Canadian Imperial Bank of Commerce (CM) 2004 Q2 法說會逐字稿

(Call In Progress) -- (technical difficulty) -- turn the meeting over to Ms. Kathy Humber, Senior Vice President, Investor Relations. Ladies and gentlemen, Ms. Humber.

Thank you very much. Good afternoon and welcome, everybody.

A couple of brief and now familiar items before we begin -- our conference call today is being audio-broadcast live on CIBC.com and will be archived on the site later today.

I would ask that you please take note of the forward-looking statement in our slide presentation, which I will summarize as follows -- some of our comments today 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 as detailed in our quarterly and annual reports.

Here to speak to you today are John Hunkin, Chief Executive Officer, Tom Woods, Chief Financial Offer, and Wayne Fox, Vice Chairman, Treasury, Balance Sheet and Risk Management. Also on hand to respond to questions are Gerry McCaughey, Head of World Markets, Sonia Baxendale, Head of Wealth Management, Jill Denham, head of Retail Markets, and Walt Macnee, head of Cards. When we get to questions, I would ask those of you on the phones to please identify yourself. With that, I'll just turn it over to John Hunkin.

Thanks, Kathy. Good afternoon, everyone. Corporate balance sheets and earnings in Canada continued to be in reasonably good shape in the second quarter. Market volumes and values have been favorable. Both of these positively affected our results. Continued weakness in the agricultural sector and the difficult rate environment had a somewhat negative effect. Overall, our results were strong.

Today, CIBC reported net income of 531 million for the quarter ended April 30 equal to $1.33 per share. This is up from 320 million last year, or 76 cents per share, which included a 22 cent per share write-down related to our Air Canada contract last year.

Our Return On Equity for the quarter was 18.4 percent. Our focus continues to be on maintaining a rock-solid balance sheet and concentrating on our core growth areas. The strength of our internal capital generation led to a Tier 1 capital ratio at quarter end of 11 percent, this in spite of actively repurchasing shares under our normal course issuer bid. This quarter, we repurchased 6.2 million shares, bringing to 8.3 million shares those repurchased to date. You may recall the program will allow us to repurchase up to 18 million shares.

I'll cover the remaining highlights of the quarter under the headings of our core key business strategy. First, risk reduction -- CIBC's large corporate credit risk continues to fall. Gross impaired loans fell again this quarter and we are aggressively working our way through our held-for-sale portfolios, as Wayne Fox will detail.

We did not reduce further our merchant banking exposure this quarter but continue to look for opportunities to do so. Market conditions are improving, our watchlist is diminishing and we expect to exit on more favorable terms ,going forward. Our target is under 2 billion in carrying value by next year.

Subsequent to the quarter-end, we issued a press release indicating that we had sold 2.3 million shares of global payments, which will result in an after-tax gain of 74 million in the third quarter. Equally important, however, is that we have entered into a series of collars with scheduled maturities ranging from March, 2006 to April, 2007. CIBC expects to recognize future-period after-tax gains in the range of $182 million.

Under productivity improvements, a number of expense initiatives are underway throughout CIBC. Our intention is to shift the cost culture at CIBC without affecting our brand strength or our governance initiatives. This quarter, we broadened the scope of governance initiatives and we continue to spend on flagship branches and improved customer service.

It is the case that our brand value has appreciated over the past two years but it is also the case that, this quarter, our productivity ratio increased from the first quarter. So, while lower than a year ago, we are redoubling our efforts to work towards a 66 percent mix target by the end of this year.

Shifting to business mix, third, we continue to make solid progress in shifting our business mix. Sixty-seven percent of allocated economic capital supports retail businesses at the end of Q2, up from 65 percent at the end of the first quarter and up from 50 percent at the end of 2002.

Fourth, it's all very well to build a best-in-class risk-management infrastructure but we have to pave the way to grow our core businesses, too. Behind the numbers that Tom will walk through in a minute, all aspects of our Wealth Management businesses performed well. Assets under administration increased 13 percent and our online brokerage business was up 57 percent from last year. We opened another flagship branch in LaSalle, Quebec; 13 more branches are scheduled to be opened by the end of this calendar year. And we had several successes within World Markets in the quarter, including acting as exclusive financial adviser to Ashanti Goldfields as they completed their merger with AngloGold.

Our Canadian equities business continues to perform well and our U.S. Real Estate Finance Group had another robust quarter.

Finally, I'm sure you'll have questions about Enron risk. You will recall there were three pieces to the resolution of Enron, the SEC settlement, the Department of Justice agreements and the prospective class-action lawsuits.

There are two relevant points to make today. First, the exit of our international securitization conduit business is proceeding on track. Second, with respect to the prospective outcomes of class-actions, we have no new information that would lead us to change our assumptions about our current legal reserves. We have insurance in place that we believe is adequate, we have expanded disclosure on this in the quarterly report to shareholders and beyond that, there is very little more we can say at this time.

The outlook for the balance of the year, in very broad terms, is for more favorable retail market's earnings, less favorable market-related earnings, continued share repurchases and more progress on expenses and the merchant banking portfolio.

This morning, the Board approved a 20 percent increase in our common share dividends from 50 cents a quarter to 60 cents. This follows a 22 percent increase at the start of the year and reflects our commitment to a 40 to 50 percent dividend payout objective.

I will now turn it over to Tom.

Thank you, John. Good afternoon, everyone. Our business environment in the second quarter was better than it was in Q1 in the Capital Markets-related businesses, as the stock and bond markets traded higher on average than for Q1 but it was worse than retail banking, as competitive pressures continue to escalate and margins narrow.

Slide Four summarizes the quarter. As John said, EPS is $1.33. Return On Equity was 18.4 percent. As Wayne Fox will discuss in a moment, corporate credit quality improved and we continue to shift our business mix towards retail. Results were helped by strong merchant banking, gains on loan sales and record results in Canadian new issue equity and retail brokerage. Results were hurt by lower revenues and higher loan losses in retail markets, higher project spending and the $16 million cost for the retail interest reimbursement program we announced last week.

Let's go to Slide 12, Retail Markets' revenue was 1.246 billion, down from 1.33 billion in Q1.

Slide 14 -- in Personal Banking, revenue was 492 million, down marginally from Q1 mainly because of a $12 million negative revenue accrual in the quarter for interest reimbursement to customers affected in the announcement I mentioned. Competition for retail deposits continued to escalate as once again not all banks cut their deposit rates following the Bank of Canada rate cuts on March 2 and April 13. Q3 revenue in Personal Banking should be higher than it was in Q2.

In small-business banking on Slide 15, revenue was 140 million, down as expected from the record 143 million in Q1. Deposit balances always fall in Q2 as business owners pay their taxes. Q3 revenues in small-business banking should be higher than in Q2.

Slide 16 -- in Cards, revenue was 333 million, down from the record revenue in Q1. Although the revolve rate was up, as it usually is in Q2, it was not up as much as expected and purchase volumes were down a little bit more than expected. Extensive industry advertising and promotion continues in the premium segment, as does direct mail in the lower rate segment. Q3 revenues incurred should also be higher than in Q2.

In slide 17, in mortgages, revenue of 155 million was up from Q1 mainly because of securitization gains. Core revenue was 123 million, down from 125 million in Q1. Discounting (indiscernible) rates took a further step up from that seen in recent quarters and we expect this to continue. Our market share has grown 12 of the last 13 quarters, increasing to 14.8 percent in Q2. Q3 revenue here should be a little lower than it was in Q2.

In Slide 18, on the line called "Other", a number of items were down from Q1, mainly treasury allocations, lower reinsurance revenue, student loans and, to a lesser extent, West Indies and President's Choice Financial. Q3 revenue here should be well up from Q2.

In slide 19, retail markets' net income was 205 million, down 77 million from the strong Q1 number. Revenue was down 84 million from Q1, as I just reviewed, and loan losses were up 37 million, mainly due to agriculture and personal lending, partly offset by a lower Cards provision. Expenses were down marginally from Q1.

Our second business group on Slide 25 is Wealth Management. Revenue you can see here was 653 million, up from 625 million in Q1.

On slide 27, Imperial Service is the group serving the top 15 percent of our branch banking customers. Revenue was 187 million, about the same as it was in Q1. While 60 percent of revenue comes from deposit and loan spreads, our main, strategic thrust here is deploying our more highly skilled relationship-oriented sales force to consolidate client assets onto our platforms.

Total funds managed were up 8 percent from a year ago with the investment funds component up 15 percent from a year ago. As a result, product commissions here were higher, but it was offset by lower deposit and loan spread, the interest rate reimbursement component in this business I referred to earlier, and two fewer days in the quarter. Q3 revenue here should also be higher than in Q2.

Slide 28 -- retail brokerage revenue of 294 million was up 36 million, or 14 percent, from Q1. In full-service brokerage, CIBC Wood Gundy had it’s best quarter ever. In both full-service and discount, revenue was up in virtually all product areas and most notably in new issues and secondary market trading. Full-service trade volume was up 6 percent and discount up 13 percent versus Q1. Retail brokerage assets under admin were up 1 percent versus last quarter and 18 percent versus Q2 last year.

(technical difficulty) -- end of the quarter, the pace here has slowed considerably as markets have traded down. As a consequence, if markets in the new issue pipeline do not improve, Q3 revenue here could be well down from Q2. Slide 29 -- Wealth Products revenue was 120 million, up about the same as it was in Q1. Mutual fund revenue was up but GIC revenue was down. The mutual fund business continued to perform well with balances up 3 percent on the quarter. The GIC business continues to be very price competitive. Our balances were up but this was more than offset by tighter spreads. Our strategy here has been to aggressively promote new products, such as the three and five-year escalator GIC, which had good success in the RSP season. Q3 revenue in Wealth Products should be about the same as it was in Q2.

On Slide 30, net income and Wealth Management -- 99 million, up 7 million from Q1. Revenue was up 28 million, as I said, largely because of retail brokerage. Expenses were up 32 million due to higher revenue-related compensation and legal reserves. The tax rate here was lower than in Q1 because the hedge fund legal reserve we took then was not tax-effected, whereas all the legal reserves in Q2 were tax-effected.

Finally, our third business group, World Markets, on Slide 40, you can see the revenue trend here which for Q2 was 1.018 billion versus 864 million in Q1.

Slide 42, in Capital Markets -- revenue was 421 million, up from 394 in Q1. The equities component of capital markets revenue, which represents about two-thirds of the 421 number, was up 10 percent from Q1. Equity structured products had a strong quarter, particularly structuring institutional deals in Europe and equity linked notes in Canada. Cash equity sales and trading were up as well with most of this due to the strong new issue market in Canada.

On the debt side, which represents the other one-third of that 421 number, revenue was about the same as in Q1. Structured transaction revenue was up a bit while foreign exchange was down.

Although we're only a month into Q3, the outlook is for lower revenue in equities and somewhat higher revenues in debt.

Slide 43, investment banking and credit products -- revenue was 442 million, up 21 percent from 366 million in Q1. The U.S. represents about half of this number. Revenue there was lower in Q2, primarily due to structured finance, which we continue to wind down pursuant to the Enron-related settlement in December. This was partially offset by higher revenue in real estate finance.

The other business lines, new issue equity, M&A and credit, were flat on the quarter.

In Canada, Q2 revenue was well up from Q1. We had a record quarter in new-issue equity as we lead or joined -- as we (indiscernible) our joint book-runner on 49 deals for $4 billion, both almost double that of the second-place firm.

In Europe, revenue was much higher than normal because of gains on loan sales and a large M&A fee.

The outlook for Q3 in Investment Banking and credit is not as good. U.S. revenue may be up, particularly if the income trust market there is receptive to the deals we have filed. But both Canada and Europe will be down from Q2.

Slide 44 -- Merchant Banking had revenue of 83 million, as gains and other income of 137 million exceeded write-downs of 54 million. We continue to feel optimistic about our portfolio, as the level of activity and pricing in the divestiture market has picked up considerably. As previously announced, in Q3, we will book a gain of 74 million after-tax from the sale of global payment shares, likely to be partially offset by a loss on sale of some of our fund investments we are considering divesting.

Finally, Slide 45 shows World Markets' net income of 259 million, well up from Q1. Revenue in the quarter was $154 million higher and expenses, mainly revenue-related compensation, were $75 million higher.

Over to you, Wayne.

As Tom has highlighted, the second quarter of 2004 saw continued overall improvement in our portfolios. Business and government loans are down 16 percent year-over-year. Total specific provisions continue to improve year-over-year and capital ratios remain strong. As I will speak to in a moment, our specific provisions guidance continues to be for lower losses in 2004.

Specific provisions for the second quarter were 207 million, up 52 million from last quarter and a $41 million improvement over the second quarter of '03. In Q2, our consumer credit provisions totaled 174 million, up 17 million over quarter one and 39 million over the same quarter last year. The increase is the result of portfolio growth combined with increasing personal bankruptcies and delinquencies in the personal loans portfolio.

Our business and government credit provisions totaled 33 million, an increase of 35 million (sic) over last quarter and a reduction of 80 million from the same period a year ago. The increase over Q1 was primarily the result of pressures in the agricultural portfolio, as that sector experienced pressures from BSE and cyclical low prices in the hog industry. Otherwise, the business and government portfolio continued to improve as a result of our ongoing effort to take risks out of the corporate loan book and a continued strong U.S. credit capital markets environment, which continues to be helpful in achieving stressed bank debt repayments.

This next slide provides you with a detailed recap of our annual specific provisions as a percentage of net loans and acceptances for the years '99 to '02 and on a quarterly basis for the last six quarters. Second-quarter provisions were 52 basis points of net loans and acceptances, at the low end of our long-term target range of 50 to 65 basis points. The consumer portfolio loss rate trended up in the quarter to 68 basis points, primarily due to increased loan losses in personal loans.

The business and government portfolio continued to perform better than historically at 23 basis points, despite the uptick in provisions required for the agricultural sector loans.

The Q2 consumer-specific provisions increased over Q1 by 17 million with credit card provisions declining 4 million and personal loans increasing 21 million, reflecting an increase in delinquencies and bankruptcies, as I previously stated.

Going forward, we expect recent actions taken to further manage the risk level of the consumer portfolio to lead to lower and more stable loss rates.

Our fiscal '04 guidance for specific credit provisions remains unchanged in that we continue to have a full-year credit loss projection of between 800 and 850 million, which is an appreciable improvement over '03. Key factors supporting the year-over-year reduction are the contraction of our corporate credit book, the two held-for-sale stressed credit transfers in fiscal '03 and the stronger tone of credit capital markets in general. We also anticipate some volume impact in our year-over-year credit provisions as we continue to grow our retail businesses. We believe that -- or we anticipate that approximately 75 to 85 percent of our fiscal '04 credit provisions will be in the consumer sector with the balance relating to business and government loans -- consistent with our strategy.

It is also possible that we will see further movement in our general allowance for credit losses in '04, depending principally on the continued progress made in proactively managing down the corporate credit portfolio. Our guidance in this regard remains unchanged in that we expect that our level of general allowance will range between 90 to 95 basis points of risk-weighted assets over the course of '04, subject to any changes being satisfactorily reviewed with both our auditors and our regulators. Currently, our general allowance is 94 basis points of risk-weighted assets.

This next slide indicates total net loans and acceptances after the general allowance totaled 140.2 billion at the quarter end, up approximately 2.5 billion. The majority of the increase can be accounted for by an increase in consumer loans in the second quarter. Residential mortgages are up 900 million quarter-over-quarter and up 1.4 billion year-over-year. Adding back the securitization mortgages on a managed basis quarter-over-quarter growth was 2.6 percent, while year-over-year growth was 10.3 percent.

Personal loans increased by 1.4 billion over the quarter and 2.4 billion year-over-year for a 12 percent increase. Credit cards outstandings remain substantially flat quarter-over-quarter at 9.4 billion but were up 14.4 percent year-over-year due to a combination of growth and maturing securitizations. Business and government loans increased marginally to 36.2 billion in the quarter while year-over-year they have been reduced by 16 percent.

This slide displays that our consumer credit assets represented 74 percent of total net loans and acceptances as at April 30, consistent with the end of the last quarter. Year-over-year, we have shifted the percentage split of our loans and acceptances by 4 full percentage points from 70/30 to 74/26 consumer versus business, continuing to position our credit capital much more towards our retail businesses, going forward. This mix in our portfolio is reflective of our strategy to shift our business mix.

Turning to our business and government loans, this next slide shows the level of the portfolio remaining relatively consistent quarter-over-quarter but down 7.2 billion, or 16 percent year-over-year. At the same time, our credit protection increased from 4.7 percent a year ago to 5.7 percent of our outstanding total business and government loan book as of quarter-end, or more specifically, to over 20 percent of our large corporate loan book.

This next slide updates you on our progress in reducing the held-for-sale portfolio and indicates that over 80 percent of that portfolio has been divested and closed by the end of Q2 with 100 percent of the assets from the Q3 '03 transfer having been sold. We also confirm that we have to date continued to achieve aggregate prices, which are better than the initial transfer values and which have then absorbed any revaluation, unrealized losses.

Sector diversification of the portfolio continues to be supplemented by our credit protection activities. This slide recaps the amount of net credit protection that we have purchased on our outstanding business and government loans. Of the 2.1 billion in on-balance sheet credit-protection, the largest hedged industrial concentrations were oil and gas at 539 million, business services at 334 million and manufacturing capital goods at 293 million.

In the quarter, we purchased 2 billion of incremental credit protection at a cost of 55 basis points. This is part of our program to proactively manage our portfolio to reduce single-name concentrations.

Our business and government portfolio continues to be reasonably diversified from an industry perspective, as evidenced by the breakdown shown on this slide. We continue to view diversification as an important objective and are continuing to place emphasis on active loan-portfolio management to improve our returns.

Moving to new formations, at 161 million, business and government new formations decreased 10 million quarter-over-quarter. From an industry perspective, the largest levels of new corporate credit classifications were from the agricultural sector at 39 percent, related to BSE and cyclical low prices in the hog market. This was followed by the technology media telecom sector at 21 percent and the manufacturing sector at 16 percent while on a geographic basis, credit classifications in Canada represented the majority of new formations at 78 percent.

Gross impaired loans shown on the next slide continued to decrease, reducing by 37 million during the second quarter and a year-over-year reduction of over 842 million, or 41 percent. The three largest new gross impaired credits recorded in the first quarter were to a European cable and telecom counterparty at 28 million, a Canadian agricultural counterparty in the pork industry at 21 million, and a Canadian manufacturing counterparty at 20 million.

As at April 30, net impaired loans were 340 million, excluding general allowance, down 77 million from January 31st and down 581 million year-over-year. As a percent of total loans and acceptances, net impaired loans improved to 24 basis points at the end of the quarter, as compared to 30 basis points at the end of '01 -- Q1 '04 and materially better than the 65 basis points year-over-year.

Turning to the next slide, business and government net impaired loans improved for the sixth consecutive quarter, reducing by a further 63 million in Q2 and reducing by 588 million year-over-year. Business and government net impaired loans before general allowance at April 30th represented 99 basis points of total business and government loans, a further 18 basis point improvement over Q1 and a 117 basis point improvement year-over-year.

Our consumer credit net impaired loans shown on this slide decreased by 14 million to negative 26 million in the second quarter, primarily as the result of specific provisions taken in the quarter for personal loans.

Now, turning to market risk, this slide displays Q2 daily trading revenue against the value at risk in our trading books. On no occasions did losses exceed the value at risk and as you can see, 91 percent of trading days provided us with positive revenue. This represents continued, strong performance in the face of challenging capital markets.

This slide shows the very substantial reduction in risk in our trading books over the last five years. Value-at-risk in our trading books rose slightly during Q2 but the average remains under $7 million, significantly below historical levels but consistent with our goal of constraining revenue volatility. Recent strength and stability in revenues from our trading activities support measured growth in these areas and controlled increases in market risk levels may occur in response to business opportunities.

This slide shows the continued decline in the Bank's structural interest rate risk. Risks are contained and we're confident that we're well positioned for a rising-rate environment. The combination of the past few charts are indicative of the modest market-risk profile we've maintained during the recent past and demonstrate the extent of the risk reduction we have undertaken in the past few years.

As we continue to make progress against our key business strategies for sustainable, long-term growth, including risk-reduction, our solid results and capital position provide us with flexibility to return capital to our shareholders. During this quarter, we repurchased approximately 6.2 million common shares for an aggregate consideration of $428 million. On a year-to-date basis, we have repurchased 8.3 million shares and have therefore completed 46 percent of our repurchase program.

Our final slide displays that risk-weighted assets have declined by 28.4 billion since the end of '98. Over the same period, our Tier 1 ratio has climbed from 7.7 percent to over 11 percent at the end of Q2. Since '98, wholesale risk-weighted assets have declined by $50 billion, of which 35 billion or 70 percent is related to the reduction in the wholesale credit books.

During the same period, retail risk-weighted assets have increased by approximately 21 billion primarily due to strong growth in mortgages, credit cards and personal loans. Q2 risk-weighted assets were up 800 million from Q1 levels, while wholesale risk-weighted assets did decline in the quarter; this is more than offset by retail growth.

John, I will turn it back to you.

Okay. I guess, at this point, we are open for questions. Maybe we can start in the room here and then go to the telephone.

One of the things that always puzzles me about your numbers is the volatility, especially of your operating expenses. I'm looking at it excluding things like variable comp restructuring charges, etc., and I find that, if I went back to last quarter, it was down 200 million or about 11 percent from the previous quarter. Now, in this quarter, it's up about 150 million, or 10 percent, from the first quarter. Can you explain what accounts for this unusual and, you know, compared to your peers, unique degree of volatility?

Thanks, Michael. I'm not sure it's unique but certainly, as we said in Q1, the project spend and the advertising budget there was lower than we expected it to be through the rest of year just because of the seasonality of our marketing programs first and the timing of some of our governance initiatives that we're gearing up later in the year.

Of the 130 increase between Q2 and Q1, 45 million of that was revenue-related compensation, which is always a good thing. Advertising and increased government spending, which, in fairness, we did indicate was going to ramp up in Q2, represented another 45 million.

This quarter, there were a number of other unusual items, about 25 million. For example, as we begin to complete the fit-out of our 300 Madison property in New York, we had leasehold write-offs of 10 million. When we closed some space in London, we sold write-offs there of about 7 million. We completed a six-month project looking at fixed assets across Canada. We had about a 10 million leasehold or fixed-asset write-off in the cost account in that respect. So, I break the 130 down into three main buckets, 45 million higher incentive costs, 45 million advertising and governance, 25 million unusuals, for about 115.

When you look at the loan losses, we sort of heard three quarters now of the loan losses in the retail bank running at somewhat more elevated levels than in the past, (indiscernible) on a dollar basis. It looks as if the formations are higher as well. I mean, how can you be confident that you can bring (inaudible) with credit adjudication and stuff like that? I mean, or is it that simple?

Maybe what we can do is have Ron Cathcart, who oversees our Retail Risk Management function, speak to that. I think that would probably be the most productive way to get that response, Ian.

Well, certainly a significant amount of the increase that you are talking about is growth-related, which is a positive story.

With respect to -- I think you did hear Wayne mention that we had seen some increase in bankruptcy in our personal loans product and also modestly higher delinquencies, which result in us increasing our provision against that portfolio this quarter.

With respect to sustainability and confidence as to how we shall keep control of the losses, going forward, we've invested very heavily over the last two years in a number of risk-management infrastructure builds effectively. We're putting in a new collection system, an entirely new platform. We have built new scorecards; we are installing portfolio segmentation tools across all portfolios and also better segmentation as far as portfolio management activities are concerned. Those builds actually have been taking place within the retail business to the point where we are pretty much done across all the portfolios.

The credit card portfolio actually is operating very well and has had a lot of investment over the years in it, so the largest dollar item is actually -- I would say we have very sophisticated tools in place. So, we have a level of confidence that we can calibrate the risk.

On the agricultural side, did that flows through World Markets because that's in the commercial book? Is that right?

For my presentation, we aggregated it in the large corporate and business and government loans because that is the conventional way of looking at it. As a practical matter, it actually belongs to Jill Denham in the sense of that portfolio and the risk adjudication is looked after by Mr. Cathcart. Ron, maybe you want to speak to that particular industry, because that is of interest, I think, relative to our -- (Multiple Speakers).

When you talked about -- I think you said a few -- (technical difficulty) -- are there a lot of these kind of chunky, you know, $20 million exposures where you are at risk? How do you evaluate that, looking forward?

Obviously, BSE is an event which no one anticipated and then no one anticipated that the border would remain closed as long as it is. The longer that goes on, the greater pressure that puts on the cattle sector. So, we are seeing inevitable losses come out of -- as a result of BSE and as a result of the border being closed.

Wayne also mentioned hogs. As you know, hogs are at -- hit a cyclical low for a protracted period last year as a result of the strong Canadian dollar and its U.S.-denominated export market, so that that eroded revenue at the front door. Of course, now we have potential action on the part of the U.S. with respect to countervailing duties and so on, which is putting further pressure. I wouldn't say that the losses have been particularly lumpy; I would say they have been representative of what's been in the portfolio. We've had some larger names and some smaller names but those are clearly two sub-portfolios within agriculture that are experiencing stress as a result of what's happening in the market.

While we are on credit, looking at the credit protection, Wayne, you obviously ramped up for both oil and gas and FI (ph). Can you give us some sense of what's going on in those portfolios that you felt -- you wanted to push those up significantly? At what point does the ongoing purchase credit protection stop, if it does? I mean, as you mentioned, you've got significant protection against the large corporate book. Are you at a point now where you've done a lot of the resizing of the portfolio, both through sales as well as protection, as well as ongoing mitigation of exposure, or is there still a lot more to come over '04 and '05?

I think basically where we are now is if look at the starting point going back (inaudible) Q2 '02 when we undertook to reduce risk and capital in the large corporate and commercial lending activities, as you can see, we've dealt with a lot of the distressed assets through the held-for-sale accounts and I think that in our noncore account review. I think we're now getting at the back end of that. As you can see, the held-for-sale account now is 80 percent completed and we continue to make progress in Q3 and we will complete that, as indicated, inside of this fiscal year.

So that having been said is -- a lot of that calling, if you like, in terms of portfolio activity, is behind us. You should obviously not be surprised to see that the credit exposure will be more of a Canadian book, going forward, than it has been in the past, so that's not entirely exclusive because we have an international franchise which includes both the UK or the European market as well as the U.S. market.

What the derivatives activity is meant to do is two things, provide diversification to the book but most importantly to eliminate concentration risk. As you would imagine, you get dealt lumpy risks, particularly in the Canadian market, and if you don't proactively do something either through syndication or through the secondary market, you leave yourself open over a business cycle to the event risk associated with those concentrations. As we all know, there's typically one or two fallen angels over a business cycle. So, our portfolio management philosophy and commitment is to reduce those concentrations, and that's what that derivative activity reflects. We've made a lot of progress and I don't know if we are at a steady-state yet but we are a lot closer to our objectives than we were two years ago. As you may recall, we set 2005 as our measurement point.

I guess the last point I would make is we overshot the runway in terms of capital associated with this business just because of the fair wind at our back. As business conditions improve, I don't think that it would be surprising to see that large corporate and commercial loans may rebuild, if you like, as it relates to servicing our clients in Canada and other marketplaces. So we haven't exited the loan market; we have just been very aggressive managers in a portfolio sense.

I'm trying to understand a little bit more about some of the revenue volatility in the retail markets, and I was specifically looking at slide 17 and 18 with "Mortgages and Other". I'm curious if you can talk a little bit more about this core revenue calculation in mortgages? (technical difficulty) -- some of the lumpier items in others, such as treasury allocation and -- (technical difficulty) -- wanted to get a little bit more color on -- (technical difficulty) -- items.

Heather, I'm glad you asked that because, you know, as we've moved to a more granular performance measurement approach here, we've seen some movement between that other account and in particular mortgages, which we think is settling down but for the last couple of quarters, we've had some motion back and forth.

Let me try and be brief but hit the high points. In that set of 155, we have had to move about 15 million from the Other category, so you know, apples-to-apples with Q2, or Q1 rather, relative to the 122, that 155 would be lower, probably about 140, okay? Core just means basically net interest income and fees. It doesn't include any securitization gains, and it doesn't include prepayments or mark-to-market. It's really a reflection of your core, new mortgage-generation capacity, okay? On the quarter, as you can see, that was pretty stable -- down $2 million.

The more relevant question, which I'm glad you asked, is when you look at retail markets as a whole and you look at revenue of 1330 in Q1 down to 1246 and 100 million of that is in the Other line, we had, this quarter, several items that sort of worked to get the retail book in that Other line. Most of that delta of 100 is due to the treasury allocations; about half of the 100 is due to treasury. We had better positioning in Q1 than we did in Q2. We took some risk off the books; we had higher expenses in treasury as we extend the term. So, a lot of that got allocated into retail. I would say, although it's hard to predict results based on positioning for Q3/Q4, it would be unlikely, in my view, that a drop of 50 million that we saw in Q2 would repeat in Q3.

The other three main items in that Other line are student loans, where we had a reversal of about 11 million. We have been trying to true-up that book over the last two or three quarters, and so there was a charge of about 11 million in that 126 number that is, we think, the final stage in the true-up. In West Indies, there was a true-up of the equity pick-up that we had last quarter of 5 million. Finally, in insurance, we are in the midst of renegotiating a number of our reinsurance contracts. Because those are not finalized yet, we've had to take what we think is a pretty conservative -- but nonetheless, the accounting rules require you to do this assumption as to accrual there and that hurt us by about 20 million relative to Q1, okay? We think that will bounce back in Q3.

So rather than me trying to give you item by item in that 126, as I said in my script, we think that number should be well up from Q2. Will it be half back, 50 million? I think there is a reasonable probability of that.

So bottom line is when you look at how retail did, despite the spread compression and despite some tougher conditions in the cards business, the main business lines did pretty well but these one-offs in that Other category, student loans, West Indies, treasury and insurance, hurt the overall revenue.

Shall we go to the phones?

We're going to have one more question here and then we will go to the phones.

Just further on the governance spending, you've announced 50 million and another 10 to add to that. Most of the quarter, you refer to 32 million in the extra spending in the proventional (ph) fees. Where is the governance going? Is this an annual provision like -- is it going to be an ongoing annual expense? Are we going to see a reduction? Is a lot of this one-time?

The vast majority of it is one-time. We announced, as you pointed out, a $50 million program for this year; we announced an extra 10 million as we broadened it for this year. So we expect to spend about 60. We spent 20 of that 60 in Q2. We expect to spend about 30 more in Q3 and probably 10 more in Q4.

There's about seven or eight aspects to the program. It does involve a number of outside lawyers and auditors to supplement our teams internally but certainly, the '05 spend would be nowhere near that 60 to keep it sustainable. The best estimate might be 15 to 20, 22-ish.

So we're going to go to the telephones. Any questions?

Thank you. We'll now take questions from the telephone lines. (OPERATOR INSTRUCTIONS). Jim Bantis from Credit Suisse First Boston.

Good afternoon. A couple of questions regarding the wholesale operations -- first, in the context of litigation and settlement issues, it looks like the SEC's office is making its way through its list of high-profile cases with the Enron and WorldCom recently. To what extent is there risk towards reserves being built up or issues regarding global crossings, given the Bank's involvement with that high-profile bankruptcy?

Then secondly, perhaps we could circle back to John's comments regarding his outlook for a weaker second half or a cautious second half in regards to the capital markets business. Perhaps if we can talk a little bit about product areas, are backlogs smaller than they were coming out of the quarter? How is the IDS product being received in the U.S. and things of that nature?

Let me take the first one and perhaps I'll start in on the second one and hand it over to either Gerry, Jill or Sonia if they would like to supplement and John, obviously if you would like to chip in.

On the question about litigation, I mean, we would disclose any name, as we have disclosed Enron as the market-timing hedge fund (indiscernible) if it were material. We haven't and don't plan to, nor does anybody else talk about other names hypothetically if they're not material. So, I can't comment on global crossing other than to say, if it were material, we would refer to it in our material.

In terms of outlook for the rest of the year, John's letter did say that the environment we see, going forward for the second half of this year, is not quite as strong as the environment we've seen in the first half. That I think was echoed in some of my revenue guidance comments, as I went through my script line by line.

The bottom line is, if you recall, most of the retail markets areas we feel pretty good, although spreads we don't anticipate bouncing back too much in Q3, they could come back in Q4 if we see some rate increases, but volume outlook is pretty good.

On the Wealth side and the Capital Markets side, as I said, outlook after one month in Q3 is pretty much down from the rapid pace we saw in Q2. Backlog and new issue equity in Canada is well down.

IDS opportunities -- we've filed 11 deals in the U.S. that we are part of. It remains to be seen the depth of that investor market in the U.S. We haven't built a franchise around that, so we can do -- you know, we were EVA break-even in our U.S. operation in the second quarter, which is the best we've had in about eight or nine quarters. So, that could be additional upside in the U.S. market. M&A business for Q3 in Canada and the U.S. looks weaker than it was in Q2, but the longer-term backlog for Q4 looks pretty good.

On the Wealth side, as I said, trade volumes are down in the last month pretty considerably, so bottom-line retail looks pretty good. Wealth and world markets -- we look at those businesses and say Q3 is probably going to be a little weaker. The other SBU (ph) will probably continue to deliver a drag of -- we had a drag of 32 million. A lot of the governance project spending fits in that account, so you know, I think you put those four pieces together and that really reflects the comments in John's letter. Jerry or Jill, no other -- Sonia? Jill?

Is that enough, Jim?

Yes, it is. Actually just a quick follow-up -- I guess when you listen to the calls off of some of the U.S. brokers, they still seem somewhat robust regarding their outlook for the second half. Are you seeing that perhaps - is it the mid-market customer base that perhaps hasn't really caught on at this point, or it's not really the customer reflection, just the general product area you described?

Jim, maybe I'm being too hard on ourselves. I mean, keep in mind, we had a pretty terrific quarter in Wealth and World Markets in Q2, so I was making a relative comment. We've had four or five hugely successful revenue quarters in new-issue equity in Canada, so when I say it is well down, it is well down but it is certainly not terrible. So, you know, the equity market just seems to be starting to cool off a bit and built into that -- it's not really a prediction but a possible outlook -- is an assumption that rates will creep up and that seems to be already probably hurting the income trust backlog in Canada.

I appreciate your general cautiousness. Thanks.

Rob Wessel from National Bank Financial.

Hi. Good afternoon. I have three questions actually. The first one relates to Merchant Banking revenues and I wanted to know two things. One is if you, John, would provide a targeted amount that you would like to realize per year I guess? The second one is if you could give some level of confidence (indiscernible) you will give a target that the Bank will sort of endeavor to limit volatility. The reason I ask is so that investors can get a sense for whether or not this is a business they can pay for.

In the merchant banking area, net revenues -- if we were hitting annualized 75 to $150 million a year net revenues, I would be quite happy when we get the books settled down to where we really want it.

So, is that -- not to be too difficult but is that -- can we take that as guidance for 2005?

I don't know what guidance is; I just manage the place. You guys have to predict the outcomes. We are clearly going to reduce -- the object of everything is to reduce the risk and reduce the volatility, Rob. We've gone a long way in that direction but the Merchant Banking book still has more work and we have a number of projects underway and I think that it will reduce the volatility in that further.

You know, I think one of the benefits that we are seeing in this quarter is, in fact, the mix of our overall business is that World Markets in fact was strong this quarter and I think that what you're seeing is the benefits of the strength of World Markets, but I think we have reduced a lot of the down-side in World Markets by the actions we've taken, both in the loan portfolio and in the Merchant Banking portfolio to date. But there is more work to be done in the Merchant Banking portfolio and I guess the message that I would say about Merchant Banking, Rob, is that I don't really see Merchant Banking being the major feature that it has been in the past. We want it to be a business that can help us with our overall business, that can provide us with good returns, but will not provide us with the degree of volatility that we've had in the past.

Fair enough. I want to ask a question of Gerry McCaughey, which was I wanted him to talk about now that he's been the head of World Markets for a couple of months anyways, to the extent he has contemplated any changes and I guess with reference to the U.S. side of the business as well.

The good news is -- about the U.S. side of the business is that there were significant restructuring efforts put in over the last two years, and I feel that it is at the right size to take advantage of the market opportunity that is available to us. Things in the U.S. look particularly good right now with the advent of the IDS opportunity, although these deals are -- we still haven't booked the revenue but our backlog right now is probably more favorable than we've seen it at any point in time. The deals that Tom talked about exceed $5 billion in overall value, and that's a tremendous amount for us to have filed and ready to go. So, the U.S. operation, I think, is at the right size and we are going to run it as per the strategy that has been evolved over the last two years.

So, if it was -- maybe I made a mistake but I thought Tom had mentioned it was EVA-positive or at least neutral, so are we to conclude from that that net earnings were reasonably positive? I think it was breakeven last quarter, if I'm not mistaken?

That was on an EVA basis. The net income after tax implication, Tom, would have been --?

Well, we don't break it out geographically but it was just marginally EVA-positive in the second quarter in the U.S. region, so that means we made, on a GAAP basis, several millions of dollars.

The last question, and I hate to be difficult, but how do you lose 50 to 70 million changing offices in New York? That seems like an awful lot of money, doesn't it?

Well, we have a big operation in New York, which is currently is spread across what Gerry? Five or six different floor spaces? We are consolidating a good percentage of that into one location. When you do that, you have to sublease the space and really, that 50 to 70 million just reflects the loss that we expect to have to take on those subleases. So, it's really a reflection of the market in the New York area for the space we have.

Thank you very much.

Steve Cawley from TD Newcrest.

Tom, I just want to go back to the comment that treasury was probably half of the loss in revenue in the "Other." If I go back to some notes from April 22nd with Michael Horux (ph), different comments I've got here -- this is a fairly closely-matched book, it's not a hedge fund, not a profit center, retail understands the risk they take on and there's always limits put on earnings risk. So, I'm just trying to understand what was said on April 22nd and then taking a look at this fluctuation in revenues.

I will start and Wayne, you may want to comment on the risk positioning in that book after I'm done.

To give you a little bit more detail, of the 50 million delta in Q2 relative to Q1, 15 million of that I referred to earlier to Heather's question about revenue that made its way up into the mortgages line, okay? So, that's just a reclass between mortgages and other, which we're trying to minimize, going forward, because I know it's hard for everyone to keep track of but we are trying to get this right. All of this is post ACG 13, so that 15 of the 50 is a reclass.

Another 15 in the round numbers was different positioning we had in the broader book in Q1, which was very successful but didn't replicate itself in Q2, okay?

Finally, again, in round numbers, another 15 was extending term on our funding and with the accompanying underwriting commissions, etc., that we pay, and that gets allocated out. So you can think of it in those three buckets. There are a number of other smaller items but those would be the three main ones, only one of which really ties into risk, Steve.

The second 15.

Of the three that you gave me?

I'm not sure what order I'm looking at.

That's fine.

Let me do it again, just so -- (Multiple Speakers).

No, no, no, I understand. That's fine. So, I should feel confident that there is not excessive risk being taken on in the asset/liability management side?

Steve, I think probably a good place to start is to look at the earnings risk that we put in our supplemental. This is not entirely the treasury, of course, because it is all-bank, but if you look at earnings risk being in the -- the one-year risk of 100 basis point rise in the yield curve, we are positioned for a rising-rate scenario. I think that number is approximately 75 million, as we -- 73 perhaps, I'm not sure of the precise number. So, I think, Steve, that's our perspective and our view, and that's the way in which the book is presently positioned.

So then the 25 (indiscernible) rate cut would have caused some of that loss?

That's right. Well, as you well know, these are all reflected in the accounts the way Tom described them to you. Keep in mind these are accrual books, Steve, not mark-to-market books. There are some of the books in treasury that are mark-to-market of course, and those are the ones that create some of this earnings volatility.

One other question, and I apologize if this would have been asked previously; I've been a little distracted. The average loans and acceptances on the retail side, relative to the one other competitor that we've seen report today who seemed to have some market share losses, it appears as if your asset growth was definitely light on the retail side. Is there any color you can give to that?

If you look at the overall loan, the entire products category quarter-over-quarter, they grew 3.7 percent and year-over-year, they've grown 11.4 percent. If you're talking about mortgages, quarter-over-quarter, they've grown about 2 percent and year-over-year, they've grown about 10 percent.

In the quarter, Jill, did you lose market share in any product areas?

In the quarter, no, mortgages were up, on loans we were fairly steady and on deposits, we are flat to very slightly down in the quarter.

So it would have been securitization maybe that resulted in the average loans and acceptances being flat?

We securitized about 1.3 billion of mortgages.

Thanks.

If I might just add -- I think, Clint (ph), it was you that suggested we put the market share numbers in the deck rather than have me go through them in the scripts, so Steve, you may not have caught up to the back of the deck but we have all those market share numbers now in print for you.

Jamie Keating from RBC.

We can (indiscernible) play book on all these various items, Tom. I apologize for re-asking on governance -- of the $50 million, you described a declining spend, going forward. I'm still not clear yet. Did we provision and will grow on a provision or are we spending on a declining basis?

Jamie, accounting rules won't permit you to make a provision, so we booked, in Q2, 20 million as we go, okay? As I said, Q3, you may not have been on, we expect to spend about 35 million, okay? So up 15 million. So, we will just book it out as we go. But once the program for fiscal '04 is done -- and we are not getting into a lot of the detail. A lot of this involves very high, stepped-up increases to documentation of procedures, documentation of regulations that need to be followed, regulatory reporting enhancements, etc. That will be done by the end of the year. Then there will be an incremental charge to the previous question, or one of the earlier questions, just to ensure that we continue to document new procedures and to continue to follow the other governance standards. But that will be well down once you've got the main program in place.

Tom, one more quick one on the litigation costs in Wealth Management -- can you just give us -- I apologize if I missed it earlier covered what the dollar amount was roughly on the expense hit there (sic)?

Well, just to give you a frame of reference, in Q2, we booked, as you know, 25 million. In Q3, it was a little higher than that; I think it was about 27 million pretax.

You (inaudible) a quarter on your descriptions there? You mean Q1 and Q2?

I'm sorry?

You said 25 million in Quarter --.

I'm sorry -- Q1, you're right. I think it was 27 million in Q2. The point I did make earlier was that the Q1 number of 25, because it's a reserve against a possible penalty, that's not tax-deductible. The reserves we took in Q2 of about, as I say, 27 million, would be tax-deductible, so after-tax, it's down, but pretax, it's a little higher.

Did you tell us if there's much more to be done? Is there anything else to be done on that regard?

Much of that litigation -- well, some of the litigation refers to what you would call legacy litigation from the Oppenheimer divestiture, and we would see that winding down pretty quickly. The remainder is just normal course litigation (indiscernible), so that number for Q3, although you can never tell these days, I would say is -- certainly the U.S. component of it would be expected to wind down pretty markedly, going forward, I would say.

Thank you.

(OPERATOR INSTRUCTIONS). Jim Bantis from Credit Suisse First Boston.

Just a follow-up question regarding Retail Markets and the Cards business -- I know, throughout Retail Markets, you've had a lot of success stories in terms of market share but clearly, the card business is under pressure through Royal PD and AMEX and we've seen the significant market share declines. I guess the question is, have we bottomed or do you see further deterioration in terms of market share on Cards outstandings? Thanks very much.

It's true that there is -- I mean, it's pretty flat, the share picture in Cards, in outstandings and spend, but part of that is the incredible market position we've got. It's such a big -- it's such a commanding lead we have in the market that we continue to be the Number One target for the competitors. I would say that we are in a fairly stable space right now. We are doing a lot of things to protect the franchise and I wouldn't look at great erosion, going forward.

Thanks very much.

We will take a couple of more questions here in the room.

John, I wanted to understand, you are thinking about the pretty impressive dividend increase in the quarter. This is the second one this year. The first one was 22; this is 20. You know, 60 cents, your earnings in the quarter, were $1.35 -- that's a 44 percent payout ratio. From your comments, you could easily have a down quarter in the second half of the year. I mean, it would almost be a 50 percent payout already. I mean, I thought your range of 40 to 50 was a range. It looks as if you're already towards the top end of that. I was just wondering what you're thinking is on --.

Well, I think our thinking continues to be -- I mean, we're not going to look at all of these things on a quarter-by-quarter basis. I mean, I'm still -- when I look at things, I'm still looking at the end of '05. That was where we started with our strategies and our targets, etc., so no, we expect to be in the 40 to 50 percent range. I mean, if we end up at the higher end of this range this year, so be it, but that's not my anticipation. So, I think it is -- we made a commitment to be within 40 to 50 percent, and we want to make sure we are within 40 to 50 percent. That's basically where we are at on that.

Quentin (ph)?

John, just in terms of one of your opening comments, you talked about redoubling the efforts around cost control. I'm just wondering what redoubling means, where in particular the focus is? Because obviously, this is something that has been a bugaboo for a long time. So, can you give us some sense of where the particular efforts are in the various business segments and perhaps programs? Obviously, (indiscernible) 60 was something you have talked about before with an interim target. Where is this going to come from? Because it seems like --.

Quentin, we thought we would start with bank analysts and then move on! (LAUGHTER). Anything else? (LAUGHTER). I think that, as we've said all along, this is going to be multi-year. I think we are making progress. I think -- and again, I'm not going to look at it on a quarter-by-quarter basis. Clearly, this year, we've had some expenses come at us that we had not anticipated, in terms of the governance expenses, which are meaningful, and we believe they were important to undertake. But again, I think that, with each quarter, I think we are making progress in the underlying cost structure and with actions we are taking. That, combined with growing the businesses, I think we are going to -- you know, we've said that this year and I think Tom made it in his comments as I did in mine that for targeting towards the end of this year, we would hope to be at 66 percent. We expect actually, based on a number of technology projects and others that we have underway, that we will see more improvement next year in '05 and we believe more improvement in '06. But I can't point to any one thing and say that other than the one I pointed out earlier, that we're going to have some specific thing that's going to hit in this year.

Michael?

I've got a few -- (technical difficulty).

You're only allowed one, Michael, and then we go onto all the other people who have their hands up.

I asked about the volatility of expenses to start out with, and I also notice considerable volatility on the margin front, at least the way I look at it, against risk-weighted assets. The past -- I guess going from the third quarter, in the fourth quarter and the first quarter, your margin on risk-weighted assets, excluding trading revenue, was actually moving up during this period. Now, you seem to be back down to the third-quarter level. Is this a more normal level, you know, that we should be looking at, going forward?

Yes, I won't necessarily refer to it right now unless you want me to, Michael, but we put a slide in, Slide 59 I think it is, which tries to break down why NIMs did compress. As you may recall, I had been predicting, really for the last three or four quarters, that NIMs would compress. We were able to withstand that, unlike some of the other banks, largely because of mix, because of the card balances growth; cards obviously are a very high-spread business. That mix more than offset it.

This quarter, we weren't able to withstand it and what we've shown on that slide -- it's a bit complicated. I'm happy to really follow-up if anyone wants to afterwards -- is that what happened in the quarter, as you know, is rates for the most part -- well, in Canada, they were lower than Q2, pretty well every month a steady decline down, so on the funding side, we made up some of that but not nearly enough, particularly in our case, as we extended term in this to offset the reduction in interest income on the asset side, particularly with -- you know, when you look at deposit pricing, which two banks cut, some of the banks cut, one bank increased, one cut, so the discipline that we had seen eighteen months ago certainly today isn't there. There's some signs, in the last three weeks, that it may be returning, but it's a combination of mix, tighter margins, tighter price-competition in deposits in particular, lower credit card balances that hurt our mix; those were the three or four main things.

In our case also, some of the one-offs that I alluded to earlier, the student loans adjustment, the West Indies pick-up, some of the New York premises, those are all in the interest income or interest expense accounts, and that hurt us as well. So there were some one-offs as well that combined, after four or five quarters of pretty stable NIMs, to cause our NIMs to go down I think 22 basis points.

Okay. Also, just coming back to Enron for a second, you talk about your insurance cover being adequate to cover the risk that you see there. How much actually is the insurance cover that (inaudible)?

We haven't disclosed that.

It would be a perfect opportunity. (LAUGHTER).

That's right -- (Multiple Speakers) -- a perfect opportunity to be consistent in our disclosure policy! I think what is material -- and we would disclose it if we felt it was material. What is material is we feel that's sufficient. We sit down every quarter on all their litigation reserves with our external council, our internal counsel, our internal auditors, our shareholders' auditors, and in the context of the accounting rules, ask ourselves "Is that sufficient?" We think it is sufficient. We've got pretty extensive disclosure. However, saying that, there's a lot of uncertainty, just as if you read the Bank of America, JP Morgan Chase and City disclosure, there is a lot of uncertainty. So, we don't think disclosing the insurance is material. It's not -- so then you ask yourself, well, it's not material, is it something we should disclose in any event? We don't think it's helpful to do that just because that's a negotiation discussion with our carriers that we would rather not have in the public domain; we would rather have privately.

Okay. One final one -- you mentioned 75 to $100 million Merchant Banking revenue as an effective and it -- (multiple speakers).

I'm sorry, I just want to make sure I was clear on that. I said net revenues in Merchant Banking between 75 and $150 million.

Seventy-five and one hundred and fifty -- the reason I mention it, it sounds like a reduction from previous objectives that I've heard before. So, am I hearing correctly? Is there a message that --?

Well, I'm not sure which numbers you've heard before. I mean, there have been numbers at times in the hundreds of millions of dollars. What I'm saying to you is that I would not -- I will be quite happy with numbers in the range of what I described there, 75 to 150 million. The main point -- and that number can change depending on the growth in overall profitability of the banks and world market profitability, but I'm saying, at present levels, and therefore the impact of volatility that Merchant Banking can have on the Bank's overall results -- I don't want that to be a significant number. So, I would take it more in that context in terms of its relative positioning in the Bank's overall profitability rather than an absolute number.

It just seems to me like the latest number I had heard previously might have been in the order of 2 to 300, or 2 to 250.

Well, at any rate, this is the latest and greatest so -- (LAUGHTER) -- that is where my mind is at right now.

I think we are worn out, so thank you very much, ladies and gentlemen.