Canadian Imperial Bank of Commerce (CM) 2010 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the CIBC third-quarter results conference call. Please be advised that this call is being recorded. To reduce the audio interference within the board room and over the conference call line, please turn your BlackBerry off for the duration of the meeting.

I would now like to turn the meeting over to Mr. John Ferren, Vice President, Investor Relations. Please go ahead, Mr. Ferren.

Thank you very much, and good morning, everyone. The purpose of this call is to review with you CIBC's 2010 third-quarter results that were released earlier this morning. These results, including the investor presentation slides we will review on this call, are available in the Investor Relations area of CIBC's website. The call this morning is being audio webcast, and an archived version will be available on our website later today.

The format for this meeting will include formal remarks from CIBC's President and Chief Executive Officer, Gerry McCaughey; our Chief Financial Officer, David Williamson; and our Chief Risk Officer, Tom Woods. Their remarks will be followed by a question-and-answer period, where other senior executives of the bank will be available for questions.

Before we begin, let me remind you that any individual speaking on behalf of CIBC on today's call may make forward-looking statements that are subject to a variety of risks and uncertainties. Certain material factors or assumptions may be applied, which could cause CIBC's actual results in future periods to differ materially from the conclusions, forecasts or projections in these forward-looking statements. For more information, please refer to the note about forward-looking statements in today's press release. Let me now turn the meeting over to Gerry.

Good morning. Thank you, John, and I'd like to welcome you to this call, and I would like to specifically also say hello to all CIBC employees who are listening to this call.

Let me remind you that my comments may contain forward-looking statements.

Today, CIBC reported strong results for the third quarter of fiscal 2010. Net income was CAD640 million and cash earnings per share were CAD1.55. Adjusting for items of note, cash earnings were CAD1.66, up 22% from a year ago. Return on equity was 19.8%.

CIBC Retail Markets reported net income of CAD599 million. This represents the highest quarter of profitability for Retail Markets since the first quarter of 2008. Revenue was CAD2.5 billion, up 7% from a year ago supported by strong results across the board.

Excluding the Visa gain in the fourth quarter of 2007, this was a record quarter for Retail Markets revenue. Credit quality in our Retail portfolios continued to improve. Provisions of CAD304 million were down CAD30 million from last quarter.

Supporting growth in our Retail franchise, we announced in June the acquisition of the CAD2.1 billion of credit card balances from Citigroup's Canadian MasterCard business. This acquisition strengthens our leadership position in the Canadian credit card market by broadening our client base and diversifying our portfolio.

In July, CIBC completed the five-year strategic branch investment program we announced in 2007. This was completed more than a year ahead of schedule. We will continue to invest in our branch network and bring further innovation to CIBC's mobile, online, ABM and telephone banking services for the benefit of our clients.

Another highlight this quarter was CIBC's broadcast sponsorship of the 2010 FIFA World Cup. Through this sponsorship, we generated high awareness around our brand. Sonia Baxendale is here this morning to talk about our progress in Retail Markets.

In Wholesale Banking, net income was CAD121 million, excluding the net loss from our structured credit runoff portfolio.

In our Capital Markets and Investment Banking businesses, combined revenue of CAD387 million was down from CAD407 million in the prior quarter. Against the backdrop of a challenging environment and low levels of client activity across the industry, these results were solid.

The performance of Wholesale Banking over the past two years has exhibited the consistency and risk control the business set out to achieve with its client-focused strategy. Significant investments in technology, combined with new and expanded client relationships, are positioning our Wholesale business for growth as markets stabilize and the global economic recovery takes hold. Richard Nesbitt is here this morning to talk about our progress in Wholesale Banking.

In summary, CIBC delivered strong results this quarter. The investments we're making in our Retail and Wholesale businesses, together with our capital strength, position CIBC well for the future. Once again, I'd like to thank all CIBC employees for the contribution that they made to making this a successful quarter for CIBC.

Let me now turn the meeting over to David Williamson for his financial review. David?

Thank you, Gerry. Good morning, everyone. I'm going to refer to the slides that are posted on our website, starting with slide 5, which is a summary of results for the quarter.

We reported earnings per share this quarter of CAD1.53 or CAD1.55 on a cash basis. We had two items of note this quarter which are listed on the top right of the slide totaling CAD0.11 per share. Our cash EPS excluding these items was CAD1.66, which is up from similarly adjusted earnings by 22% compared to a year ago and 14% compared to last quarter.

The first item of note was a net loss of CAD0.25 per share in our structured credit runoff holdings. I'll provide more detail on the components of this loss in a few moments.

Second, we had a reversal in the provision for credit losses in the general allowance, which improved earnings by CAD0.14 per share. This was primarily driven by improved credit experience, a topic I will touch on again shortly.

Excluding these two items of note, results in the quarter were helped by lower loan losses, revenue growth in Retail Markets and higher treasury revenue.

Our results this quarter also generated substantial strengthening in our capital ratios. Our Tier 1 ratio is now 14.2%, up from 13.7% last quarter. And the tangible common equity ratio is now 9.5%, up from 8.9% last quarter.

This next slide provides a summarized statement of operations on a reported basis, showing net income for the quarter of CAD640 million. As is evident on this slide, the provision for credit losses is down significantly from the prior year and the prior quarter.

As I mentioned, this quarter was helped by a reduction in the provision for the general allowance. There were two main reasons for this reduction. The largest is the general allowance had built up during the economic downturn as credit quality deteriorated. But we are now starting to see improvements in our loan portfolio, in particular the cards portfolio is allowing us to reduce some of the allowance that has been built up.

Second, we completed a card securitization during the quarter which reduces the level of on-balance sheet assets requiring a general allowance.

The other factor helping this line is a decline in the level of our specific provisions due to improved credit performance across our domestic business lines. Tom Woods will further comment on our credit experience in his remarks.

Turning now to our business results, starting with CIBC Retail Markets, which is on slide 7, revenue for CIBC Retail Markets in the quarter was CAD2.47 billion, up CAD154 million or 7% from Q3 of last year. This is the strongest growth since the first quarter of 2008 and was supported by strong results across our personal banking, business banking, and wealth management businesses as well as higher treasury allocations.

Looking at the results of the specific business lines on this slide, first, personal banking, where revenue was CAD1.6 billion, up CAD87 million or 6% from the same quarter last year. In Q3, we experienced increased volumes and deposits, mortgages and lending, and higher fee income.

Business banking revenue of CAD350 million was up CAD18 million or 5% from the same quarter last year, primarily due to increased volumes in deposits, and lending.

Wealth management revenues of CAD336 million was up CAD18 million or 6% from the same quarter last year, as stronger equity markets increased asset values.

FirstCaribbean revenue of CAD141 million was down CAD28 million or 17%, primarily due to the impact of a stronger Canadian dollar and lower volumes. Other revenue was up CAD59 million, primarily due to higher treasury allocations.

Slide 8 shows the trend for core Retail net interest margins, or NIMs. Core Retail NIMs declined by 4 basis points in the quarter as a result of unfavorable lending spreads that were affected by the narrower prime BA spread,, which is partially offset by favorable deposit spreads. On a year-over-year basis, NIMs were also down 4 basis points due to lower spreads in FirstCaribbean.

Turning to slide nine, net income for this quarter from CIBC Retail Markets was CAD599 million, up CAD183 million or 44% from Q3 of last year. Revenue was up CAD154 million, as we have just discussed.

And, next line, turning to the provision of credit losses of CAD304 million, they're down by CAD113 million from the same quarter of last year and down CAD30 million from the prior quarter as a result of lower losses in domestic commercial banking cards and personal lending portfolios, partially offset by higher losses in FirstCaribbean.

Now, on interest expenses -- were CAD1.4 billion, up CAD42 million or 3% from Q3 of last year. Higher performance-based compensation and benefits were partially offset by lower litigation provisions.

Turning to Wholesale Banking, revenue this quarter was CAD315 million, down CAD233 million compared to the prior quarter, primarily driven by a loss from our structured credit run-off business compared to a gain in the prior quarter.

Excluding items of note, Wholesale Banking third-quarter revenue was CAD435 million, down CAD8 million or 2% on the same basis from the prior quarter.

And Capital Markets revenue declined by CAD34 million due to lower fixed income and derivatives revenue as a result of decreased client activity and widening credit spreads, which was offset partially by higher equity new issues and advisory revenue.

In corporate and investment banking, revenues increased by CAD14 million from higher investment banking and corporate credit products revenue partially offset by lower net merchant banking gains.

In the other segment, losses of CAD61 million were unfavorable by CAD210 million versus the prior quarter, due to losses in structured credit run-off this quarter relative to gains in the prior quarter.

Wholesale Banking net income was CAD25 million this quarter, down CAD164 million from the prior quarter. Revenue was down by CAD233 million from the second quarter for the reasons previously noted. The provision for credit losses was CAD29 million, up slightly from the prior quarter. The increase was driven by higher losses in our European leveraged finance run-off book, partially offset by lower losses in our US commercial real estate portfolio. Non-interest expenses were CAD258 million, up CAD14 million from the second quarter, mainly due to an increase in employee-related compensation.

Excluding all items of note, net income for this quarter was CAD121 million, down CAD11 million from the prior quarter on the same basis.

This next slide summarizes our structured credit run-off results for the quarter. We had a net pretax loss of CAD138 million this quarter versus a gain of CAD58 million last quarter.

The three largest items, as shown on the slide, are row one, which is the loss this quarter from credit valuation adjustments, or CVA, on purchase protection from financial guarantors. The loss in the quarter of CAD116 million was driven by widening credit spreads for financial guarantors.

The next item is in row 5, which includes the net gain that was realized from sales and terminations undertaken during the quarter. During the quarter, we realized a gain of CAD55 million from actions taken to reduce exposure in our structured credit run-off business.

The third item is row 6, which includes the losses on our Cerberus note, which is introduced as a form of a hedge against our exposure to USRMM underlines. The gain in our US residential mortgage market holdings, in row 2, acts to partially offset the loss on this note.

In summary, our results this quarter reflect an improved Retail Markets revenue, which benefited from increased volumes in several of our key businesses. Wholesale Banking revenue, adjusted for items of note, was down only 2% from the prior quarter in a more difficult market. These results reflect the fact that we continue to run this business with comparatively low levels of trading risk. Our client driven strategy and limited principal trading activity have allowed us to generate sustainable and risk controlled trading revenues this year.

In addition, our loan-loss experience continued to improve, and our Tier 1 capital ratio of 14.2% positions CIBC well for future growth. Thank you for your attention. At this point, I'll hand it over to Tom Woods. Tom?

Thank you, David, and good morning, everybody. With respect to credit risk on slide 21, specific loan loss provisions were down for the fourth successive quarter at CAD297 million. The CAD35 million reduction versus Q2 as due to continued improvement in Retail Markets, particularly in our cards, personal lending and commercial portfolios. This more than offset higher losses in FirstCaribbean and our European leveraged finance run-off book.

General loan losses, as David said, were a recovery this quarter of CAD76 million or 6%, due primarily to reductions in the cards allowance. Gross impaired loans were up marginally this quarter, but new formations were lower for the fourth quarter in a row.

On slide 22, our US commercial real estate finance business has $2.1 billion of drawn loans and $231 million of undrawn exposure. In Q3, we took loan loss provisions of $17 million, down from $28 million in Q2. Gross impaireds are $345 million and net impaireds, $191 million.

You may recall last quarter I said that the outlook for provisions here in the second half of the year would be about the same as in the first half. Although loan losses turned out to be better than this in Q3, there is some potential for higher loan losses over the next few quarters, possibly back to the run rate we saw in the first half of the year.

On slide 23, our European leveraged finance run-off book has CAD716 million in drawn loans and CAD152 million in undrawn exposures. In Q3, there were CAD12 million in provisions for credit losses, following a restructuring of one of our loans. At the moment, the outlook for loan losses in this portfolio is positive.

On slide 24, our US leveraged finance run-off book has $321 million in drawn loans and $397 million in undrawn exposures. There have been no provisions for credit losses thus far in 2010 in this portfolio, and the outlook continues to be good.

On slide 25, our cards net credit loss rate in Q3 was 5.2% versus 5.6% last quarter, and the peak of 7.1% in Q3 '09. Losses were down CAD9 million versus Q2. Write-offs and delinquencies continued to improve quarter over quarter. Although July's 30-day delinquency rate was up marginally versus June, the 90-day delinquency rate continued to improve.

On slide 26, our coverage for credit losses continued to be strong with 40% of specific allowances as a percentage of our gross impaired.

Turning to market risk, slide 27 shows the Q3 distribution of revenue in our trading portfolios. In Q3, all but seven trading days, or 89% of the time, had positive results, down slightly from 91% of last quarter.

And on slide 28, our Tier 1 ratio was 14.2% at Q3, up from 13.7% at the end of Q2. Our tangible common equity ratio in Q3 increased to 9.5% from 8.9% last quarter.

These increases were mainly due to strong capital generation and a decrease in risk weighted assets.

Thanks. I'll now turn the meeting back to John Ferren.

Thank you very much, Tom. So we're ready to take any questions from the phone lines.

(Operator Instructions). Steve Theriault, Bank of America Merrill Lynch.

Thanks very much. Start maybe with a question for Gerry. Based on Q3 earnings, your payout ratio looks like it's about 52% in the quarter, again, on an annualized basis. There's obviously lots of changes coming on the capital front, but you're growing capital at a pretty impressive pace. So a couple of questions. Is there any reason to believe you will rethink your targeted payout ratio of 40% to 50% in the aftermath of all the capital changes? And how long do you think it will take for the regulatory air to clear sufficient for CIBC to be in a position to start thinking about dividend increases?

Thank you. We do not currently have plans to change our payout ratio target of 40% to 50%. When the dividend gets down back into that range -- excuse me, not the dividend, the earnings -- on a consistent basis, we think that we would, as always, review our dividend with an eye to whether or not it was at an appropriate level.

We don't just consider the payout ratio. We also consider where we think we are in the economic cycle because that bears on your thoughts of future ratios and a variety of other factors. So, we are not planning to change the range. Once we're back in the range, and we're getting very close to it, we will start our consideration around the thought process of future dividend increases.

However, you pointed out that at this time, there's an important part of that thought process, which is what our future capital change is going to be as a result of the worldwide regulatory review. And we feel now that although there is still uncertainty there, that there is enough information out to give us a preliminary indication that CIBC will continue to be well positioned from a capital viewpoint, and so we would also be at the time of considering any changes to dividends, be considering our overall capital deployment strategy, given that right now, pre-changes, we're at double the regulatory minimum and one of our highest capital ratio -- well, probably our highest capital ratio ever.

So, this is an important matter. It's one that because the regulatory changes are not yet final and it's still an environment around the world that I think is changing, it's still something that does not require current action, but we are in the thought process stage of future capital planning.

Okay, thanks for that. One more if I might, a numbers question. Very strong securitization gains in the quarter -- how much of the CAD76 million of general reversal is reflected in the CAD48 million of net securities gains that you report in your sub pack on page 17? What I'm trying to figure out is whether backing out both of those effects would, in effect, be double counting the impact.

I will jump in and maybe Tom will speak as well. So you raise two things there, the adjustment to the general and gains in the AFS securities area. So, maybe I will speak to the latter and then maybe Tom could speak to the change in the general. Anyways, so just -- I'm not 100% sure I followed your question, but let me speak to each of the components. But maybe before I leap in, if you can just repeat your question if you would.

Maybe -- I guess what I'm trying to figure out -- sorry, not the securities gains, the securitization gains of I think it was CAD48 million in the quarter, that reflects -- does that not reflect some of the general allowance reversals?

Yes, Steve, it does. And on page 17, the CAD61 million line just above your CAD48, CAD61 million, about CAD25 million of that would be related to the securitization activities on cards in the quarter.

Okay, that's helpful. Thanks.

Rob Sedran, CIBC.

Hi, good morning. It seems like there's always a lot of activity in that run-off book. I wonder if, David, if you can give us an update on how you feel about the recoverability of the assets? And I'm not really speaking about CVA adjustments or marked-to-market, but more how comfortable you are about getting your money back? And to the extent this little patch we've hit in the economy here turns into something more serious, do we need to be nervous about this portfolio?

Hi, Rob. It's Ron Lalonde. I'm running the structured credit run-off book, so I will deal with that.

Let me start by saying that this is a run-off book, and our target, therefore, is to exit this activity, and we've been pursuing that path now for a number of quarters. So, that is really our first mandate.

But speaking to the actual quality of the book, we remain fairly comfortable with the credit quality of the assets there. Just to give you a couple of numbers, the biggest chunks of our remaining portfolio are the CLO portfolio and our corporate debt portfolio.

The CLO portfolio -- we are experiencing cumulative losses to date of a little under 4%. Our attachment points on that portfolio average about 30%. On the corporate debt portfolio, accumulative losses are less than 1%. Our attachment points are about 20%. So we're very comfortable with the credit quality there. But as I indicated, our objective over time will be to reduce and ultimately eliminate this portfolio.

So I wouldn't rule out the possibility that we would take opportunities if the market shows us to exit blocks of the portfolio. And if that meant taking some losses or perhaps not being able to recognize some ultimate gains, we would certainly consider that at the appropriate time to reduce the size of the portfolio.

Okay, thanks, Ron. And just a quick follow-up for Tom, I guess; Tom, your comments on the next few quarters are consistent with what we heard yesterday from one of your competitors in terms of potentially seeing an uptick in loan losses in the next couple of quarters. So how much of that is just conservatism? And how much of that is concern that the recovery may be stalling here?

Yes, Rob, my comment, was actually specific to the US commercial real estate space, because we had a pretty good quarter on loan losses. And I'm not particularly concerned about it; I just wanted to be sure that you didn't read into that good Q3 number necessarily a continuation of that going forward.

Having said that, like I don't have any particular concerns about that. We've just got, as I've said before, five or six situations that were in negotiation, and we could have a quarter where we have higher than that kind of run rate. So that was specific to real estate.

I mean to try and help you on guidance, I don't really want to give overall loan guidance. Having said that, I think when you look through -- the card's portfolio obviously drives our losses. And we had a continuation of improvements quarter over quarter on delinquencies. Thirty-day delinquencies were up in July a very small amount versus June, so I wanted to highlight that.

I don't have any particular reason to say that our loan losses this quarter are going to necessarily be much higher or much lower in Q4 and Q1. I think when you go book by book, again, cards drives it.

FirstCaribbean, we could see some pressure there. You probably noticed impaireds uptick there a fair bit. Commercial real estate likely to be up a bit; and cards, the same or down a bit. So I think that kind of run rate you can expect going forward is more or less the same as what you saw this quarter.

John Aiken, Barclays Capital.

Good morning. Tom, just carrying on with you, in terms of the residential mortgage gross impaired loan formations that we saw in the quarter, the weakness, was there any regionality in that? Or is this more broad-based?

No, good question, and this has come up before. There's a lot of regionality in this, and it's very much driven by FirstCaribbean. The rules in FirstCaribbean in the various regulatory environments, they are quite a bit stricter than they are in Canada. And, we write loans off -- not write loans off -- we impair mortgages after 90 days in both Canada and the Caribbean.

However, for a loan to come back into unimpaired status in FirstCaribbean, it depends what jurisdiction it's in. And in some cases, it can't come back until payments have been made for a full 12 months consecutively. So, I want to -- I think I can be pretty definitive in saying, when you look at that impaired number outside Canada, not to be alarmed -- clearly if the Caribbean economy continues to be slow and deteriorating, some of those loans are going to go into provisions. But a lot of regionality, and I'm not concerned about it at the moment.

Great, thanks. And a question for Richard on commission levels. I'm assuming the sequential decline this quarter was based on volumes. But can you talk to the profitability of your trading strategy, in particular the high-frequency trading that you would be doing?

Yes, sure. Yes, I think we're fortunate to have it, actually. You've seen the traditional business declining in the industry since 2007 and, not only declining in terms of volume levels, but also in terms of commission payments -- commission payouts per share. So the traditional business is declining, and we are replacing some of that revenue with the high-frequency activities.

So, I think the business -- that trend is going to continue. It's going to be more difficult to make money in the traditional secondary commission business. And I do think that there will be continued growth in the electronic trading.

Great, thank you.

Thank you. The next question is from Brad Smith at Stonecap Securities. Please go ahead.

Thanks very much. My question just relates to the past-due amounts that you reported in your sub pack. And I was just curious with respect to this is on -- what page is that -- 24, I guess it is. Just the uptick in the residential mortgage past dues in aggregate, CAD2.4 billion from CAD2.3 billion, I'm wondering if you could just clarify as to where the regional influence is there? And the same question relating to the business and government. Is that -- I mean should we just assume that most of that past-due movement relates to non-North American loans?

Yes, that's right. Same answer to the previous question on mortgages, you are seeing all of that uptick and more actually is in FirstCaribbean. Canada was down a bit. And the same point I made holds here -- well, it's a slightly different point in the sense that these are all non-impaireds, obviously, because they're under 90 days. There's a fair bit of seasonality in the Caribbean. We're in the summer. We do tend to see an uptick in delinquencies. Mortgages traditionally there have come back.

So with the same caveat I gave you before, if the Caribbean were to continue to decline, more of those in percentage terms than historically could flow through into impaired and into provisions. But like I'm not concerned about that at the moment.

Business and government is slightly different, and I alluded to this with a comment earlier. Again, the increase is due largely to FirstCaribbean. And there, as I say, we've got five or six situations where we are working on, and we could see some provision increases there, which I alluded to earlier. So I would be not concerned at the moment about mortgages. Lots of focus on the business and government. But I would remind you that FirstCaribbean losses tend to be either side of CAD20 million. So if we see a significant uptick there, chances are it won't be large in the context of CIBC's typically recently CAD300 million loan losses a quarter.

Right. Okay, thank you.

[Gabriel Duchesne], Credit Suisse.

Just looking at the dividend, a follow-up on Steve's question there, and the outlook for increases in 2011, given what your view is on Basel III, the economy, your above average payout ratio, and your structured credit exposure, should we -- would it be unreasonable to expect dividend increases from CIBC in 2011?

I wanted to emphasize, first of all, my previous remarks, which are being back in the payout range, and then giving consideration to where we think we are in the cycle is probably the key determinant here. If the determinant was capital levels, we would be much further down the road on the dividend topic. And the reason why is because we -- according to all the information we have today, which is not bad in terms of what the new rules are going to look like for capital, plus the time frames for phase-in, do indicate that we are going to have a very good capital position looking forward. Obviously, we're in a very good one today, but I also mean very good from the viewpoint of capital deployment and/or dividend increases.

On the dividend increase side, though, we do not look at capital as the first gating factor. We do look at the payout ratio as the first gating factor because our strategic imperative is to have everything at CIBC as consistent and sustainable as we can. And payout ratios are probably the first, most important gating factor as to consistency and sustainability. So that's the key element; the earnings profile is the key element to the dividend consideration.

If it was capital, it would be something that would be a much quicker discussion. So that's what you should keep your eye on. And as I said earlier, once we're back into the range, it will be something we are reviewing. And we're getting fairly close to now, so I would say that it will be under consideration and discussion in 2011.

Okay. Thanks for that. The Canadian Retail margin, can you comment -- and a couple numbers questions here and that will be it. But can you comment on the margin and if there was any prepayment activity that may have actually been a benefit to the NIM? I wouldn't suspect it would be that substantial, but just curious there. And then, on the treasury allocation to Canada, can you provide a bit more detail on the magnitude of that and the nature? And that's it.

So first, I will speak to NIMs and then hand over to Sonia maybe -- Sonia, would you like to --?

On the NIM front, in the Retail business, as you will have noted, it's about a 4 basis point decline on the quarter. The recent rise in the short-term interest rates would have had a favorable impact on our deposit spreads, somewhat offset by the lending side. Prepayment would have had virtually no impact on our quarter-over-quarter numbers. If you are thinking year over year, then it would have had a positive impact.

Okay. And then the treasury allocation?

Happy to speak to the treasury allocation. So they're up quarter over quarter. So we've had I would say quite strong underlying results in treasury this quarter. So that [end] is reflected there.

A couple of factors. One was the -- as we mentioned some time ago that we incurred costs to strengthen our balance sheet and to improve our funding term structure, and those costs were incurred and affected the treasury results.

Over time, we're going to see those alleviate, and I think that's being recognized in our treasury results. And as a result, they're strong this quarter and we're hoping we will continue along those lines. And in addition to that, we had gains in the AFS securities this quarter, which also impacted the reported treasury results. So it's those two pipes that are affecting treasury this particular quarter.

Okay. And actually, I'll just sneak another one in there. I came across the purchase price for MasterCard was CAD1 billion, or how should I -- does that number -- is that the right way to interpret it -- the Citibank portfolio?

The overall -- there's two elements to the MasterCard. There's the on-balance sheet part, and then there's the component that is off-balance sheet in a trust. So the overall portfolio was over CAD2 billion, but you've got two components there. You've got a component that comes on balance sheet that is roughly about CAD800 million. And then you've got a component that's securitized and off-balance sheet, which I think is about CAD1.3 billion, CAD1.4 billion. So, the amount of premium paid on that was actually quite small, but that's the block of business that was acquired.

Okay, thanks.

You're welcome.

John Reucassel, BMO Capital Markets.

Thank you. A question for Sonia. Sonia, the outlook, what type of outlook do you have for the domestic spreads and the loan growth in Canada, particularly in the Canadian consumer? Is it -- I assume we have to slow down. What are you guys preparing for? And what do you think it means for the competitive environment on spreads?

Sure, thanks. On the spreads, I would expect them to remain relatively in line with what you'd seen at the Q2, Q3 levels. I think competitive pressures will likely offset some, but not all of potential interest rate benefits. Product mix, obviously, will also have an impact over the NIMs over the next few quarters.

And I think that will apply across the industry. From a CIBC perspective, we would expect to have continued above market growth in our deposit franchise; mortgages and lending, probably more in line with the industry. Our expectation is to maintain our market share.

But I would, on the lending side, certainly and particularly in mortgages, expect slower growth than we've seen over the past 12 to 18 months.

Okay. Thank you, Sonia. And then, for Gerry, just back to this payout ratio. When you talk about a 40% to 50% range, is that a harder range that may be even the past? Are you happy to slip above 50% in weak economic conditions or is dip below 40% in strong economic conditions? Or are you going to try and keep it pretty tight? How should we look at that going forward?

Well, I think I would start with where we are today. Our current dividend in weak economic conditions did drift above the 40% to 50% level. So, the range is something that we would like to remain within, but when you have economic conditions as extreme as we saw, at current levels, we did drift above the 50%. And that's something that we have been comfortable with through this cycle.

In general, though, we would like to have a dividend profile that, along with our strategic imperative of consistent sustainable earnings, where we had the capacity to be consistent and sustainable in increases, hopefully all the way through the cycle. And, I do believe that as you get into a difficult cycle, if you've got yourself correctly positioned within the payout ratio, that you would continue to raise your dividend, albeit possibly tuning it a bit because of the outlook.

So, I think what you see today is a reasonable indication of our view of the hardness of the range. We had an extreme picture in terms of the economy. We went above 50%. We haven't made any increases as long as we've been above 50%.

Once we get back into the range, we will consider increases, of course, in light of this consistent, sustainable target that we have. So, I wouldn't look at the 40% to 50% as being something that we are changing as to hardness. It would be I think -- our past activities would be representative.

Okay, thank you. And then last, Gerry, we've had some US companies and international companies opine on where they kind of think thresholds are going to be for Tier 1 or TCE ratios. Do you want to opine on where those structurals are going to come in, or are you going to take a pass?

Well, the information is not complete at this time. And, rather than make a comment about the broad marketplace and get tied down to the absolutes of the market, I would like to make a comment that's directional and relative.

And that is, CIBC's positioning, as far as we understand the circumstances today, versus those international competitors and the Canadian competitors; and all indications that we have today is that we are going to be very well positioned. Our total common equity ratio is now very well positioned. We do have lots of capacity in that area also.

And, the phase-in period for this also appears to be a lengthy one, and it's something that when we look at our positioning into the phase-in period, we find that the flexibility that we will have, with the information we have today, is actually rather high. And don't know if that's where things will end up because the I's haven't been dotted and the T's haven't been crossed in the agreements.

But, the reality is that I'm more interested in CIBC's position, which I know, as opposed to trying to guess at the final regulatory position, which I don't know. And CIBC's position, by all the information I have, is in the very strong category. And that may give rise to incremental flexibility for us in terms of our strategic choices.

Fair enough. Thanks, Gerry.

Sumit Malhotra, Macquarie Capital Markets.

First, for Tom Woods, just in regard to the CAD76 million general allowance release, are your conversations any different now with OSFI or any of your regulators in regards to general allowance for leases than they would have been coming out of the previous cycle? Specifically, is there more of a push to keep provisioning, shall we say more balanced through the cycle, rather than having swings up and then swings down?

Not really. I think the regulators are -- we have continual dialogue with the regulators on all these topics. I think it's fair to say, as you would, I'm sure agree, post the financial crisis, the nature of those discussions with regulators has intensified. So, general loan loss provisions are a topic every bank in Canada goes through with the regulators every quarter. So, I don't know that it's anything particularly different than it has been.

So the -- obviously you've touched on the state of the economy and where we are right now. If I look back at CIBC in 2003, 2004 specifically coming out of the last cycle, there was quite a material level of general reserve reduction. In your mind, economy permitting, of course, there's no regulatory hurdle to the same experience this time around?

I don't think there's a hurdle. I think there's just a good transparent discussion with the regulators. So, it's actually quite formulaically driven. There is the potential for an overlay. And I can tell you in the cards business, actually, given that delinquency -- that the improvement in delinquency seems to be stabilizing, we've actually put a slight qualitative adjustment more conservative on it. So, I think the whole general provision methodology is very well understood by regulators and it's really not an issue of any serious debate. We go through it every quarter with them. And as the economy improves, as you saw this quarter, the formulas drove, both for cards and for Wholesale Banking, slight improvements.

Let's shift over to net interest income for David Williamson. You touched on the fact that part of the reason for the asset growth was, I think you said treasury or perhaps liquidity. When I look at net interest income this quarter, even if I look at your core definition, and considering the higher day count, a pretty noticeable increase in quarter over quarter net interest income. Is this related to some of those treasury activities you talked about? And can you give me a little bit more detail on what exactly was driving NII and the asset side from treasury?

By all means. So, a couple of factors. So we will speak about treasury, but I think one of the key drivers of NII on a quarter-over-quarter basis is, in fact, the Retail business. We saw solid volume growth in most of our Retail products.

We also, on a quarter-over-quarter basis, you've got three extra days in the quarter. So, from an NII perspective, that's also a pretty substantive factor. And then coming to -- and so the core business is performing well is the key point.

And then, from a treasury side, then, yes, I was happy with the results in treasury. We're just -- hopefully we'll continue to see an improvement in our treasury's impact on the business relative to some of the costs we incurred some time ago during a period of time where it was more expensive to fund. But that's going to be a gradual evolutionary process.

But that's -- really it's the driver on the business front here, I would say more so than -- a combination of the two -- treasury and the business.

All right. And finally, probably for Gerry, sticking with Basel and capital, when I think about leverage from a common equity perspective, I'm looking at assets to common equity. And this quarter with the aforementioned increase in assets on an average basis, the bank is back up close to 30 times again. And, when you think about some of the different things that are coming out of Basel, I know it's a moving target here about whether -- what the grandfathering timeline is for innovative Tier 1, preferred shares. What's your view on the bank's aggregate leverage ratio? And I know there's different definitions of that, but when I look at that common equity or assets to common equity number close to 30, do you have a view as to where you want that ratio to migrate over time?

Well, first of all, I did want to say that I would include in my comments on the leverage ratio, I would give it the same treatment as I have been giving capital in terms of our view of where we will be positioned from a leverage ratio post new rules. We believe it will be very solidly positioned. And, the reality is that within the current ratio, which is in line with where the rules are today and our principles that we have around consistent, sustainable earnings, but we also have some flexibility to have our balance sheet constructed in a variety of different ways from an asset viewpoint.

Some of the assets that are held are highly liquid and they do move around a little bit from quarter to quarter in terms of the levels. And we have an ability to adjust that. So the first thing is, is that, there is flexibility within there, some flexibility. But secondly, we do believe, when we look at how we want to run the business, and what the new rules are, we do believe that we have ample room here, and it is not a factor that is on our list of potential issues going forward.

You talk about liquid assets, just to wrap it up, are you -- is that a reference to the CLO book or some of the other assets that you are -- on the balance sheet?

No, I was talking about the regular business that comes and goes. I was also talking about various positioning activities that take place sometimes in normal course to hedge our treasury activity, things like that.

And, the other thing is that the -- when we look through our pro formas, the reality is, is that we have not adjusted our view of the new regulatory environment to the fact that, in all probability, by the time the rules are in, the amortization of this portfolio will have started to kick in extremely rapidly, and the portfolio would basically be a much smaller factor.

These things change depending upon a variety of factors, but the amortization of our CLO portfolio is something that is going to be picking up over the course of the next 12 months according to our current forecasts.

That's a very positive factor for that portfolio because to the degree that amortization pays it off, it means that we are getting paid off at par as opposed to the liquidations that we have been doing so far, all proactively at, albeit, small discounts. So, that would be an additional tailwind from where you would be looking at our results today if that portfolio was of a much smaller size at that point in time.

That's a good point. Thanks for your time.

Mario Mendonca, Canaccord Genuity.

Good morning. Gerry, you've now given us good information on capital and on the leverage ratio, both of which the bank seems to be in a great position, and I understand your points here. But the one that's remaining now is liquidity, and I'll be frank, that's the one that's probably most confusing for me to really, when I read all the proposed standards. Could you offer anything on where the bank stands so far as your understanding of the liquidity provisions, how those are shaping up?

Well, I would give you the -- basically, I would give you the same answer. We have looked at the information that is available, which has been maturing and becoming clearer, although it's not final yet. As that information has become more available -- and I agree with you, some of it is still not as clear as we believe it will be in the final version, but to the extent that the information that is publicly available has been well scrutinized, plus, to the degree we've been able to inquire, for clarification, to the various bodies that are involved, we do believe that liquidity is an area that we will be well-placed in.

And it is something that we do have a high standard on we believe versus the marketplace at this time. And we do not think that there will be incremental strain to maintain that standard under the new rules.

No incremental strain -- is that with reference to your earnings or anything else?

I was basically talking about several facets. When you look at the element of how one works within the liquidity, and therefore, the funding markets, you always have, first of all, the queuing theory of the markets, meaning, are you able to fund your strategic plan? Because you're always -- at least it's generally very, very easy to fund in the shorter term. But it's a strategic plan that we are always interested in; the placement of term debt.

And, the first thing in the markets as to the placement of term debts that is of great interest, as I say, is the queuing theory element of it. If you are able to tap markets on a steady, sustainable basis, and you are finding that you don't have particular rush periods, then, what you do find is that the types of securities that you are able to market will have a different compartment over a strategic framework than if you are doing it on a more lumpy basis.

That, in the end, will factor, as always, into the price of your funding. And so, the net of this, sort of the part that you are looking for, is that we do not expect that it will put a cost pressure on us from the viewpoint of our overall term funding targets that we have.

No cost pressure on your funding. How about any pressure on the revenue side in terms of the securities you hold? And would there be any impact on essentially the asset side of the balance sheet that you can foresee, having to sell particular assets and beef up on, say, more liquid assets?

Actually, it's -- the short answer is I don't believe so at this time. But I will tell you that, it's quite interesting that I think the broad marketplace, just because of the way the general economies are going, at least for the short term, is not heading in that direction; because the reality is that client asset formation and the viewpoint of the large credits in the lending markets, at this time, is something that is not putting pressure on I think very many banks' balance sheets within the overall industry. Corporate clients, the larger they are, the more so this is the phenomena, are, in general, renewing facilities. And as I say, I don't believe this is a CIBC phenomena. As a matter of fact, I know it's not. I think it's more of a broad-based economic and industry phenomena.

Corporations are, in general, renewing facilities. And this is very generalized, but I think it's still not bad in terms of the changes that are going on in the market. They're renewing them and they're generally renewing them not at larger sizes; they're generally renewing them at the same size or smaller.

Generally, spreads are better, but the amount drawn and undrawn -- generally the amount drawn has also been coming down, and I think there's two reasons for that. The current state of the economy; there's some hesitation in terms of capital investment on the corporate side. In addition to that, there's a lot of prudence on the corporate side in terms of their balance sheets.

So what you are getting is the reflection of that behavior in -- and this would be North America wide, probably the same in Europe but I'm less expert on that. You are getting behaviors of that customer set are acting to reduce the draws on the banking system.

And you are seeing on the other side in the banking system, I think especially in the United States, some of that has been replaced by participation in the treasury marketplace. And the statistics do bear out in the US that treasury placement is much larger on a domestic basis. And I think there's probably some indication that that is not just net investors. It's banking system activity.

Okay. So no pressure, or where you sit right now, you don't see pressure on the funding side, and you don't see any major changes on the asset side?

What I'm saying is that given the information at this time, that in those areas that you indicated, we do not expect that it will be changing our business planning or our business results in a fashion that is significant. And by the way, the only reason why I am saying -- I'm just saying that it's not significant; I'm saying that there are some areas where we think it's possible we would be net positive, but also some will be small net negatives. We think that's industry-wide. Our picture overall is very good.

There are a lot of changes coming over the next little while that are -- we think in the end, we're well-positioned for. There's other changes coming also, which we're not going to open up today, but discussions around IFRS will be coming. And there's some very preliminary information on that that could also be a positive. And, as I say, it's going to be an interesting environment.

So far, what we see in terms of the regulatory and accounting changes, the picture looks fairly good for CIBC. I always want to be cautious because these things do change. They're not in our hands. They are in the hands of a broad group of regulators and other stakeholders.

Thanks very much.

Darko Mihelic, Cormark Securities.

Thank you. I would like to pin down David on a couple of answers you've given previously to the net interest income. And the well want to approach this is, you mentioned that the increase in the net interest income quarter over quarter was primarily a result of better business from Retail. So one way I think of looking at this is when I look at your average interest earning assets, they are at CAD302.3 billion in the quarter. Now, that's up substantially quarter over quarter by about CAD18 billion, of which I can only trace about CAD4 billion of that to Retail.

So my question is, what else are you doing in treasury that would add so much to the balance sheet? And the question is pertinent because your net interest margin collapsed quarter over quarter at the all bank level by about 13 basis points. So I want to try and understand what's moving your average interest earning assets and your margin quarter over quarter because I am looking forward to try and understand your net interest income picture in future quarters. If you think this is too complicated, we can take this off-line.

No, I -- well let me offer a couple of comments, Darko, and then if we want to go in deeper then we will take it off-line. So a couple of things. My comment before was on the net interest income, and that, the numerator so to speak, and I'll come to the change in the offset base in a moment. So that's where I was speaking to volume growth in Retail. There's good net interest income growth both in the business and the treasury. So both are helping.

Now to your point, bank NIM is down 13 basis points. That's not a numerator issue because we're seeing good growth in net interest income, but we are seeing growth in the denominator in the average interest earning assets front.

So, there's two factors there. One is treasury and that's what Gerry was referring to before. There's rebalancing and hedging activities within treasury. It ebbs and it flows. In this particular quarter there was more activity there. But again, that's -- I would say more in the normal course hedging activities. If you do it through the cash market as opposed to derivatives can expand your asset base, so that's just -- but in addition to that, there's the client centric.

So there is -- you have probably identified -- the billings you identified there was probably mortgage growth. You will see trading securities are up. That's CAD3 billion. That's more the growth that Richard is seeing, client-related in his business.

So, we are -- the big points being, we are seeing growth in net interest income. This quarter, we saw larger growth in the net interest earning asset base, which pulled the NIM down. But in that is both client centric and some treasury activities. Nothing on the treasury side that is different from normal. It's just a volatile space, and the rest is solid business growth.

Okay. And just two questions for Sonia, and I will try to make them brief. Sonia, you mentioned that you expected mortgage growth to soften a little bit. But I want to try and pin you down because mortgage growth in the quarter is actually quite strong. So what is it that you saw in the quarter that says to you, mortgage volumes in the future will be weak, and maybe perhaps you can offer us a data point. For example, I'm hearing anecdotally that July origination volumes for mortgages were weaker. Would you be able to share with us how much weaker they were?

So to answer your question, I think there are a number of environmental factors that the various items that you know about in terms of potential rate changes, all the benefits that HST, all those kinds of things in Ontario, that saw us have some particularly high growth up to the end of June.

I will say that July was -- originations were softer. And, I don't -- we're not going to give specific numbers on that at this point, but certainly industry-wide, the mortgages were down in the month of July. I think that's pretty publicly available information. And, there is no reason to think at this stage that that's improving.

Okay. And one last question, Sonia. Would you care to help us out with the possible impact of the changes to credit card rules here in Canada?

Help you out in what sense?

Well understanding the impact on CIBC and what potential mitigants you have available to you.

Okay. So we've talked about this a couple of times. Some of the regulations have already come into effect, and you are seeing that impact in our results. Some of the more significant impacts will come into play as of the beginning of September. And those are interest calculation methods, application of payments and grace periods. The latter one has minimal to no impact on us. The first two will have an impact on CIBC and will have an impact on all card issuers in Canada, so there is a financial impact.

There will be virtually no -- given the timing, there will be virtually no impact in the remainder of 2010. We have been working on a number of product changes, enhancements that you have seen in the market to offset some of these things, so there will be a financial impact. I would, in CIBC's case, as I've mentioned in the past, we will be able to offset the majority of it in 2011.

Okay, thank you.

Michael Goldberg, Desjardins Securities.

Thank you. Were structured credit losses in the quarter, the CAD138 million, in USRMM or non-USRMM? Or could you give us some idea of the mix?

Yes, Michael, on the USRMM, we had a slight pickup. We earned money there, so really the big impact in the CAD138 million was the spreads on financial guarantors. So it's really the protection and the CVA that we have taken against that protection, in the quarter, was the big driver.

And on the non-USRMM?

On the non-USRMM, I mean really the story this quarter was the protection, right? So it's both on the non- and the USRMM. But it was a -- it was really the spreads that moved out the -- so there's two factors. One was the spreads. That was the negative one.

The other factor that was a positive one was, as we've reduced some of our exposure, we had a gain on that space. And then, I guess this one other factor that's kind of more to your point, Michael, about which category. We have the Cerberus note that's protection against our USRMM. So the USRMM got better and the Cerberus note came off. So those two are correlated.

One of the things, Michael -- it's Gerry here -- in terms of answering your question that I think is very important item that people should understand around this book is that the amount of risk weighted assets that we have set aside against, for instance, the receivables that David just talked about, has a very interesting impact; is that when we had to take the incremental spread charge for the receivables, that reduces the value of those receivables. And because we have such a heavy weighting of risk weighted assets against those receivables, there's immediate capital relief that comes in that, in some cases, is a zero sum.

And, we're actually seeing that now in the portfolio that when there are fluctuations, or interesting enough, on disposals, and it's one of the reasons why we've been very comfortable with disposals even though they would generate small losses -- and what I'm trying to get at is that you have this interesting phenomena where you have a pro forma earnings loss -- well on the face of it, an earnings loss, but you then have an immediate release of capital because you have written down that asset.

And because of the way, under risk weighted assets, those assets are assessed, you might have a very large multiple of risk weighted assets which, in the end, you end up being, in some cases, capital positive; in some cases, capital mitigating; in some cases, capital neutral.

So just as an example here, David will give you the numbers on the capital impact here because it was fairly important in terms of understanding this portfolio. I do believe it's also important in terms of understanding Ron's discussion around any future intents that we may have. David?

Thanks, Gerry. Yes, just to put some numbers to what Gerry is talking about, he's absolutely right. So we have now just over CAD4 billion of RWAs that are held against our monoline exposure. So this quarter, where we took a further write-down on that monoline protection, it actually ended up helping our Tier 1 ratio by about 10 basis points. So it's just a -- it would have released some RWAs that more than compensate for the earnings impact.

The other comment I would make, Michael, about the stratification, really when we look at USRMM now, our net exposure in that space, net of Cerberus, is really to a de minimis level now. So really, the USRMM story has played out, and the remaining exposures in the non-USRMM, and that's really what Ron was speaking about before, which is CLO and CDO -- and that exposure is very different in its nature. And our anticipation is that it will pull apart.

So on balance, do you think that structured credit is going to remain a headwind as it was this quarter or return to being a tail wind, as it was in earlier quarters recently?

Good question. It still -- there's a couple of things that have happened with the portfolio. One is it's smaller, which is a good thing, and that's through the efforts of Ron and Gerry and others to manage the portfolio down, so the absolute size of the numbers are continuing to come down.

Second thing is we have taken some offsetting positions. So we have got rid of the underlying, have kept the protection. So we've talked about that in prior quarters, but by changing our holdings, we now have some offsetting positions, which has further dampened down the net impact. But overall, the portfolio is still a net long portfolio. So it will play to how the market goes.

We had four quarters where the markets tightened and we're better, and we had earnings. This past quarter, it's a tougher quarter in the markets, and hence we had a loss. So it's A, smaller; B, with some of the offset positions, it's a dampened volatility; but it's still in that long portfolio.

As I mentioned earlier, Michael, the other factor that is very important to consider in this portfolio is that the amortization schedule is, as we're looking forward, going to start to kick in. The -- there is a pool to par factor in this portfolio. And as that continues to proceed, there is that probable upward movement in terms of the valuation of, particularly, the CLO portfolio.

And as that happens, what you see is the diminishment in the size of the receivables, the release of those RWAs, and a reduction in the remaining noise potential that exists within the portfolio. Because this business of spreads widening or narrowing, which is very tied into just indexes that are out there as opposed to completely tied into the individual idiosyncrasies -- it's something that I think reduces clarity in terms of our overall earnings. And therefore, the fact that this portfolio now is getting closer to where the portfolio itself resolves in existence in a positive way, regardless of market conditions, is a very -- something we look forward to.

Okay. I have one other question. You talked about a lengthy phase-in for the new capital rules. Do you expect that the phase-in period in Canada is going to be the same as in other jurisdictions?

Well, first of all, in the end, that is the decision of the Canadian regulators. On a broad basis however, I do have to say that all of the indications that we have received from virtually every area that we discuss this, or where we get our information publicly, discussions we have with our industry counterparts, would indicate that one of the key principles that the industry and central banks and regulators are aiming for worldwide, is alignment. And, the key principle of alignment is something that we do believe that Canada is interested in and a supporter of. So, while again, I don't like to speak for the regulator and I'm not going to, it would seem that, given that principle, that Canada would be on the same timeline as others. And so, I would expect that.

Thank you.

Andre Hardy, RBC Capital Markets.

David, you talked about a gradual improvement in the treasury contribution to Retail over time. Just to be clear, what's the starting point you are using when you make that comment?

Just picking up really on the points we discussed in prior quarters, where we looked in 2008, where we spoke specifically about taking our funding structure and terming it out, and other actions we took on capital and innovative Tier 1 and so forth which reside in treasury results. So, it's really I'm just looking at the results that we have had as an institution in 2008 and in 2009 were affected by the costs associated with what was environmental factors, just spreads generally; the fact that at that point in time, we were making sure that, as Gerry said, strategically, we are topping term funding; and some of the capital steps that we took as well. So, just that there's those kind of factors that will flow back out again, and that's happening.

And then there's the overall portfolios within treasury, which just in a declining interest-rate market, are performing well. We're positioned such that that's been a good result for us, so it was really just those kind of factors, Andre.

But I guess what I'm trying to ask, David, is in 2008, you made CAD200 million. In 2009, it was CAD70 million. The last four quarters were, I'm just eye-balling it, but call it negative CAD140 million, again, I'm just eye-balling it. When you say things should improve, what is the starting point?

Well, it's off of those kind of bases that you are starting to see that kind of improvement. So it's not -- it's from the basis that we are at now and it's showing some numbers there that that is the base from which we're hoping to improve.

Sorry, the last number, the minus CAD40-ish million a quarter? Or the --?

Yes, and I think I'm following you; it's just from our last quarter, our results over the last while in treasury. That's the base upon which we're looking to improve.

I mean treasury is the funding mechanism for the bank, so I'm not looking to say that overnight we're going to have a transformation.

What I'm saying is that we've got a couple of factors in treasury. One is a more stable one with just the underlying results of treasury, and they're on an improving trend line. It's not going to be like next quarter we're going to be in a different place or anything.

And then there's the other -- it's just a more progressive trend. And then the other thing I've spoken to before is the gains in the AFS securities. That, by definition, is -- and maybe that's what you are looking to Andre, that's, by definition, more lumpy in nature. And we did have a substantially good result in that area this quarter. Not surprising in a declining interest-rate environment if you are positioned in a way where you are holding some assets in treasury. So that's another factor that impacted this quarter specifically, where AFS gains were higher than what they have been on average for some number of quarters.

If you took out the AFS gains, you would've had a negative contribution from treasury to Retail. Would that be fair?

Treasury's overall impact is, delta-wise, a -- quite a substantive positive impact.

I'm sorry, I'm thinking absolute. Sorry for not being clear. You had a CAd40 million absolute contribution?

Well, let me look at it because it's a hard space to give specific guidance, right? But what we could do is if you look to the AFS information in the SFI page 3, on a -- on an adjusted basis, you pull out all the structured credit, we've got AFS gains this quarter of about CAD120 million. If you look over the past four quarters, we have been, on average, about CAD70 million. So, this quarter relative to the last four-quarter average, we're up about CAD50 million.

Okay. That --

That's not guidance per se because that's a function of this particular quarter, interest rates declining, and there's a lot of environmental factors that come into that. And as you will see also another part of the SFI, there's still a fair amount of accumulated gains that have built up and haven't been realized. That's some latter part of the SFI. So this quarter just the way we've been positioned, we've taken some, but we've got some still in the hopper too.

That's helpful. Thank you.

Thank you. There are no further questions registered. I would like to turn the conference back over to you, Mr. Ferren.

So thank you, everyone, for joining us today. I know it's been a long call, but we did feel it was important to get to all your questions, so have a good day, everyone. And thank you again.