But growing capital and lowering our risk profile is just part of the story, it is also about growing and building our three main businesses for the long-term.

Our personal and commercial business remains central to our strategy. We have indicated to the market that, while long-term this business may be a 6-7% growth business, we believe that in the period covering this year, 2004 and 2005, we should be able to average 10% plus earnings growth rates. Year-todate earnings are up 15% -- well ahead of target.

In wealth management we have set out equally straightforward objectives, depending on the geographical jurisdiction.

In Canada, we are prepared to invest for the future, to fill in the gaps in our offering, and better exploit our huge assets -- our brand, our customer base, and our technology. In that context our earnings goals have been modest in the short-run and more demanding in the medium-term.

For Waterhouse we have focused on eliminating the losses in the international sphere and lowering the breakeven points in the North American operations to position us for a return to more active trading. We have also insisted on maintaining technology spend so we can continue to upgrade our offering.

I am very pleased with our results. International Waterhouse lost only $1 million in the quarter, excluding restructuring costs, compared to $17 million in Q2. North American Waterhouse earnings more than doubled from $27 million to $61 million driven by a 43% increase in trades per day in North America. We are pleased with the operational leverage we have built in this business.

Turning now to our core wholesale operations, I am also pleased with their results. We had a strong domestic underwriting quarter. In the Canadian market we led equity transactions for Rogers, CHUM, and Pembina Pipelines, among others. On the debt side, we completed a transaction for Maple Leaf Sports & Entertainment. While the M&A market remained challenging in Q3, we continued our strong position in advising medium cap oil and gas companies on transitioning to become royalty trusts. During the quarter we acted as lead advisor to Bonavista Petroleum and Baytex Energy.

We said we believed we could earn $500-550 million this year by focusing on two franchises: our domestic wholesale group, and our global capital markets group. This was a very challenging goal given the amount of change we have introduced to this business. We remain confident that we can meet that target for the year as a whole with earnings to date of $423 million in our core wholesale business, excluding the goodwill impairment and restructuring charges booked in the second quarter.

We also said we would restructure the equity options business. We have made some progress but have a way to go to eliminate losses. Current quarter losses were $10 million versus $15 million last quarter.

Let me now give you some brief comments on things that I see as issues in each of our businesses and areas where we will be directing our focus.

Personal and Commercial Banking

In personal and commercial banking, clearly the number one issue here is the decline in margins. Margins dropped eight basis points this quarter and we expect a further decline next quarter. About half of the margin decline relates to a change in mix, reflecting a change in customer preferences towards products with lower margins. The rest is attributable to competitive pressures. Some of the competitive pressure may be related to normal ebbs and flows and it is hard to predict how long this will take to play out.

In any case, our task is clear: restructure our expense base through process re-engineering to permanently lower our cost base so that we can meet our profit targets despite declining margins. This is what we have done so far this year and this is what will continue to be our focus next year. To do so will require spending money to save money, so our results in P&C could be somewhat lower in the fourth quarter than they were in the third.

We are delighted with our acquisition of 57 of Laurentian Bank’s branches, which makes use of two of our key assets: our proven ability to integrate, and our strong capital position. We welcome the employees and customers to the bank and promise to deliver them the comfortable experience that is the heart of our brand.

Wealth Management

Turning to wealth management, I think it is appropriate for me to repeat what I said at the last analyst meeting. I like the discount brokerage business. While, as some of you have noted, its value is clearly not reflected in our stock price, I am not running the company to generate short-term gains in stock price. Waterhouse’s earnings power will eventually show up in our consolidated earnings and our market value.

Some analysts have also wondered whether I have the stomach for the volatility inherent in Waterhouse’s earnings stream. The short answer is yes. We are comfortable with volatility, which in this case is transparent to the marketplace, predictable, and tied to a high growth, high multiple business.

What we want to avoid is a year of negative earnings -- that is why we have aggressively driven down our breakeven points. Businesses that are overexposed to periods of negative earnings in effect borrow from the stability inherent in the predictable and non-volatile earnings stream of our retail and other wealth management businesses. Such volatility has the risk of robbing these earnings of the premium mulitiple they deserve.

Wholesale

This thinking also reflects my view of the wholesale business. Properly structured, it is a good business and one that leverages the overall strengths of the bank and provides earnings diversification. It has to be run, however, on the basis of the capital we have assigned it and operated in a manner that makes annual losses, such as we suffered last year, extremely unlikely.

This has been our focus this year and our management team has done a superb job in carrying out what is a tough assignment -- executing a disciplined ROE–focused business model that maximizes shareholder value. My hat is off to the team.

At the start of the year we told you we had built into our plans a forecast for PCL and PCL-like expenses in the core portfolio of $100MM per year. This number was based on roughly a 100 basis point loss over a credit cycle.

You will note that again this quarter there were no core wholesale PCLs, and we did not highlight a significant increase in expense for credit mitigation in our core book even though we said earlier that we had doubled our protection. The cost of credit protection is amortized over a longer period and therefore the incremental expense over last year’s run rate has not been significant. With this latest purchase we are now at an annual run-rate of $28 million per year.

However, as I noted earlier, depending on market factors, we are looking to add another $1 billion in credit protection in the fourth quarter or sometime next year. If this occurs, our annual run rate for credit protection expense next year could be $40 million.

Does that mean that the total PCL-like cost is likely to be only $40 million? That obviously depends on what happens to the unprotected part of our portfolio, which is very high quality. 60% of net outstandings are investment grade, 83% of total net exposure is investment grade and total net exposure is 30% lower than it was at the beginning of the year.

Looking to next quarter and the following year, it is difficult to provide guidance. There may be “accidents”, but there is nothing in the portfolio that is currently causing us to have real concerns.

There are, of course, in addition, separate accounting issues surrounding the treatment of credit protection. We will ensure complete transparency in explaining any impact the pending changes in accounting rules may have.

I should also comment on the sectoral provision release. When we set up the sectorals, we indicated to you that we were confident we were adequately provided, but not overconfident. We had a number of very large exposures where the company had to be restructured. Liquidity in the secondary market was very weak, and many companies faced dim prospects in their ability to refinance. Much has changed since then. As many of you have pointed out there has been a definite improvement in these markets, and we have been the beneficiary.

We have a very disciplined process to review the adequacy of our reserves each quarter. Obviously with $698 million in sectorals and approximately $300 million in generals allocated to the non-core bank, we are very conscious of how leveraged we still are to changes in the credit environment. The evolution of that environment will obviously be the key determinant of the amount of, and the speed with which, sectorals are released in coming quarters.

Conclusion

In conclusion, I am very pleased with the quarter. We have managed to transform the company to deal with our business issues faster and more thoroughly than I originally expected. We have been helped by the environment, but the management team has been very focused; our people have worked hard and they all deserve a lot of credit.

We are now a repositioned company with excellent positioning in each of our three main businesses. We are not without our challenges, but we understand them and they are the challenges of any company operating in these business sectors. We have a strong capital position, a lower risk profile, and high leverage to a continuing strong credit environment. Finally, we have a management team focused on operational excellence and just doing what we said we would do.

And with that, I would like to hand the floor over to Dan.