雷蒙詹姆斯金融 (RJF) 2011 Q3 法說會逐字稿

Good morning.

My name is Sylvia.

I will be your conference operator today.

At this time, I would like to welcome everyone to the quarterly analyst conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you.

Mr.

Reilly, you may begin your conference.

Good morning.

I'm enjoined by a cast here.

We have Jeff Julien, our Chief Financial Officer; Jennifer Ackart, Controller; Steve Raney, head of our bank; Chet Helck, our COO; Paul Matecki, Chief Legal Counsel; and last, but certainly not least, Tom James, our Chairman.

We will go into probably a little more detail on the call but I wanted to start off kind of an overview.

We have a lot happening this quarter.

Our total revenues are up 14 percent over last year's prior quarter and flat versus last quarter.

I think, given the market, a very good performance.

Our net income, reported GAAP net income was down 23% versus last year's prior to quarter but up 23% if you took out adjusted for our auction rate securities on a non-GAAP basis and down 7% versus last quarter.

I think the results to me, given so much movement this quarter, is really in the 9 months' ended numbers where revenues were up 16% versus the 9 months for last year.

But net income GAAP was up 32% and, again, adjusting for the auction rate, securities was up 49%.

So, I think we are off to a very, very solid year.

Most of our segments had robust performance given, really, the markets with the only exception, really, capital markets which we will spend a little time on due to securities commissions.

I am going to go through the major segments and comment on them and then turn it over to Jeff who will go through some of the other segments and some of the detailed questions that arise.

Before I start that, there are probably 5 fairly significant events that happened this quarter for us; 4 had some financial impacts to our numbers.

The first, obviously was our auction rate securities where we took a $45 million pretax charge.

That charge does not include $1.750 million of our settlement with the states for legal fees.

That is just the provision really for buying the securities.

The reason we went ahead and did this, is we felt from -- even though we felt we had a very defensible position and leading industry practices in terms of disclosure on auction rates, we wanted to get it behind us for the company and, maybe more importantly, provide liquidity for our clients.

We just, last Friday mailed out to our clients their offers to redeem their securities and we will be starting that process; the first batch will be done within the first 10 days of receipts.

So that's going to have some impact that we can talk about and Jeff will get into the detail.

We also completed a $250 million secured senior unsecured note offering.

So, we will talk a little bit and then that interest income and some impacts that that had on our statements.

We closed our Howe Barnes transaction, which because we expensed some of the fees and costs of that transaction, had some impact also.

Fourth, we bought controlling interest in our European equities subsidiary.

That consolidation had a little bit of impact on revenue and on costs.

And, fifth, which didn't have an impact, but we announced that we have a contract to purchase about $500 million of loans in Toronto from Allied Irish bank.

So, a busy quarter and a lot going on.

Let me start with the private client group.

Revenues were flat quarter on quarter and I think, given the market and things going on, pretty good.

Securities commissions were down slightly, about 1%, but really made up by mutual fund-related types of revenue.

Pretax income was up about 16%.

The biggest swing in that was really our nonqualified options expense.

Last quarter we had taken a charge of about $2.5 million.

This year we had $2.1 million credit.

So, kind of a net swing.

Most of the cost was $4.7 million there.

The business is in great shape.

The assets under administration is up $3 billion in essentially a flat quarter market in the S&P.

$1 billion, approximately, of those assets were from the Howe Barnes acquisition and the rest were really just from inflows from our advisors.

Also a nice reversal of a trend is advisor count is up about 27 advisors and we are up in the US, Canada and the UK in terms of the number of financial advisors.

Business should be in good shape, and remember, most of our assets -- a good chunk of our assets in that business are billed in advance.

So, we should have a good start for the quarter there.

Capital markets -- kind of a little bit of a mixed tale, as you know, in the industry.

It's been a tough quarter in the markets.

Our M&A fees were about flat with last quarter.

And, we had a good quarter.

I mean, we are coming off a strong quarter last quarter.

Our underwriting fees were up slightly.

The main impact is they were up in the US, actually, about $5 million but down in Canada about $4 million.

So, despite the number of deals that we published, lead deals, which we told you that statistic is not a greatest indicator.

We have debated on to publish lead deals or co-managed deals.

We had a large number of co-managed deals that really drove revenue this quarter so even though the statistics were down, the revenue was just slightly up.

The big change was in institutional securities commission which were off 10% for the segment and trading profits which overall were down between all the businesses, mainly fixed income, but overall down about $7 million.

So, the backlog is good.

July has been a tough month; August typically is not a great month; and September is often a good month depending on the markets.

So, the outlook from a backlog standpoint is good but from the market, kind of hard to predict.

Also, our tax credit fund business had a very good backlog and should be positioned well this quarter, to finish very, very strong on the up side for the capital markets business.

The asset management business, again, good results.

We have had strong net inflows.

Assets under management were up from $35.6 billion to $36.6 billion, about $1 billion.

If you look at total wrap fees that we have, both our non-managed and our assets under management, were up from $87 billion, say into $90 billion.

So, both of those pieces were up 3%.

The result is revenue was up 6% or about $3 million.

Expenses were only up $800,000.

So, we had a good net increase of about 16% on net income for that segment.

Again, I think, good performance, especially given the market.

The bank, highlight the bank, even though revenue is slightly down and pretax income was flat, a lot of positive signs in the bank.

Loans grew at $225 million, which is off a flat production, the net increase I think was a good number.

We also announced the purchase of Allied Irish Bank loans of about $500 million.

I want to remind you, I think it will be good if we close that but it will have an impact on our provision if we close it.

So, as you model your numbers, part of doing that is putting a cost when you start and so it will impact the numbers.

Interest spreads tightened slightly as we had told you we thought they would at the beginning of last quarter.

And credit continues to improve; the credit quality in the bank and the portfolio.

You can see that in the net charge off in provisions which were both essentially flat to last quarter.

That is after the SNC exam, which typically, the results of the SNC would come in last quarter.

We got them in this quarter and we had a flat charge with even that, essentially $2 million effect with the SNC.

As you know, our policy is to write down the ones that they have lower and not to write up the ones they have higher.

I think we keep good focus on that.

With that, that is kind of the view of the major segments, as a well-positioned, and the question is honestly, what is going to happen in the capital markets this coming quarter.

I will turn it over to Jeff.

I think we are going to start on proprietary capital.

Jeff?

I will try to head off some of the questions, lest we be here a while.

In the other income line on the financials, which kind of sticks out, most of that delta from the prior quarter relates to proprietary capital write-ups; you can see that in the proprietary capital segment information in the release.

About a $14 million swing from last quarter.

That encompassed our venture capital investments at the holding company.

The unfortunate consolidation of the employee investment funds, most of which comes out through the noncontrolling interest, so one of the factors that drove that up this quarter, as well as our merchant banking fund, all three.

So, that was the biggest change.

Most of the balance related to some of these mutual fund-related revenues that Paul mentioned, such as the omnibus fees, networking fees, education marketing support fees, et cetera, that are in the other income line items, that one had a big jump.

We typically, on the venture capital funds, by way of reminder, we generally mark those every June quarter when we get the audited statements in, generally in April and May, from all the funds that were invested and we mark them for the audited balance.

So, it's kinds of a once-a-year adjustment on those.

But, it can go either direction.

It's just we have had improving market over the last year which caused a positive mark.

The other segment that has had a couple of good quarters in a row is the emerging markets, as we have had good investment banking activity in Latin America, 2 quarters in a row.

That one has been performing and contributing more than it had in the past.

Comment on that interest -- you can see the net interest dropped about $4 million quarter versus the preceding quarter.

The biggest factor there, of course, is we issued bonds in early April which added about $2.5 million, roughly, of interest expense to our books this quarter.

The balance was a slightly lower interest spreads at the bank.

The tax rate obviously is another one that sort of sticks out; it was right around 40% this quarter.

That was a combination of things.

One is we have the nondeductible fine that Paul mentioned, $1.75 million fine to the states relative to ARS.

Secondly, we repatriated some money from an offshore island related to some activities that we had discontinued some years ago that we had not paid taxes on.

We paid taxes when it got repatriated this particular quarter as we continue to consolidate cash at the RJF level as opposed to having it parked in subsidiaries.

Those two things, coupled with a depressed pretax income number because of the ARS charge, led to the rate to look abnormally high.

But, for the year-to-date it's still pretty much in line, 37%, 37.5% type range.

With respect to ARS, Paul mentioned that we have mailed the letters.

Clients have I think, 75 days, to respond.

We are going to start making reimbursements as soon as next week.

As they come in, we have established a separate subsidiary to house these in.

A provision that we took, we were estimating, back when we did the settlement, several weeks ago, we were estimating $50 million.

It came in closer to $45 million.

About half of that provision relates to what we would call credit-related issues and the other half, kind of, is really more just time value of money.

So, with the exception of the Jefferson County positions, which are the potential credit issues, we expect to recoup and possibly even to Jeff County's as well.

But we certainly, on the others, we expect to recoup this over time as the redemptions continue to occur or as interest rates start to rise, either one, which may happen at the same time.

I want to talk a little bit about ROEs for the quarter.

As reported, the ROE for the quarter was 7.4%.

But, again the non-GAAP adjusted for removing the $45 million provision, not all the attendant expenses but just the $45 million provision itself, the ROE for the quarter was about 11.76%.

And that gives us a year-to-date ROE of just under 13% for the quarter -- for the year to date which, again, without the interest earnings that we have been accustomed to all these years is about where we have been for the last couple quarters.

Lastly, I want to make a comment about comp ratio.

You can see that trended down for the second quarter in a row, not in a big meaningful way but somewhat.

I would say we are continuing to watch the comp levels pretty closely, particularly the incentive comp accruals.

Rather than having lumpy adjustments toward year end, we are being a little more diligent.

Secondly, impacting those, was that we had some modest adjustments for the lower profitability because of the ARS charge for some impact on some of the profit related accruals, so that had an impact as well.

So, that was -- that is some detail on some of the things I know that would otherwise come up in question.

Okay.

Great.

At this point, we will go ahead and open it up for questions.

So, Sylvia, why don't you ask?

(Operator Instructions) Your first question comes from the line of Daniel Harris from Goldman Sachs.

Hey, good morning, guys.

Daniel.

Paul, I would love to get your views.

There has been a lot of discussion in the industry recently about some consolidation and expansion opportunities and you guys have talked publicly about growing your asset management business.

I would love to get your high-level thoughts on what you are seeing out there and what you guys continue to focus on.

We know the international asset manager is something that you talked about in the past.

Is there anything else that you would like to continue to grow into?

I think in terms of asset management, as you said, we publicly and are actively seeking an international large cap manager.

I think we would opportunistically look at other managers that would sit and help fill out kind of a family of funds in Eagle.

So, that is ongoing.

When you look at both strategic fit, cultural fit in terms of the manager and the organization, something big enough that it's worthwhile doing but not so big that it's outside of our range and then at a price that we think is reasonable, it's easier said than done.

We are very active.

We have been -- we have Court James full-time assigned to that and we are using some other outside people to help us.

So, again, if we find the right acquisition, I think we would close but we are not going to do one just to do one.

It's ongoing.

And so that strategy hasn't changed.

Okay.

Moving on to the banking and trading environment, the muni business seemed like it was much better in the second -- in the fiscal third quarter than it was in the quarter or so before that.

Are you guys still seeing strength in the demand for municipal issuance and, from a secondary trading perspective, how has retail investor reengaging that market?

I think overall just with low -- institutionally in the muni business I don't think there has been a big pickup.

With rates being low, we are seeing -- that's why commissions are down.

I think a lot of people are sitting on the sidelines waiting.

The retail investor has probably gotten a little more conservative than before, the flows to equity funds have turned negative again.

Our experience has actually been fairly good.

We had net inflows given this environment.

I think a lot of people are looking to wait and see.

I can't say that there is a big shift in the quarter market.

Okay.

And then last for me, the -- we did finally see some head count pickup in the number of advisors this quarter.

A welcome relief.

Anything you're seeing on the recruitment front.

I know we ask this every quarter, but incrementally, do things feel like they are getting slightly more amenable to being out there in the market looking to recruit brokers away?

I'm sure it's still a challenging market but the headcount growth was a positive this quarter.

Yes, It's still a challenging market.

I think, we were aided partially by the Howe Barnes acquisition, certainly, and RJA.

The market is still difficult for a couple of reasons.

People in the last couple of years were put under retention packages.

That is a factor.

And also, after a tough couple of years in the market when people are doing well, even if they think it's a better firm, they are less likely to pick up and move.

So, you know, the visits are up but recruiting is still tough and competitive.

Okay, Paul, thanks very much.

Your next question comes from Devin Ryan from Sandler, O'Neill.

Good morning, guys.

Not too much from me but it would be helpful if you could give a little more detail on the type of assets that you are acquiring from Allied Irish Bank in Canada and any more help on the impact and results.

You obviously mentioned we could think about the provision but what about on the net interest income side?

Devin, good morning, it's Steve Raney.

A little additional color on that.

That portfolio, as Paul mentioned, is about $500 million outstanding, currently about $650 million in commitments.

There is 25 relationships in -- that comprise that balance.

Eight of the 25 are commercial real estate loans.

Six are corporate loans, C & I, commercial and industrial loans, and 11 loans that are really C & I, but are a little bit specialized in the power and infrastructure arena with government or provincial contracts that support that power and infrastructure build that was -- project financed that was built.

All of those are completed projects at this point.

As Paul mentioned also, we are anticipating and working with the regulatory approval process right now.

I would anticipate getting that closed this quarter.

The provision impact on that current balance would be roughly $7.25 million.

And then, on the margin, the current yield on that portfolio is approximately 7.4%, including the discount being amortized over the life of the loans.

I would say that, that is on a pre-hedged basis.

We are evaluating some hedging as well.

So, that is on a pre-hedged basis.

That would have a positive impact on our margin.

The hedging extent would be below the net interest margin line.

We also, in our modeling, right now most of those loans are floating rate loans tied to the Canadian banker's acceptance rate which is at a historically high level relative to LIBOR.

In our modeling, going through our analysis and negotiating the purchase price, we factored in some compression in that.

But, the current yield on that portfolio, once again, is around 7.4%.

Okay, great.

That is helpful.

Just back to the other revenues.

You obviously spoke about the proprietary capital gains and you mentioned, Jeff, the various mutual fund fees.

I know that those can bounce around from quarter to quarter, but they seemed higher than normal.

I want a sense of is there anything unusual, why this quarter was maybe elevated on that front as well, if this is a new run rate going forward or if there is just something else there that we need to consider?

I think in large part it is going to be a new run rate.

We continue to convert our mutual fund positions to an omnibus basis.

We had a significant vendor converted over in February, which definitely helped this quarter.

And that will be recurring.

And as both -- we increase the positions and we increase the sales positions in all of these mutual fund families, as assets continue to grow, we expect that, that will be a slowly upward trending line over time.

Okay.

Great.

Lastly, I may have missed this, but on the other expenses, even outside the $1.75 million auction rate fine, is there anything else in there that would be kind of also unusual to the quarter?

That also just looked a little bit elevated?

Other than some of the expenses related to the Howe Barnes acquisition and some of those fees that used to be capitalized that are now expensed, they are actually down from last quarter.

But there wasn't anything that I would point to other than the fine.

Okay.

Great.

That's it for me.

Thanks, guys.

Your next question comes from Hugh Miller from Sidoti.

Good morning.

Hugh.

I had a follow-up question on the banks.

Certainly appreciate the color there regarding the loan portfolio and so forth.

Can you talk about the growth opportunities there, how you guys view that?

Obviously, you have now 25 relationships, but what are you thinking with regards to being able to leverage your capital at the bank and being able to grow in Canada?

What are the opportunities you are seeing there?

We look at the opportunities there just like we do in the US It gives us a platform to leverage our equity capital markets' clients.

It's a base.

So, we have a good franchise there and we plan to leverage it like we have here.

That is really the growth opportunity.

And this was just a way to get the business kick started.

Do you foresee out of the gates in the coming quarters a nice opportunity to go out there and cross sell to your current clients or is this going to be a slow and steady progression?

I think it would be slow.

In fact, Hugh, I think that the portfolio of $500 million -- we will be looking for new opportunities and have a small team that will be on the ground in Toronto, but the run off of this portfolio will most likely exceed our new production.

But, as Paul mentioned, it is kind of our place to launch this business and we got a very profitable and growing business in Canada already that this will be supplemental to and we have some good relationships already that we can leverage.

Incidentally, we have made two or three loans here in the US in US dollars to Canadian-based companies.

That effort was already under way.

That is one of the drivers in terms of this acquisition opportunity.

It aligned itself with what we were already doing.

And I guess one question, just follow-up on the recruiting environment.

Obviously it was a nice change to see some growth there.

Are you seeing any kind of change in the up-front money that the larger peers that you are competing against, are going out there, just given the choppy market conditions, are they reassessing what they are paying up front or has there really not been a change in that?

I don't think dramatic -- there is always somebody that we think is not rational leading the way.

That may shift and change but there always seems to be somebody that is looking at head count growth over anything.

But, we still get a good number of people that you can't pay them enough to go some places and they want to join us.

So, we certainly -- our transition assistance is not as high as others but we try to keep it economical and be in the market.

It's cyclical.

We don't believe that the high-end offers are sustainable because we don't see, no matter how we run it, that they are profitable.

You mentioned one of the headwinds being the retention packages that have been awarded since the recession.

Do you have a sense of what the typical duration of those tend to be and is there a time period, obviously, that would free up the opportunity to be more active on the recruiting side?

There is 5 to 7 year packages.

There is a major firm where there is shorter term retention from '09 and '10.

It wears off next year.

So, I mean, they are all over the place.

But they tend to do 5 to 7 year deals.

As those amortize down, when you get down to less than half it's not the same retention as in the first half.

It's a cycle.

We will chip away.

This isn't the first time it has happened.

There is also, as players that look at consolidation in others, it always gives us opportunity.

We just have to be disciplined.

Good point.

You did mention about the -- we did see industry flows coming out of equity funds, maybe more pressure on the domestic to the international.

Have your discussions for an acquisitions on the international asset management fund kind of changed at all given the near-term market conditions or is that likely not to have swayed at all?

We are very long-term oriented.

The ideal asset manager would be an international large cap manager that had European distribution and we could leverage it and they could leverage our US distribution in a good portfolio manager.

We are looking both in North America and in Europe.

Where ever we find the right team, if we find them, we will have them join us.

Although the current market environment may cause a few more to come available.

Right, exactly.

I guess that was getting back to my question, have the valuation discussions over what they are willing to accept changed at all given the market conditions or is that not been the case?

Not much.

I think the problem is when they are down, a lot of people say, well, it's not the time to sell because it will come back.

There are pros and cons.

I don't think it's changed short-term.

Okay.

Thank you very much.

Your next question comes from Doug Sipkin from Ticonderoga Securities.

Yes.

Thanks.

Good morning, everyone.

Two questions.

The first for Steve, trying to think about this another way, I guess on the bank transaction, you indicated, I guess, you guys would have a provision of $7.25 million.

How should we be thinking about the break even on that portfolio?

How many quarters or a year or two years do you see the break even on that upfront provision expense?

I am trying to frame that growth yield, that 7.4% you provided on an apples-to-apples basis with your current portfolio.

Doug, I don't know if I can answer that.

We haven't really looked at it on that basis.

Once again, this is -- this last quarter we did 61 new corporate loan transactions that totaled almost $700 million.

Drove some of the outstanding.

So, this acquisition in and of itself is not -- it's less than one quarter's production of our normal corporate production.

So -- when we are doing that, part of our provision expense this last quarter, the June quarter, was related to loan growth.

I don't -- it's similar to us just growing loans organically anyway.

That being said, that yield, the average life of these loans, I would say, is probably 3 years in terms of the maturity dates across the spectrum of that portfolio.

Certainly over the life of that it is going to have a return to us at least equal to what our domestic portfolio is yielding.

You can look at it as it's a foothold for a new business.

The loan production, as Steve said, is not a game changer and given where we are, we like the credits, we like the people and it has a little better return going in.

We modeled it to tighten a little bit.

You should look at it the way we have always done business.

We just have a foothold in Toronto now.

An opportunity to grow loans.

For my part, we have a capital allocation kind of cap to the banking industry.

So, we are not trying to have a game-changer in terms of allocation to the banking industry.

We are just trying to be able to consume the free cash generation and keep the retained earnings reinvested to fund future growth at the bank.

We have had difficulty doing that, as you know, over the last couple of years.

So, that's really the challenge.

I appreciate that.

I guess I was trying to get a sense, because I get the sense that you did sort of purchase it, the loans -- I don't think you said this but I'm sort of saying it, at a little bit of a discount.

So, with the accreted gain, I'm at least thinking that it could be more profitable than your current book even though it's much smaller.

That is the hope.

We try not to buy at a premium.

That's the hope.

Whether we hedge or not, there may be some other costs, there may be some currency costs.

The most important element is the credit selection.

We went through every loan, obviously it's a relatively small number of loans.

We kicked some loans out.

So, ultimately, if the loans perform, then it is going to be a nice acquisition.

That's the basis for us going into it.

Got you.

Okay.

Then the SNC, any reason why it was this quarter and not next quarter?

It surprised us.

They got it done quicker.

They are actually working faster than normal, a surprise.

Everybody's June quarter, it went out to everybody the end of June.

We got it June 30th, the afternoon, effectively.

Just finally, your investment banking revenues continue to be very impressive.

I mean, is it really just a combination of some of the small acquisitions you made in market share gains?

I was pretty surprised given what happened in June and late May for you guys to put up such a strong number.

Is there anything else going on there where you guys just feel like maybe some of the bigger shops are running into some issues on the mid-cap type of companies or is it just your sweet spot sectors are working really well?

I think until late June, July, a lot of these sectors that are income driven, the REITs and MLPs were just strong.

They are strong products and we were well-positioned.

In the REIT space, we play against everyone.

So, that was a big driver.

And, Latin America, we had some deals that -- some pretty large deals for that size where we lead the way and that contributed, too.

Canada was very, very strong until this quarter.

They were off some.

But they have had good performance, too.

So, we have been well positioned in our sectors and the market has been good.

We don't see that ending, although end of June, beginning of July wasn't the best for our industry.

Great.

Those are all my questions.

Thank you.

Your next question comes from Steve Stelmach from FBR.

Hi, good morning.

Just real quick on the off shoring security provision of $50 million, you said half was credit related to Jefferson County.

What is the implied recovery value of that Jefferson County.

What does that $25 million represent.

About $90 million in positions.

That's helpful.

It was a $45 million charge, not $50 million charge.

I apologize, yes.

$45 million.

And then maybe this is a little bit longer term question but, on Basel III, it's unclear how the federal government is going to adopt it or apply it to different institutions but is that at all having an impact on your acquisition strategy?

I mean, clearly, capital has not been an issue for you guys, but, is that in the back of your mind when you think about doing M&A?

First, we are not sure how the government is going to apply anything right now.

But everything we have looked at, we are solidly capitalized.

The best we can tell from any of the provisions, it is not going to be an issue for us.

Okay.

That's not an impediment, at all, okay.

Maybe a more technical question for Steve.

You talked about an adjusted LTV analysis, roughly small dollar amounts, $3 million provision.

Was that an analysis trying to gauge what strategic defaults are or is that just simply an analysis of recovery value?

Recovery value.

Okay.

And, yes, we overlay the Case-Shiller information across our portfolio each quarter and look at what we think will be the LTVs in our loans and that analysis along with what we think potential further home price declines, we factor all that in and that drove that $3 million addition to the provision for the quarter in the residential portfolio.

All right, guys, thank you.

Your next question comes from Joel Jeffrey from KBW.

Good morning, guys.

Joel.

Just to go back to Doug's question a little earlier.

On the M&A and the underwriting front, you mentioned the sectors that are strong.

Are there any sectors that you see sort of the pipeline building that are about set to take off?

We have been building and recruiting heavy in technology because we see that as a sector that's been heating up.

There has been enough displacement of firms that we think there is an opportunity.

I think the other sectors we play in have been okay but, again, the REIT and MLP and the M&A business, which has been very good for us across the board, have been driving it so far.

Some sectors we're not positioned in, too.

The [FIG] business is an area where we thought, when we acquired Howe Barnes, that the near-term activity would be a little higher than it has been but it will come.

We have gotten a few transactions out of that already.

We got a lot of synergy with fixed income in terms of working for the clients but, again, the interest rate environment hasn't been real helpful with that.

We think there is still some upside in that.

The integration has gone very, very well.

Energy is probably the other one.

Yes, energy.

We are very, very active in the energy space, downstream energy, you can see the announcements of the MLPs that have been strong for us.

Great.

You mentioned institutional securities was down 10% quarter on quarter.

But, specifically, how was your institutional equities business?

What was the performance of that?

I don't know what to tell you.

We are looking for -- give us one second.

About the same.

Same percentage, roughly.

We looked at most of the businesses.

They were down 9 to 12%, pretty much across the board.

And actually -- that has been less than most people if we look at year-to-date changes.

I think we have done better but there is clearly a downward trend.

Lastly, you have given us color on the loan purchase and describing it as a foothold into Canada.

Are there any other areas that you are looking to implement this strategy in?

Are there any other, whether it be geographies that you want to get into or is this a possible new strategy in terms of just growing a loan portfolio in general?

Canada has always been -- if you look at the bank's strategic initiative, it has been around taking our best equity capital market clients.

We had very good performance, literally no defaults during the downturn with our clients there.

So taking our best clients where we know them in lending.

We also have some other related projects -- our securities-based lending with our private client group.

We have been building up our mortgage origination both outside and inside our private client group as a strategy.

We are getting focused on the areas that we have been good at and that are synergistic with our businesses.

Probably no other geographies in the near term.

No, we're not looking to go to any other countries.

Great.

Thanks for taking my questions.

I show no further questions at this time.

Great.

I know there's a lot of things moving up and down and I think the business, again, 94 consecutive profitable quarters is -- feels good.

I have only about 90 more to tie Tom.

[ Laughter ] Probably won't make it that long but we will try to keep the streak alive.

The question for us is all the businesses are solid and we are well positioned.

What we can't predict is what is going to happen in the market, especially in the near term.

Positioned well.

If the market picks up, I think capital markets will return and probably the big challenge in the institutional side is also fixed income with low rates, clients not just here, everywhere, have had their fill of low rate, long term stuff.

There is a lot of cash on the sidelines.

When they redeploy, when they have a different expectation.

That it's going to be this way forever or it's going to move up.

We will kick start the business.

Until then, we will just wait through the cycle.

I think business is in good shape.

Thank you for joining us.

We will talk to you next quarter.

Ladies and gentlemen, this does conclude today's conference.

Thank you for participating.

You may now disconnect.