a few questions. I guess for -- I guess for Wayne. The risk assets in the quarter, there was a significant fall looking like in the trade securities at the average balance sheet was pretty stable during the quarter.

Just wondering because that's a number 2 basis that came in higher than expected on the prerelease date, is there something going on inside there that is going to continue going forward or is it -- adjustments just at quarter end. Can you give some clarity to that?

Couple of things. First Caribbean being one of them that had an effect in the context of the quarter. We proactively manage our leverage ratio and given the moving parts we were trying to forecast where we come in and we wanted to make sure we got safely in the 19 times range give or take. As you can see there were a lot of puts and takes that had to be considered.

So I -- within abundance of caution, I wanted to make sure we were safely in line on that ratio. Keep in mind that we were well inside of those -- those targets for the whole fiscal year. It wasn't something that was of a concern other than just for -- for the quarter-end reporting. We anticipate to be actively doing the same going forward.

Okay. And then -- David, both questions I guess imbedded. Given the bank now is kind of -- kind of reporting commercial banking up into a retail framework, and you have been talking about what you think CIBC World Markets can deliver in terms of earnings, you know, it was a billion, then it got adjusted to 5 to 600 million at a run rate, which I always thought included commercial banking.

Can you give us an update on where you think that might be, and then, also, on your -- on the merchant bank, clearly in this year, it was significantly below due to the market conditions what you historically said you could deliver, you know. How is that going to impact, I guess, your outlook in terms of 500 million to 600 million and reducing merchant bank and reducing corporate loans?

Well, first of all, commercial banking does still report to me, and I think the effort that Tom has made is to be able to allow the analyst community to compares apples-to-apples with the other banks. I think that was reason why it was presented that way. It's about $100 million of bottom line depending on the year. Hopefully we will be doing better than that so you can add and subtract any which way you like and it was included as part of that $500 to 700 million was the range actually given for what I called not great but reasonable color -- mid-level market conditions. So if you were to exclude commercial banking from that, it would be give or take $100 million of bottom line. The second part of your question, I think, was about merchant banking. You correctly pointed out our $200 million of net revenues this year positive were substantially below where our targets have been taking the book from $3 billion to $2 billion. We would clearly go from the 600 to 800 range that we were previously targeting, 300 to 500 on average over the cycle.

Clearly right now, that looks like a challenging target for next year, given the environment that we're in. But when you work back from a 20% IRR on that type of assets over a cycle, I would still be my expectation and would be built into that 500 to 700 would be probably at the lower end of that range and those are net revenues.

So --.

As opposed to bottom line.

If I can follow-up to your comment about -- when you were looking at, I think, the interest -- if I looked at the revenue side at CIBC World Markets for 12 months '02, you said if you used a flat number -- if I looked at the expenses, you felt you were comfortable with your expense base, giving a mind-set of flat revenues for '03, IE the cuts you made in the expense base given the flat.

The question was about the U.S..

Okay. If -- if you've -- I guess from an expense base perspective, if revenues range $3 to 5 billion and we allocate full provision reduction that is being expected by the bank, 10% to 15%, all allocated to you, ie., retail remains flat in terms of PCLs and get a 10% to 15% reduction in your expenses, the bottom line looks to be about zero for '03.

I caution a couple of things, those 3 billion of revenues are a number of balance sheet write downs which we hopefully wouldn't anticipate repeating in 2003.

So would you not be looking at flat revenues? You would be looking at material up by virtue of their balance sheet.

What I would describe as "operating revenues" as opposed to what hopefully were one-time bottom-of-the-cycle outside write downs.

Michael and then --.

At year-end, can you tell us how much power related net MPO number was? It is not in the package.

And also, how much did you have in the way of fallen angels in the -- in the fourth quarter? And was the loan that was classified among the fallen angels or was it already non investment grade or were there any other power loans that were classified in the quarter that were in those fallen angels. In other words, did you classify any fourth-quarter power fallen angels.

And finally, can you give us an update on the student loan situation? Sometime back, you took a very large provision against this sector and can you tell us what's happened since then in the way of exposures and the allowance.

Dan Ferguson responding to the first question. Power generated energy traders gross impaired at the year end was 126. Net impaired 56, and the -- the account that we generically refer to was indeed a fallen angel.

Michael, on student loan, yeah, we did take a provision a couple of years ago, and that provision has proven to be correct. I mean, there was some question as to whether it was too much or too little. It's proven to be bang-on.

We continue to have a book of student loans of $3.2 billion, and that compares of a book of a little over $4 billion two years ago. We continue to offer student loans on an agency basis so it is not a business we have exited completely. We have just exited the risk part of that business because when we did not renew the five-year contract because the risk return was skewed against us quite frankly, so that business is proven to be -- continues to be challenging for each of the three banks that's in it, just because of the collections challenge.

However, we have brought the collections in house and we are working with the students to extend term where there are challenges in meeting the payments, and it is by all, it has worked out extremely well.

This is David, just following up on Quentin's question. Trying to come at it a different way. You know, you had 3 billion of revenues in 2002. If I add back CBA and high yield and a variety of things, 3.4 billion over revenues. If you add 2.5 billion of expenses, it's hard -- maybe the expenses will be down, but I would imagine variable comp will be up from, you know, earnings -- if the -- if the oil market produces earnings.

So if loan losses are, you know, even a little bit below a billion, you don't make a lot of money in 2003. So what I am clearly trying to -- you know, understand what the run rate of expenses are and accept revenues are very variable. How should we go about thinking about earnings power in '03?

Well -- well, maybe I can start. I think you have to grind through each of the four sub businesses one at a time. Capital markets clearly has been -- I mean, quite even apart from the -- some of the -- the write down challenges that we face, most of those in the investment banking line, I think you have just got to go back to -- not even seven or eight quarters ago, but four or five quarters ago to see what kind of upside we can get in that business. So, you know, as I look at the sensitivities, clearly there is upside in capital markets if you believe we are near the bottom right now.

The investment banking and credit products have had most of the hits in terms of provisions on loans as well as the write downs to the CDO's and high yield portfolio. New issue equities with a fees have been low. MNA has been okay, not great. So, those are the two lines where you have got to believe there is some upside in anything other than the trough part of the cycle.

Merchant banking, David has already talked about, so I think everyone has just got to make their own judgment on both those first two lines, what kind of earnings power we can get, but clearly as you look back over the last ten quarters, the last quarter we have seen has been the worst of those ten quarters.

If I were to look at it and just strip out the merchant banking line and say we don't know what that is, it looks as if the run rate on revenue is about $700 million. You know, even in some pretty good reasonable quarters. And --

For which line?

Just total revenues, you know. If I go back -- I don't know, eight quarters and just keep stripping out, you know, the merchant banking, 800 million or 900 million dollars. I guess the reason I am sort of focusing on this is, you presented in the chart that you believe your base earnings on retail is 365.

Clearly, most people don't believe CIBC market will make any money at all over the next year. Are you confident that World Markets will make money in '03?

I'll take that then. More questions here. Any questions on the phone?

Yes, sir. The next question comes from Nick Salleli from Bancorp. Please proceed with your question.

I have a question on efficiency ratio. I did look at the slide where you exclude the variable comp and the tech spending. But I am just trying to get a feel for next year. Do you have a lot on the Cap Ex as far as technology? Because when I do look at, I do believe they include all those numbers. Where would you like to see your efficiency ratio for next year?

That's a good question Nick. Let me just point out that slide that I referred to where we take out tax spending and I know you are not implying this, but just to be clear. I mean, tech costs are costs like anything else. We just didn't want to fall into the habit of penalizing ourselves and motivating ourselves to starve the tech budget to hit cost ratios.

So we very much look at expense ratios with the tech spending in but we also look at it without that. At the moment, we are on a rolling budget process here at CIBC, which is sort of best practice in North America now. We've got a desire among the businesses to increase tech spending next year, which is probably no surprise for any large company; however, we are going quarter to quarter.

Last year, tech spending was up a little from the year before. We foresee tech spending being about the same this year as in '03 that is versus '02. You know, trying to pick a NIC's ratio and the question on the World Market side to me and David is very tough.

In the retail wealth and commercial banking side where the revenue stream is more stable, you can shoot for a mixed ratio. We would like to get it down to under 60 if we can. Two big tech projects we have undergone right now will provide in the next few months big synergies with the back costs that will help us get there. But consolidated is as much a revenue story, Nick, as it is a cost story.

One last question. On the Amicus, can I just clarify -- just confirm the 366 million restructuring charge, will that be the final and total cost of exiting Amicus in the U.S.?

Nick, we are going to have in Q1 a bit more earnings drag of Amicus, and as I said for the whole year, the Amicus drag, we expect to be between 15 and 20 cents. We believe it will be closer to 15, but we have provided that range just to be conservative. Some of the actual exit costs for Amicus U.S. did not CF1 O qualify under the accounting rules to be taken in this quarter.

Clearly, we are not operating the business and spending money to make money going into '03, so any cost in the U.S. will affect restructuring but just didn't qualify. Most of the earnings drag in Q1 will be continuing from Canada by Q2 next to no drag in the U.S. and overall, hope to get earnings drag down to 15 cents for the whole year and by Q4 to be positive.

Lastly, will you be using the same performance objective targets for next year?

No, we are in the midst of evaluating those targets. We have -- we have completed our three-year time frame, if you will, when we set the first targets. In terms -- share price is still our number one objecting objective. Some would say not an objective but the output of performance achievements, but clearly share price is very important us to.

I will give you a sense of what some of the topic areas are, we haven't finalized them but we will for the final report. Return in equity is very important. What I will say there is we are less likely to shoot for, you know, years where we have 20-plus returns so we are probably going to narrow that range down, and in those years as David and John have said in the past, at the top of the cycle, use those years to mitigate our risk, to cushion the down part of the cycle. We are going to be very focused on retail and wealth, top-line earnings growth. We would like to get earnings growth to work there -- revenue growth toward the 10% level.

Finally on costs, we are setting NIC's ratio for individuals businesses recognizing the market businesses is hard to do, but our overriding objective is to cost growth less than rate of revenue growth. On the capital side, no change to the tier 1 in total capital ratios and finally business mix, you heard John comment on that moments ago.

Thank you very much

Thank you. The next question comes from the line of Barry Cohen of Maverick. Please proceed with your question.

Hi, thanks so much. I apologize, a little late getting in on the call and I mace may have missed this. Did you give some sense of guidance in terms of the provision rates that one should expect by a major business line or in totality?

Dan Ferguson responding to repeat our earlier guidance, we expect our specific provisions to decline in the range of 10 to 15% year-over-year.

Thank you very much.

Thank you, ladies and gentlemen, as are reminder to register for a question, please press the 1 followed by the 4 on your telephones.

We will take one more question. Michael?

Given all the uncertainty, I think, that people feel about your recurring earning power, can you comment on your dividend policy moving forward?

Well, clearly, both in terms of dividends and I think for that matter share repurchase, those are things that we very much like to increase our dividends and repurchase shares if we have access -- excess capital, but I do not anticipate an increase in the dividend or repurchasing of shares during the course of the next fiscal year. I just think that in my perspective at any rate, I am not certain this recovery is really a recovery. And particularly in the United States where we have a significant book of business. And so, we are going to operate CIBC until we are clearly into a recovery in a cautious manner to ensure that we preserve the earnings that are available and maintain very strong capital base. Even going beyond 2003, though, do you feel that from the -- you know, sort of from the ongoing recurring normal earnings of -- of the company that, you know, that they are consistent with the type of dividend that you are paying now. Michael, I feel that we -- we are looking at right now a period of somewhere between 12 and 18 months to really know where we are in getting through this cycle. After that, I have every confidence in CIBC's ability to produce consistent and growing earnings at very acceptable returns to shareholders. So I -- I have every confidence from that.

Very good.

Well, listen, thank you all for those who came and thank you those on the phone and for all of you who are celebrating Thanksgiving this weekend, have a great one.

Thank you, ladies and gentlemen. This does conclude the conference call for today. We thank you for your participation and ask you that you please disconnect your lines.