Raymond James Financial, Inc. (RJF) Q3 2011 Earnings Report, Transcript and Summary

Good morning, my name is Sylvia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quarterly Analyst Conference Call. [Operator Instructions] Thank you. Mr. Reilly, you may begin your conference.

All right. Well, good morning. I'm joined by a cast here. We have Jeff Julien, our CFO; Jennifer Ackert, 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're going into probably a little more detail on the call, but I want to start off kind of an overview. We have a lot happening this quarter. Our total revenues are up 14% 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 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-month 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're off to a very, very solid year. Most of our segments had robust performance given really the markets, but the only exception really Capital Markets, which we'll spend a little time on, really due to securities commissions. I'm 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. Four had some financial impact to our numbers. The first obviously was our auction rate securities where we took a $45 million pretax charge. Now that charge does not include $1.750 million of our settlement with the state or legal fees. That's just the provision really for buying the securities. The reason we went ahead and did this is we felt from -- even though we thought we had a very defensible position and had leading industry practices in terms of disclosure on auction rates, we want to get it behind us for the company and maybe more importantly is provide liquidity for our clients. And we just, last Friday, mailed out to our clients their offers to redeem their securities, and we'll be starting that process. So 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. Jeff will get into the detail. We also completed our $250 million secured -- senior unsecured note offering. So we'll talk a little bit about net 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 equity's subsidiary. Net consolidations had a little bit of impact on revenue and on cost. And fifth, which didn't have an impact, but we announced that we have a contract to purchase about $500 million of loans from -- in Toronto from Allied Irish Bank. So a busy quarter and a lot going on. Let me start kind of 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 a $2.1 million credit. So kind of a net swing. Most of the cost was $4.7 million there. Now the business is in great shape. The assets under administration is up $3 billion and 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 the trend is advisor account is up, about 27 advisors, and we're up in the U.S., Canada and the U.K. in terms of number of financial advisors. So business should be in good shape. And remember, most of our assets, a good chunk of our assets in that business were built 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 market. Our M&A fees were about flat with last quarter, and we had a good quarter. I mean, we're coming off a strong quarter last quarter. Our underwriting fees were up slightly. The main impact there is they were up in the U.S. actually about $5 million, but down in Canada, about $4 million dollars. So despite the number of deals that we published, lead deals, which we told you that statistic is kind of not a greatest indicator. We've debated on to published lead deals or comanaged deals. We had a large number of comanaged 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 commissions, 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, isn't a great month. And September is often a good month, depending on the market. So the outlook from a backlog standpoint is good, but from the market, it's kind of hard to predict. Also, our Tax Credit Funds business has had a very good backlog and should be positioned well this quarter, to finish very, very strong on the upside for the Capital Markets business. The Asset Management business, again, good results. We've had strong net inflows. Assets under management were up from $35.6 billion to $36.6 billion, about $1 billion. And if you look total wrap [ph] these that we have both our nonmanaged and our assets under management were up from $87 billion to say $90 billion. So both of these pieces were up 3%. The result is revenue was up 6%, about $3 million. Expenses were only up about $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, I think, in the highlights of 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 of flat production. The net increase I think was a good number. We also announced the purchase of Allied Irish Bank loans, about $500 million. I want to remind you, it's -- 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 in [ph] 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. And you could see that in the net charge-off and provisions, which were both essentially flat to last quarter, and that's even 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's essentially $2 million effect with the SNC. So 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. So I think we keep good focus on that. So with that, that's kind of the view of the major segments. They're well positioned, and the question is honestly what's going to happen in the Capital Markets this coming quarter. So I'll turn it over to Jeff, who I think we're going to start on Proprietary Capital. Jeff?

Yes, I'm going to try to head off some of the questions, lest we'd 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 interests, so one of the factors that drove that up this quarter, as well as our merchant banking fund, all 3. So that was the biggest change. Most of the balance related to some of these mutual fund-related revenues that Paul mentioned such as omnibus fees, networking fees, education marketing support fees, et cetera, that are in the other income line item. So 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 to the audited balances. So it's kind of a once-a-year adjustment on those but it can go either direction since we've had improving market over the last year, which caused a positive mark. The other segment that had a couple of good quarters in a row is the Emerging Markets, as we've had some good investment banking activity in Latin America, 2 quarters in a row. So that one has been performing and contributing more than it had in the past. Comment on net interest. You can see that 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. And then 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. It was a combination of things. One is we had the nondeductible fine that Paul mentioned, the $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 never -- 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. And those 2 things, coupled with a depressed pretax income number because of the ARS charge, led the rate to look abnormally high. But for the year-to-date, it's still pretty much in line just in the 37%, 37.5% type range. With respect the ARS, Paul mentioned that we've 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 -- in fact 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 the Jeff County's as well. But 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. Now 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 attended 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 -- I mean for the year-to-date, which again without the interest earnings that we've been accustomed to all these years is about where we've been for the last couple of 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. And I'd say we're continuing to watch the comp levels pretty closely, particularly the incentive comp accruals rather than having lumpy adjustments toward year end, we're being a little more diligent. But 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's some detail on some of the things I know would otherwise come up in questions.

Okay. Well, great. At this point, we'll 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.

Paul, I would love to get your views. There's 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. So love to get your high-level thoughts on what you're seeing out there and what you guys continue to focus on. We know the international asset manager is something you talked about in the past. But is there anything else you'd like to continue to grow into?

Well, I think in terms of Asset Management, as you've said, we publicly and we're actively seeking international large cap manager. And I think we would opportunistically look at other managers that would sit and help fill out kind of a family of funds in Eagles. 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 at a price we think is reasonable, it's easier said than done. But we're very active. We've been -- we have accord James full time assigned to that and we're using some other outside people to help us. So again, if we find the right acquisition, I think we would close, but we're not going to do one just to do one. So, it's ongoing. And so that strategy hasn't changed.

Okay. Moving on maybe 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 reengaged that market?

I think overall just with low -- institutionally, in the muni business, I don't think there's been a big pickup. With rates being low, we're seeing -- that's why commissions are down, I think a lot of people are sitting on the sidelines waiting. The retail investors probably have gotten a little more conservative than they were before, the flows to equity funds have turned negative again. Our experience has actually been fairly good. We've had net inflows given this environment. So I think a lot of people are looking to wait and see. I can't say there's a big shift in the [indiscernible] market.

Okay. And then last for me. We did finally see some headcount picked up in the number of advisors this quarter, a welcomed relief here. Anything you're seeing on the recruitment front? I know we ask this every quarter, but I guess maybe incrementally, do things feel like they're 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, still a challenging market, I think. We're 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, so that's a factor. And also when -- after a tough couple of years in the market, when people are doing well, even if they think it's a better firm, they're less likely to pick up and move. So the visits are up, but recruiting is still tough and very, very competitive.

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

Not too much for me, but just it'd be helpful if you could maybe just give a little more detail on the type of assets that you're acquiring from Allied Irish Bank in Canada and anymore help on the impact on results. You obviously mentioned we just think about the provision, but what about on the net interest income side?

It's Steve Raney. Little additional color on that. That portfolio, as Paul mentioned, is about $500 million in outstandings, currently about $650 million in commitments. There's 25 relationships in -- that comprise that balance. Eight of the 25 are commercial real estate loans. Six are corporate loans, so C&I, commercial loans and industrial loans, and 11 loans that are really C&I but are a little bit specialized. They're kind of 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're anticipating and we're 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 those loans. I would say that that's on a pre-hedged basis. We're evaluating some hedging as well. So that's on a pre-hedged basis. So 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 bankers acceptance rate, which is at kind of a historically high level relative to LIBOR. In our modeling when we were 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's very helpful. And just back to the other revenues, obviously, you spoke about the Proprietary Capital gains. And then you mentioned, Jeff, the various mutual fund fees, and I know that those can bounce around from quarter-to-quarter, but they seemed higher than normal. So I just wanted to get a sense of is there anything unusual and then why this quarter was maybe elevated on that front as well, if this is kind of a new run rate going forward or if there's just something else there that we need to consider?

Well, I think in large part it's just going to be kind of 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 increased the positions and we increased the sales positions in all these mutual fund families, the assets continue to grow. We expect that, that will be a slowly upward trending line over time.

Okay. Great. And then, just lastly, pardon if I 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, no, it was actually down from last quarter, but there wasn't anything that I would point to other than the fine.

Your next question comes from Hugh Miller from Sidoti.

I had a follow-up question I guess on the bank. I 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? I mean, obviously, you have 25 relationships, but what are you thinking with regards to being able to leverage kind of your capital with the bank and being able to grow in Canada? What are the opportunities you're seeing there? How should we think about growth?

We look at the opportunities there just like we do in the U.S. It gives us a platform to leverage our equity capital markets clients really, as a base. And so we have a good franchise there, and we plan to leverage it like we have here. And that's really the growth opportunity. And this was just the way to get the business kick started.

Do you, I guess, foresee kind of out of the gates in the coming quarters a nice opportunity to go out there and kind of cross-sell to your current clients? Or is this kind of just be a slow and steady progression?

I think it would be slow. In fact, Hugh, I think that the -- that 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 -- a place to launch this business. And we've got a very profitable and growing business in Canada already that this is going to be supplemental to. We've got some good relationships already that we can leverage. Incidentally, we've already -- we've made 2 or 3 loans here in the U.S -- in U.S. dollars to Canadian-based companies. That effort was already underway, which -- that's 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 a follow-up on the recruiting environment. Obviously, it was a nice kind of change to see some growth there. Are you seeing any kind of change in the upfront money that the larger peers that you're competing against are kind of going out there just given the choppy market conditions? Are they kind of reassessing what they're paying upfront? Or has there really not been a change in that?

I don't think dramatic -- there's always somebody that we think is not rational leading the way, and that may shift and change, but there always seems to be somebody that's just 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 now certainly -- our transition assistance is not as high others but we try to keep it economical and be in the market. So it's cyclical. I think -- we don't believe that the high-end offers are sustainable because we don't see, no matter how we run it, that they're profitable.

And you mentioned kind of one of the headwinds being the retention packages that have been awarded since the recession. Do you have a sense of what those -- the typical duration of those tend to be? And is there a time period? Obviously, that kind of would free up the opportunity to be more active on the recruiting side.

There's 5- to 7-year packages. But there's a major firm where there is shorter term retention from '09 and '10 wears off next year. So I mean it's all -- they're all over the place, but they tend to do 5- to 7-year deals. But as those are amortize down, too, I mean when you get down to less than half, it isn't the same retention as it was on the first half. So it's a cycle, and we'll chip away. This isn't the first time it's happened. There's also -- as players look at consolidation in others, it always gives us opportunity. So we just have to be disciplined.

Okay. Good point. And you did mention about the -- we did see industry flows kind of coming out of equity funds, maybe more pressure on the domestic relative to the international. But have your discussions for an acquisition on the international asset management fund kind of changed at all given that the near-term market conditions or is it likely not to have swayed at all over pricing?

We're very long-term oriented, so 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 U.S. distribution and our good portfolio managers. So we have -- we're looking both in North America and in Europe. And wherever we find the right team, if we find them, we'll have them join us.

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

Right, exactly. And I guess that was getting back to my question is that, have the valuation discussions over what they're 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're down, a lot of people say, well, it's not the time to sell because it will come back. So there are pros and cons. I don't think it's changed short term.

Your next question comes from Doug Sipkin from Ticonderoga Securities.

Two questions. The first for Steve, kind of 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 like the breakeven on that portfolio? How many quarters or a year or 2 years do you sort of see the breakeven on that sort of upfront provision expense? I' m just trying to frame that gross yield at 7.4% you provided sort of 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. I mean once again, this is -- this last quarter we did 61 new corporate loan transactions that totaled almost $700 million, it drove some of the outstanding. So this acquisition in and of itself is not -- it's less than one quarter's production of our corporate -- normal corporate production. And when we're doing that, we -- part of our provision expense this last quarter, the June quarter, was related to loan growth. So 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.

And certainly over the life of that, it's going to have a return to us at least equal to what our domestic portfolio is yielding.

Yes. I think 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 for us in the quarter [ph]. 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. So you should look at it the way we've always done business. We just have a foothold in Toronto now.

An opportunity to grow loans.

Remember that we have a capital allocation kind of cap to the banking industry. So we're not trying to have a game changer in terms of allocation to the banking industry. We're just trying to be able to consume free cash generation and keep the retained earnings reinvested to fund future growth for the bank. And we've 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 just trying to get a sense, because I get the sense that you did sort of purchase it, the loans -- I mean, I don't think you've said this but I'm sort of saying it at a bit of -- a little bit of a discount anyway. So with the sort of accretive gain, I'm at least thinking that it could be a little bit more profitable than your current book even though it's much smaller so...

That's the hope. We try not to buy at a premium. That's the hope. But 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 performed, then it's going to be a nice acquisition, and that's the basis for us going into it.

Got you. Okay. And then, the SNC, I mean any reason why it was this quarter and not next quarter?

It surprised us. They got it done faster.

They're actually working faster than normal. That's a surprise.

Yes.

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

We got it June 30, the afternoon, effectively [ph].

And then 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've made and market share gains? Because personally, I was pretty surprised given what happened in June and late May for you guys to put up such a strong number. I mean, 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 I mean, is it just sort of 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. And they're strong products and we're well positioned in the REIT space we play against everyone. So that was the big driver. In Latin America, we had some deals that -- some pretty large deals for that size where we led the way and that contributed, too. Canada was very, very strong until this quarter. They were off some, but they've had good performance, too. So we've been well positioned in our sectors and the market has been good. And we don't see that ending although June -- end of June, beginning July wasn't the best for our industry.

Your next question comes from Steve Stelmach from FBR.

Just real quick on the offshoring [ph] security provision of $50 million, you said half was credit related to Jefferson County. What's the implied recovery value of that Jefferson County? Is it -- what does the 25% -- what does that $25 [ph] million represent?

About $90 million in positions. That was a $45 million charge not a $50 million charge.

I'm sorry. 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 all having an impact on your acquisition strategy? I mean, clearly capital hasn't been an issue for you guys? But is that in the back of your mind when you're thinking about doing M&A?

First, we're not sure how the government is going to apply anything right now. But the -- everything we've looked at, we're solidly capitalized. The best we can tell from any of the provisions, it's not going to be an issue for us.

Okay, that's not an impediment at all. Okay. And then just 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. We overlay the Case-Shiller information across our portfolio each quarter and look at our -- what we think to 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 our provision for the quarter in our residential portfolio.

Your next question comes from Joel Jeffrey from KBW.

Just to go back to Doug's question a little earlier. On the M&A and the underwriting front, you mentioned the sectors that have been strong. Are there any sectors that you see sort of a pipeline building that are sort of just about set to take off?

Well, we've been building and recruiting heavily in technology because we see that as a sector that's been heating up, and there's been enough displacement of firms that we think there's an opportunity. But 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. So some sectors we're not positioned in, too.

The Howe Barnes services.

The FIG business is an area where we thought when we acquired Howe Barnes, that's a near term, activity would be a little bit higher than it has been, but it will come. So we have gotten a few transactions out of that already. We've gotten 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. So we think there's still some upside in that. The integration is going very, very well.

Energy is probably the other one.

Yes, energy. We're very, very active in the energy Space. In downstream energy, you can see the announcements, though the MLPs have been strong for us.

Great. And then you mentioned that institutional securities was down 10% quarter-on-quarter. But specifically, how was your institutional equities business? What was the performance of that?

To tell you -- we are looking for it. Give us one second. About the same, same percentage roughly.

Yes. We looked at most of the businesses, they're down 9% to 12%, pretty much across the board. And actually, that's been less than most people if we look at year-to-date changes. I think we've done better, but there's clearly a downward trend.

And then, just lastly. I know you've given us a lot of color on the loan purchase and describing it as a foothold into Canada. Are there any other areas that you're 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 the loan portfolio in general?

No, I think Canada has always been -- we've -- if you look at the bank's strategic initiative, had been around taking our best equity capital markets clients. We had very good performance, really clearly no defaults during the downturn with our clients there. So taking our best clients, so we know them in lending. We also have some other related projects or securities-based lending with our Private Client Group, and we've been building up our mortgage origination both outside and what's inside of our Private Client Group as a strategy. So we're just -- we're getting focused on the areas that we've 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 into any other countries.

And I show no further questions at this time.

Well, 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've got only about 90 more to tie Tom. Probably won't make it that long, but we'll try to keep the streak alive. The question for us is all the businesses are solid, and we're well positioned and what we can't predict is what's going to happen in the market so -- especially in the near term. So 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 kind of their fill of low rate long-term stuff and there's a lot of cash on the sidelines. So when they redeploy, when they have a different expectation, or -- it's going to be this way forever or it's going to move up, we'll kick start that business. Until then, we'll just wait through the cycle. But I think the business is in good shape. So thank you for joining us, and we'll talk to you next quarter.

Ladies and gentlemen, this does conclude today's conference. Thank you for participating. You may now disconnect.