Question-and-Answer Session
Operator
Your first question comes from Ken Usdin – Bank of America
Ken Usdin – Bank of America
Good morning, Ed I was wondering if you could just talk us through on the net interest margin guidance, what your exact rates forecasts are as far as number of cuts or [inaudible] in the US or abroad and also what your expectation is for the funding costs for the capital raise and if that’s incorporated within the guidance.
Edward Resch
Well I’ll start with the second one first, I can’t comment specifically as I’m sure you appreciate because we just announced the transaction this morning, but we do have an estimated cost of the capital issuance included in the guidance for the year. We have a couple of offsetting things going on in terms of the margin in 2008 which is why I said that we were sticking with the 185 to 195 but probably will be toward the higher end. We’re approaching certainly the first half of the year on a very conservative basis where we anticipate that we’re going to be growing capital and we’re thinking about the balance sheet on average as being relatively stable with the fourth quarter, the NIM being stable and we’ll grow the capital and run the ratios at or above the top end of the ranges and we’re doing this for the reasons we said previously, which is conservatism. We’ll also probably not be buying back any stock in the first quarter and maybe the first half.
In terms what we expect in terms of the FED we have the probable benefit which is partially baked into our NIM expectation of the FED cutting. We expect them to cut at the end of this month down to 4%. If they go below that and there’s possibly more of a likelihood of that in the last week or so than there was before that, we have the offset in our forecast for the ECB of the Bank of England which we’re currently forecasting the ECB to be down about 3% to 3¾% and the B of E to 4% to 4¾ % by mid year so the proposed FED decreases will help us in terms of net interest margin. The proposed foreign central bank decreases, principally the ECB and the Bank of England will hurt or net interest margin. The bias is toward the FED helping a little bit more than the foreign central banks hurting us because we’re still much more dominant in terms of the FED. But that’s our rate forecast and the reason why we have the margin still at around 195.
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