Good afternoon and welcome to BMO Financial Group’s third quarter 2009 conference call for Tuesday, August 25, 2009. Your host for today is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.

Great, thank you. Good afternoon everyone and thanks for joining us today. Presenting today are Bill Downe, BMO’s Chief Executive Officer; Russ Robertson, Chief Financial Officer; and Tom Flynn, our Chief Risk Officer. The following members of the management team are also here this afternoon. Tom Milroy from BMO Capital Markets; Gilles Ouellette, head of Private Client Group; Frank Techar, Head of P&C Canada; Ellen Costello from P&C U.S.; and Barry Gilmour, Head of Technology and Operations. After the presentation, the management team will be available to answer questions from pre-qualified analysts. To give everyone an opportunity to participate, we ask that you please ask one or two questions then re-queue. At this time I’d like to caution our listeners by stating the following on behalf of those speaking today. Forward-looking statements maybe made during this call and there are risks that actual results could differ materially from forecasts, projections, or conclusions in the forward-looking statements. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts or projections in these forward-looking statements, and you can find additional information about such material factors and assumptions and the material factors that could cause actual results to so differ in the caution regarding forward-looking statements set forth in our news release or on the investor relations website. With that said, I will hand things over to Bill.

Thank you, Viki and good afternoon everyone. As noted, my comments may include forward-looking statements. As you’ve seen, BMO reported very good third quarter financial results. These results underline the continuing success of the customer focus that we are demonstrating across all our businesses. They also point to the substantial long term earnings capacity of the Bank. Russ is going to review the financial results in more debt, but let me highlight some of the big picture numbers. Net income for the third quarter of fiscal 2009 was $557 million with an ROE of 12.1%. The strong momentum in our core businesses is highlighted by our pre-provision pre-tax earnings of $1.1 billion; this compares with $885 million in Q2 after adjusting for the severance costs we took last quarter and up 15% from a year ago. We’re successfully executing on our strategy of providing customers the value proposition that helps them make sense of their banking and investing. Our financial results underline the rebalancing of our businesses through a systematic, multiyear effort aimed at strengthening our brand, customer loyalty, competitiveness and core business performance. I’m pleased with the performance of our businesses and we’re confident in our momentum. Looking at the broader economies, there is normalization underway. We are identifying growth opportunities and we’re well positioned going into 2010. With respect to the provision for credit losses, we’ve taken a methodical approach to valuing our loan book and we’re comfortable with where we stand. We expect PCL’s to remain elevated into 2010 however we’re confident that the strength of our core business earnings will absorb our credit losses through this cycle. There has been some attention on U.S. commercial real estate in the investment community and for context; BMO’s exposure is small at around 2.5% of our total loan portfolio.…

Thanks, Bill. I’m very happy to be here in and good afternoon. As some of my comments may be forward-looking, please note the caution regarding forward-looking statements on slide one. Our core businesses continue to deliver good results with record revenues in the quarter and bottom line growth in this slower economy. On slide three, you can see the reported third quarter earnings were $557 million or $0.97 per share compared to $0.98 last year. On a cash basis, earnings were $0.98 per share and our Tier 1 capital ratio remained strong at 11.71%. Adjusted cash EPS was $1.05 after excluding an increase in the general allowance of $0.07 per share. Credit costs remain elevated as expected, with specific provisions for credit losses of $357 million in the quarter. Effective in this quarter, to better align our wealth management strategy, all of BMO’s insurance businesses now operate within the Private Client Group. We’ve also moved the term investments business to P&C Canada, achieving better alignment with P&C’s retail product strategy. All prior periods have been restated for these changes. Turning to slide four, record revenue at $3 billion it was up 12% quarter-over-quarter. The increase was largely driven by continued strong performance in P&C Canada and BMO Capital Markets. Corporate services revenue also improved as expected, as the negative carry on funding continues to moderate, as evidenced by a higher net interest income in the quarter, which was partially offset by lower non-interest revenue. Year-over-year revenues increased 8% with strong growth in BMO Capital Markets, reflecting significantly higher trading revenues and higher corporate banking revenues. P&C Canada also contributed to the increase, with volume growth across most products and higher net interest margin. Revenue was lower in the Private Client Group and in corporate services due to the market environment.…

Thanks, Russ and good afternoon. Before I begin, I draw your attention to the caution regarding forward-looking statements. I’ll start with some summary comments on the risk front for the quarter. First, specific provisions for loan losses were similar to last quarter at $357 million. Provisions are elevated and we expect this to continue, given weakness in the economy and high unemployment levels. We’re continuing to see migration in the portfolios, but the pace of migration has moderated in a number of areas. Second, with the improvement in capital market conditions and actions we’ve taken to reduce some of our positions, there were no Capital Market charges of note in the quarter. Lastly, we continue to be comfortable with our risk profile, our credit risk management to sound. We’ve taken steps over the last two years to reduce risk in certain areas and the parts of our portfolio that are impacted more by the environment are performing reasonably and are not outsized relative to the overall balance sheet. I’ll start now with slide three, where we provide a breakdown of our loan portfolio. As shown, 71% of our loans are in Canada and 23% are in the U.S. Within the Canadian portfolio 62% of assets are consumer loans of this total, 85% is secured and 88% is secured excluding credit cards; our U.S. portfolio mix 42% consumer with commercial and Capital Markets loans making up the larger portion. Slide four provides details on our U.S. operations. The U.S. consumer portfolios are relatively evenly spread across first mortgages, home equity and auto loans. Provisions within the segments continue to be elevated given the environment. Our performance is better than peers. The slide also provides information on our U.S. commercial real estate portfolio. Our exposures in this area are not outsized, are…

(Operator Instructions) Your first question comes from Mario Mendonca - Genuity Capital Markets.

A question first on the explanation, I believe it was Russ, you’re providing us the explanation on why there was a 33 basis point increase in the margin year-over-year. I’m not sure if it was in your comments, but in the text, it was the securitization of lower margin mortgages. Am I correct? First of all, that was a portion of the increase?

Yes.

What caught me a little bit off guard is most of the banks and maybe BMO is a little different here, most of the banks, really in retail, they really account for the securitization activity on a managed basis, so corporate really picks up the difference. Is BMO different in that respect?

No.

No. So why is it then that the securitization activity would have affected the retail margin? Genuity Capital Markets: No. So why is it then that the securitization activity would have affected the retail margin?

Wee make whole on the revenue side, but the balances are removed from the loan books sitting in retail.

So retail is not then on a managed basis? Genuity Capital Markets: So retail is not then on a managed basis?

I misinterpreted managed, but we do make whole on the revenue. We don’t reclassify the balances back to the balance sheet of retail, which is here I guess your view of what managed would mean.

I guess what I’m saying, so the denominator of the calculation, you’ve removed the loans. So the denominator of calculation goes down, but you’ve made the revenue whole. Genuity Capital Markets: I guess what I’m saying, so the denominator of the calculation, you’ve removed the loans. So the denominator of calculation goes down, but you’ve made the revenue whole.

Yes, Frank we’d like to jump in here.

Yes, Mario, the business is kept whole, but we reflect the revenue in NIR not in NI. So we do eliminate the balances from the calculation of them NIM, but there is no securitization revenue or keep whole revenue that is reflected in the NI as well. So for purposes of NIM calculation, securitization has no impact on the net interest margin in P&C Canada.

It has no impact? Genuity Capital Markets: It has no impact?

Well, it has no revenue impact. The denominator is affected by the elimination of the balances that are secured.

Sorry Frank, you just said that the NIM is unaffected by it, but in your text you’re saying that it was increased, because of it. So I’m really confused now. Genuity Capital Markets: Sorry Frank, you just said that the NIM is unaffected by it, but in your text you’re saying that it was increased, because of it. So I’m really confused now.

P&C Canada’s NIM is impacted as the balances are eliminated from the denominator; but there is no NI in the keep whole, because it’s reflected in our NIR not in the NI.

Then that is different from your peers I would or I guess… Genuity Capital Markets: Then that is different from your peers I would or I guess…

Don’t know.

I’ll follow up on my own then, another question. In Europe, it seems like gross impaired loans in Europe were up a little bit. Maybe this is a sort of a small book of business, but could you help size it for us? Genuity Capital Markets: I’ll follow up on my own then, another question. In Europe, it seems like gross impaired loans in Europe were up a little bit. Maybe this is a sort of a small book of business, but could you help size it for us?

I think we provide segmentation in our sub pack of the exposure. It’s a quite small book of business from memory it’s on the order of $1 billion. We did have a credit that became impaired in the quarter.

Maybe just one final question for Tom Flynn, it sounds like you’ve hedged that exposure, the $815 million related to Apex, but if I am not mistaken, there’s a $392 million provision against that already. Is the provision still required now that you’ve hedged the exposure? Genuity Capital Markets: Maybe just one final question for Tom Flynn, it sounds like you’ve hedged that exposure, the $815 million related to Apex, but if I am not mistaken, there’s a $392 million provision against that already. Is the provision still required now that you’ve hedged the exposure?

I think the way to think about it, Mario, is that we have hedged the notes; and as we’ve talked about we’ve also hedged the first 500 of our senior funding facility. In effect, the hedge crystallized the marks that we have taken to-date on the notes. So there won’t be a material or significant change in the carrying value of the notes as a result of the hedge, and there won’t be a recovery or any further loss on the provision.

Your next question comes from Ian de Verteuil - BMO Capital Markets.

It’s a question regarding trading revenues and mark-to-market losses on a variety of thing. The trading revenues look excellent. It looked to be all in interest rates. I was hoping maybe Tom Milroy could provide some color on that. Is that really the yield curve, and is that a business where that’s going to moderate, if we get any sort of flattening to the curve? BMO Capital Markets: It’s a question regarding trading revenues and mark-to-market losses on a variety of thing. The trading revenues look excellent. It looked to be all in interest rates. I was hoping maybe Tom Milroy could provide some color on that. Is that really the yield curve, and is that a business where that’s going to moderate, if we get any sort of flattening to the curve?

The answer is that, trading revenues were obviously very strong and the interest rate tends to vary, but they were also good across a number of the other businesses including FX, equity, and a few others. The answer to your question is yes, if the interest rate environment changes then obviously we will not see revenues driven in that area to the same extent that we have. However, as we’ve seen in past history, we would expect that as certain businesses, the performance suffers as a change of rate environment we’ll be able to pick up the revenue streams from some of our other businesses that aren’t benefiting the same way today.

Tom, it didn’t look as if foreign exchange was that good. It looked to be lower. Am I missing something? I’m looking at page 12.

It’s been down off the record that we had foreign exchange trading revenue in the first quarter, it was down and down, but it’s still up from where we have historically run the business. So, on a relative basis, that’s another area that continues to be pretty strong on a historical basis.

In the corporate segment, there was a comment of mark-to-market losses on hedging activity. Does that flow through the trading revenue line or does that show up somewhere else?

It’s Russ. It does flow through in the other line in trading and it swung about $70 million from a positive to around $50 million are so negative in the quarter and that relates to corporate hedging initiatives and cross currency swaps, etc.

Is that the hedges on the loan book, is that credit default swaps to protect you from…

I’ll turn that back to Tom. That’s a different line item.

Yes, under the credit default swaps on the loan book we carry in our part of the business, Ian and as was mentioned before, this quarter the offset to the CVA was mark-to-market losses on the CVA as spreads came in, you gain in one area and you lose in the other and that’s, I would say to you, that’s something that’s happened in our business on an ongoing basis.

So that comes through on the other line on trading revenues, Tom? That comes through the other line in trading revenues. They’re the net of those two the CVA net of the mark-to-market losses on hedging?

No, that comes through on the interest rate line.

Your next question comes from Steve Terrio - Merrill Lynch.

On page 29 of the sub pack looks like Canadian consumer delinquencies have largely stabilized this quarter. Tom, how comfortable, if at all do you think we should be that these metrics won’t move meaningfully higher over the next few quarters and a second one if I might. The reductions in impaired loans this quarter pretty big number at $233 million, did this represent more predominantly loan sales or recoveries? Can you give us a bit of color and insight on that figure as well? Thanks.

First on page 29 of the supp pack where we’ve got the consumer delinquency numbers, we referred both in our press release and in the comments here to moderating migration in the portfolios and you see that, the delinquency numbers on page 29. In Canada the delinquency numbers are flat quarter-over-quarter at 62 basis points and we aren’t calling a bottom here; what we are saying is that we are seeing moderation in the negative trend that we’ve seen. So, I think it is possible that as unemployment more likely than not trends up a bit from where we are right now, these numbers move up somewhat, but we wouldn’t expect them to move up sharply and I would be a general theme in the credit portfolio. So, I would say there is some risk of an increase, but not a significant risk and really no risk of a sharp spite based on what we’re seeing right now. In terms of the change in the impaired loans, most of the reduction would have come from write-offs in the quarter. Sales in the quarter were not significant. I think they were around $50 million.

One last quick one if I might any charge this quarter on marking-to-market your own debt?

It’s Tom Flynn. There was no net charge. There was a gain of about $23 million, which was offset by a hedge. So, it was flat to the P&L in the quarter.

Your next question comes from Darko Mihelic - CIBC.

Two questions actually, the first question with respect to your net interest margin discussion. You mentioned that part of the reason for the improvement in the net interest margin was related to the negative carry and the fix you effectively affected in the Treasury. I’m just curious how much of an impact was that and it sounds as though, reading through your MD&A, it sounds as though that there could be more coming, so effectively what I’m angling at here is how much did that improve the name in the quarter and do you think that there could be more improvement going forward and how much?

Well, it’s going to capital history on this. As you recall back in Q1, the one to three month issue the interest rates, number one were dropping quite quickly, and the one month rate dropping much more quickly than the three month. Our fund transfer system, where we consistently charge the groups on a one month basis, that difference in one and three ended up in corporate. This related to all of our wholesale funding, and that was quite significant. While it was improved in Q2 and then Q3 it improved another $160 million of NI. So it’s now down to a relatively small amount. We could see a little more improvement, but I wouldn’t think it would be that significant compared to what we’ve seen in this quarter.

I think my second question also, Russ maybe for you as well. When we look at the adjusted effective tax rate for the quarter, it was about 21%, if we take out the general allowance and some of the notable items. That would compare to about 14.8%, last quarter to about 14.2% a year ago. What can you tell us with respect to what we should be expecting on the tax rate for the bank now? I mean, it sounds as though it’s primarily due to lower income from lower tax restrictions, but can you give us any help on the tax line going forward?

In this quarter as you referred to, we did see some tax efficient transactions. We also saw, as you saw in the press release, in the Private Client Group $23 million recovery on settling some tax issues, which drove the effective rate downwards. I think going forward, we kind of shy away a bit from giving guidance on this, but 17% to 20% is still our view. The mix of income from low tax rate jurisdictions combined with our North American business, I think that would still be the guidance, Darko.

Your next question comes from Jim Bantis - Credit Suisse.

A couple questions, Tom, when we think of the credit situation , I guess I’m reading your comments or listening to your comments with respect to the losses moderating and we’re obviously picking up the trend with respect to the formations declining, particularly out of the U.S., yet management chose to increase the general reserves. I’m wondering if you can kind of reconcile the moderation with the increase in general reserves.

I think it’s the difference between the direction of change and the pace of change and we think there would likely be some upward pressure on the provision over the next few quarters. We don’t see it moving up sharply, but we think there’s potential for some upward pressure and that reflects an economy that is still dealing with the effects of the recession and an unemployment rate that is still increasing. So the increase in the general that we took reflects our view of the impact of the lingering effects of the recession on the credit portfolio.

So when we see $550 million in formations this quarter, we could probably expect that number to bounce around as opposed to continue to trend lower?

I think that’s fair to say. I think it will bounce around and could be a little bit higher one quarter and a little bit lower one quarter, but generally, there’s still some negative migration in the portfolio, but the pace both generally on the consumer side and on the commercial side of the migration has slowed.

My second question is regarding the profitability of the bank. I think, Bill you’d called as kind of more reflective of the bank’s earnings power, $3 billion in record profits relatively low tax rate at 16%. The ROE seems light at 12%. I’m wondering if you can talk about, what the sustainable return on equity is for the bank?

Jim, I think you’ve touched on two things. One is the amount of capital; and clearly the Tier 1 capital ratio is very, very strong and that’s delivered, as Russ said. The environment going into 2009 was very uncertain. As you saw, 2009 started out pretty bumpy for markets as a whole, I still think there is still potential, although I think the potential is reducing, of a double dip or a second downturn in the economy. We discount it because of the amount of stimulus that’s coming into the U.S., still to come; but that’s a possibility. So I think maintaining a high capital level is a precaution. It’s also a source of competitive advantage and as we get more visibility around the reduction in credit provisions and they’re still well elevated above their expected loss level and you know that history has shown that provisions tend to spike, not ride on a high plateau for very long. When we see some pace of reversals offsetting our new formations, I think we’ll have a clear view of some opportunities both to grow the balance sheet and to expand our business. We’ve done a couple of small acquisitions in the last six or seven months that have been very positive, because the price at which we were able to do them and, because they were assets that otherwise wouldn’t have been available to be purchased. So I think as far as the recovery in the return on equity of the Bank, that will come as the capital levels return to more normal levels and the provisions return to more normal levels and you can do the math yourself pretty easily.

Thanks, Bill. No, I appreciate that. It’s interesting when I look at your slide eight, and perhaps you’re not intentionally symbolizing something, but you suggest that excess capital over a Tier 1 ratio of 8% is $6.5 billion. Coming from your previous comment, I mean, it doesn’t sound like Tier 1 ratios are declining in the near term. So that’s just more of a calculation you’re showing as opposed to indicative of what real excess capital is. Credit Suisse: Thanks, Bill. No, I appreciate that. It’s interesting when I look at your slide eight, and perhaps you’re not intentionally symbolizing something, but you suggest that excess capital over a Tier 1 ratio of 8% is $6.5 billion. Coming from your previous comment, I mean, it doesn’t sound like Tier 1 ratios are declining in the near term. So that’s just more of a calculation you’re showing as opposed to indicative of what real excess capital is.

I think we’re not signaling anything. What we are doing is showing that normal capital ratios and we still believe that an 8% Tier 1 floor is prudent for the Bank. In this environment, being at the floor is not our intention, but I do think that the capital ratios in our industry will come back down from their current levels. You have to remember that BMO and the other Canadian banks, but I’ll speak specifically to BMO, went into the downturn with much stronger Tier 1 capital ratios than the U.S. banks and even stronger relative to the European banks. So the normalization process that takes place, I think we’ll see our capital ratios come down as the environment normalizes. As to the rest of the world, they may in fact be much closer to our levels in the future.

You had mentioned about using some of your capital towards acquisitions. A couple of your competitors have been tied to bank assisted deals, whether it’s in Ireland or in the south of the U.S. I’m just wondering if you can give us an update in terms the Bank’s appetite in terms of their ability to price credit risk right now and look at doing a timely acquisition to build upon the Harris franchise? Credit Suisse: You had mentioned about using some of your capital towards acquisitions. A couple of your competitors have been tied to bank assisted deals, whether it’s in Ireland or in the south of the U.S. I’m just wondering if you can give us an update in terms the Bank’s appetite in terms of their ability to price credit risk right now and look at doing a timely acquisition to build upon the Harris franchise?

With respect to being able to price credit risk, I think that it’s been a real benefit to have the stress test completed in the industry. It’s provided a lot more visibility and with respect to valuing commercial loans, we do have a high degree of confidence in our own ability to evaluate credit and even to do it on a file by file basis. So I think that it would be a reasonable thing for us to be involved in looking at FDIC assisted transactions. As you know, in those deals you do have to absorb a portion of the credit loss. Basically you’re paying for the deposits and then your purchase price is the expected loss. So I hope that we’ll see a good pipeline of transactions. So far there really haven’t been that many, and we certainly haven’t looked at banks that are not adjacent to or close to our current operating area. That’s really the number one limit. The second thing is if we’re going to acquire a bank through an FDIC process, we have to be satisfied that they have high-quality branches; that the customer base can be retained. Some of the banks that are in the process of being liquidated have very hot deposits and you could acquire the buildings and not really have a core deposit base and you’d be paying for deposits that you couldn’t retain. So I think that is the whole process that anyone who is acquisitive at this time has to go through it’s hard work and then the banks that you really do want to own, not just because they are cheap, but because they are consistent with your strategy and I know that sounds a little bit general, Jim, but it’s actually very specific with respect to the way we’re going about it.

Your next question comes from Robert Sedran - National Bank Financial.

Russ, I know there’s a lot of moving parts in the OCI line, but can you help me understand some of the bigger swing factors? Is the decline there all FX or is there something else I should be looking for?

[Technical Difficulties] The translation of our net foreign operation, so that’s all FX, and accumulated other comprehensive income, and then the hedging of the unrealized gain on the translation of foreign operations net of tax, 815 that’s all FX.

Actually my line went that for about 15 seconds there. So I guess I’ll just go back to the transcript.

I’ll just say it’s all FX.

Then just the other follow-up question, you mentioned the CVA and the mark-to-market losses largely offset. Is that why the CVA sort of wasn’t called out as a notable item this quarter? Can you give us a sense going forward, I mean if we are in a period where maybe we’re getting some reversals on previous write-downs. How you plan to treat these reversals in terms of adjusted earnings on a going forward basis? Is it a materiality question in order to get called out as a separate item?

I think our view this quarter that our mark-to-market adjustments are relatively modest and they did for the most part offset and therefore was a view that it was not necessary to adjust the reported earnings. Going forward, I think, that will be a matter of what type of mark-to-market adjustments occur as to how we handle them.

It’s Tom Flynn. I’ll add one thing. The two largest items that we had in the quarter were the CVA and the CDS item and both of those are tied to credit spreads and so they’re highly correlated and they went in the opposite direction and net to basically zero. So that was part of the thinking behind not identifying them, the fact that they’re both driven by the same thing.

Correct me if I’m wrong or help me understand. Is that the treatment that would have been applied in prior periods as well, because they would have been moving in opposite directions in prior periods too, right?

They generally would have been; that’s right. So in prior periods, we have on occasion identified them as items of note or whatever the term is. I think the key issue around whether we did or didn’t relate to the size. In this quarter they were far smaller than they had been in a few of the recent quarters and the net was de-minimize and so we just decided to keep it simple.

I’m going to stop well short of asking for guidance on the trading line, because I know it’s impossible to do, but I guess based on those comments it sounds like the number. The reported number is not far from what the actual number of the underlying business was, because those two items sort of were both in the trading line and offset. Is that a fair comment?

I think that’s a fair comment.

Your next question comes from Brad Smith - Blackmont Capital.

My question relates to note four in your shareholders report, page 36, under securitization. I was just wondering if I could get a little bit of better clarity with respect to the generation of gains related to the revolving credit card securitization vehicles. The note is kind of showing that there is no activity and I think there’s a sub note there that confirms that there were no new securitizations, but there continued to be gains. These numbers at $116 million this quarter and $120 odd million last quarter and the quarter before are quite large numbers relative to the earnings of the bank and they’re also large numbers relative to the balance or the amount of rollover or revolving in the vehicles. Can you talk a little bit about the economics and the sustainability of these numbers?

I’ll give you the accounting and if Frank wants to give any color on this, but the securitization, as you’ll see it was about $4.5 billion is the outstanding in the credit card and of course, they payoff very quickly and we undertake to top up those vehicles as they pay down. So those gains that you see relate to the credit cards that we sell into those vehicles on a continual basis. That’s why they are fairly significant and that will continue as long as we maintain those trusts at $4.5 billion.

So the $116 million, that is a gain related to not the $4.7 million, but to the proportion of rollover effectively. Can you just give us a sense of what that proportion was?

I’m not certain. I don’t know that number. We’d have to get back to you on that.

Something less than $4.7 million...? Blackmont Capital: Something less than $4.7 million...?

It’s related to the amount that would be topped up; and we’ll get back to you on the exact numbers, but obviously credit card receivables pay off quite quickly. So there’s a sizable amount of top up that would occur in every quarter. Tom Flynn just has a point here.

I’ll just add one thing that the gains on the credit card top up sales are larger than they are on the mortgage top up sales, because the spreads are much higher on the credit card product. So with the higher spread, you get a higher gain when you put the assets into the securitization vehicles.

That just sort of brings me to my next question, I mean the proportion of credit card loans at $4.7 million is almost more than double your on-balance sheet position now, and that’s up very substantially over the last couple of years. Yet reported net interest margins for the Bank are also up. Since these are high spread loans, the fact that margins for the Bank can increase at the time that you’re shunting high spread loans off-balance sheet and generating gains, can you reconcile that for me? It seems a kind of counter current there. Blackmont Capital: That just sort of brings me to my next question, I mean the proportion of credit card loans at $4.7 million is almost more than double your on-balance sheet position now, and that’s up very substantially over the last couple of years. Yet reported net interest margins for the Bank are also up. Since these are high spread loans, the fact that margins for the Bank can increase at the time that you’re shunting high spread loans off-balance sheet and generating gains, can you reconcile that for me? It seems a kind of counter current there.

I’ll take a crack from the P&C perspective. This message is consistent with prior quarters, and I don’t know how else to come at this, but if you look at what’s been going on for the last four, five, or six quarters, our deposits have been growing much more rapidly than our loans. In year-over-year for instance, our deposits are up $10.9 billion, and our loans are down $2.4 billion. That’s going to have a large impact on net interest margin. If you think about what’s going on in our loan portfolio, we have had a change in mix in our loan portfolio. Our consumer loans at higher spreads are growing much more rapidly than our mortgage loans at lower spreads. On top of that, we have initiated this year some pretty significant re-pricing both on the consumer portfolio and on the commercial portfolio. So while we have seen in the P&C business an increase in our net interest margin and it’s been relatively high 33 basis points year-over-year, we have had a significant change in the dynamics of the business over that period of time as well. So it is all three of those factors that are having an impact. Obviously, the securitization activities, is having an impact on the denominator; but there is also other major differences in the business today than we’ve seen in the past.

So, Frank, in other words, if you hadn’t securitized an additional $1.5 billion or so in credit card loans, then the Bank’s margins would be that much greater today and would have increased by that much more over the last six, eight quarters. Is that what you’re saying, effectively, right? Blackmont Capital: So, Frank, in other words, if you hadn’t securitized an additional $1.5 billion or so in credit card loans, then the Bank’s margins would be that much greater today and would have increased by that much more over the last six, eight quarters. Is that what you’re saying, effectively, right?

I’m looking at Russ for the answer to that question.

I’ll jump in. I think the answer to your question is yes; but there’s a further add to it. If we hadn’t securitized credit card loans, the margin would have been higher. However, we’ve also securitized very significant amounts of mortgages, as have all of the Canadian banks. Mortgages have a relatively low spread compared to both cards and our portfolio in general. So that has had a negative impact. That’s inflated the net interest margin, and so those two items will offset each other. So you can’t just look at the impact of the cards in isolation. The mortgages, because they’re a lower spread product and we’ve securitized a lot of them, would have had a meaningful impact on the overall margin as well and a positive impact.

My last question just on this note four, there is no statistics related to weighted-average life prepayment interest rate etc. under the July column. I understand, because those vehicles are all in place. Are we to assume that those estimates have remained unchanged and they’re driving the $116 million? Blackmont Capital: My last question just on this note four, there is no statistics related to weighted-average life prepayment interest rate etc. under the July column. I understand, because those vehicles are all in place. Are we to assume that those estimates have remained unchanged and they’re driving the $116 million?

Yes, there would not have been a material change.

Your final question comes from Sumit Malhotra - Macquarie Capital.

For Tom Flynn, if we go to slide 26 of the Russ Robertson slides, just want to go back to this credit valuation adjustment, how it affected trading? You have a couple of days here at the end of May, the end of July, in which you had about $130 million in CVA related trading revenue come through. Am I correct in assuming that’s roughly, what we’re looking at here that was the bulk of the CVA gains in the quarter? If that’s accurate and if the CDS mark-to-market losses also went through trading, shouldn’t we see days of large proportionate losses to offset that? Am I thinking about that the right way?

Let me try to explain the page and see if it helps. We’ve got large gains, as you’ve noted, at the end of May and at July. The end of July rather, they total about $130 million. We booked the CVA at quarter end. The CVA for the quarter as we’ve disclosed was $61 million and of that, we booked about around $90 million at the end of May and at the end of July. So the majority of the amounts that you’re seeing with relate to the CVA. There was a negative CVA in the month of June. In addition, in May when we had a CVA of $23 million against the total revenue of about $80 million, we had some positions that are valued monthly that benefited from tighter credit spreads and that produced gains that are included in the $80 million and we also had some adjustments to some of the holdbacks that we have on the valuation of the trading books and that’s in the $80 million as well.

So these two large ones you’re saying standout, but the gross CVA gain in the quarter was around $60 million and I think you said a couple times the MTM loss was around $70 million?

That’s correct.

Okay, and maybe just these two standout, because they look so big. One more and we can leave it there. This might be for Bill. Capital ratios obviously, benefited from the RWA decline and currencies played a role, it hurt you in Q4, it helped you in Q2 or Q3. There was a comment that capital ratio should decline as loan growth increases. If you comments throughout the MD&A that especially on the business lending side and this is normal in this kind of environment. We’re not seeing too much growth. Could you maybe give us an overview on how the bank is feeling in terms of its overall organic loan growth here, except currency? What do the trends look like and are there market share gains that the bank is picking up either in Canada or the U.S. from the withdrawal or the removal of certain competitors?

That’s a good question and I’m glad we had a chance to finish on the momentum in the businesses, Sumit. There are going to be opportunities. Certainly, Frank has spoken about the growth that we have seen in the higher spread lending products in personal banking in Canada and I think on the commercial side, we do expect to see demand for credit recover. You have to remember that particularly with respect to commercial banking, when the economy starts to grow again, there’s a big portion of the market that was providing credit that is no longer there or is certainly somewhat limited. So the demand on bank balance sheets with respect to this notion of re-intermediation portions of the asset securitization market that have gone away is real. So I think, we will see commercial loan growth in Canada first and then we’ll see commercial loan growth in the U.S. Right now in the U.S., I think that it’s clear, at least in our customer base, that the quality of earnings has been improving because of a heavy focus on cost control and a lower level of reinvestment, but when the recovery starts, I think you’ll see a pickup investment, a rebuilding of inventory, and a call on working capital. So we do think we will see some growth in commercial loans balances and we’re certainly seeing in the large corporate market as facilities come up for renewal or even as maturities in the term market come in, there are opportunities to refinance with bank financing at much wider spreads. So, I do think there is an opportunity for organic growth in the balance sheet, but it’s not going to be fast and I would look into 2010 for that. That was the last of the questions operator, I think?

Yes. That this concludes the question-and-answer session.

Okay. Well, thanks very much and I want to thank everyone who participated in the calls. We were happy to be able to have the opportunity to provide clarification and if you have follow up questions, by all means please give Viki a call and before we sign off I just want to reiterate the three primary messages that I think define the quarter. The first one is that our customer-focused strategy is working and I’m happy to confirm that we’re staying with it. Customer’s needs are evolving every day we believe there is an opportunity to provide new products and responsive service that will deeper relationships. There is no better time to build client relationships than this point in the cycle. There is no better time to increase loyalty and in truth, there is no better time to lay the foundation for growing the Bank. We are very pleased with the results that we have achieved to date. I think that the first three quarters of this year are good evidence of emerging strength, but we’re not satisfied. The second thing is that we’ve been able to continue to invest in our frontline and we’ve been able to continue to invest in customer-related initiatives and at the same time keep a very tight control on discretionary spending. That gives us an advantage as we start to see an expansion and the third one and this goes to the last question, there are going to be opportunities to generate superior growth as growth returns. Having a strong balance sheet and four core businesses that we have a high degree of confidence in is the place that we want to be. We’re well positioned to participate as these opportunities do emerge. Thanks again for joining us today. We look forward to speaking to you at the end of the fiscal year. Good afternoon.

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.