Jeffrey N. Edwards: Client activity levels were strong in the business. We did see a pickup in volatility in March and so we benefited from that pickup. We continue to build out platforms to invest in technology. Structured products have always been important to that business and that continues to be the case.
Michael Hecht (Banc of America): On the fixed side, you noted strength in commodities trading. Do you think about that as the environment being stronger in your favor in your core areas like power and gas, or just stronger growth in some of the newer product areas you have been investing in or good positioning there?
Jeffrey N. Edwards: We did see strong results in our core areas, growth in power and in our core geographic markets, U.S. and Europe. We do continue to make good progress in our other newer businesses as well. On a sequential basis, if you look at the broad-based new products: oil, coal, weather, our index products, we did see sequential growth there. There is more activity in our metals business as we build out that capability. Going forward, we will have more to talk about there. Internationally in Asia it was also a good quarter of growth. We received the first license by a non-utility in Japan to trade power. We expect those markets will develop similarly to the power markets that we have seen historically develop in, first the U.S. and then Europe. So continued good progress on the initiatives there and we believe that ultimately that will drive more revenue growth in the future.
Michael Hecht (Banc of America): Is it possible for you to touch on the level of your overall retained interest for mortgage securitizations, non-investment grade in particular?
Jeffrey N. Edwards: If you look at our retained interest in general, one important point to make there is that the majority of them are investment grade rated securities that are either part of our CDO warehouse or the result of securitizations that are effectively in inventory that we intend to sell on to investors. There is only a small part that reflects the subprime residuals. In general, given the level of activity in securitization, you would expect and you will see retained interest will be up. The residual on that will be up at a much lower rate.
Michael Hecht (Banc of America): The fee growth on the retail business was about 1% versus 5% at the beginning of the period. Could you expand on that?
Jeffrey N. Edwards: When you look at our asset-based fees, it is fair to look at it on a year-on-year basis, up 11% which is a solid performance by GPC. When you look at it on a linked quarter basis, there are a couple of things going on. One, the fourth quarter always has higher Visa fees and Visa fee levels will come off on a sequential basis. That retards the growth rate to some extent. The other point to make is that we had a strong response particularly at the end of the fourth quarter carrying through into the first quarter to our strengthening deposit platform, and you saw a continued growth in our deposits. Some of the growth in GPC that you would other see go into asset-based fees ends up going into the interest line which was up much stronger on a sequential basis.
Michael Hecht (Banc of America): You saw about a 50-broker increase quarter over quarter, still well relative to your peers but slower than in recent quarters. Is that intentional, or are you seeing any impact from pick up in recruiting from any of your peers?
Jeffrey N. Edwards: Every quarter we say and mean that the competition is intense. I would say that was true this quarter as well. It is important from our perspective to maintain good discipline when it comes to competing for brokers and we did that. Our focus remains on building our platform and investing in technology and training, which we think will continue to provide an attractive environment for brokers. The one other thing that I think is worth pointing out in the first quarter is we did have a restructuring in our small institutional division and that group went down. When you look at it on a net basis, there is noise sequentially.
|
More:
