Celeste Mellet Brown - IR: Good morning. This is Celeste Mellet Brown, Head of Investor Relations. Welcome to our Second Quarter Earnings Call.
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I will now turn the call over to Chairman and Chief Executive Officer, James Gorman.
James P. Gorman - Chairman and CEO: Thank you, Celeste. Good morning, everyone, and thank you for joining us. We will again review the progress we've made towards the six strategic priorities we delineated in January that would drive our return on equity and return on tangible equity excluding DVA to greater than 10% and 12% respectively.
We're pleased with the progress we've made during the quarter and we met or exceeded several of the goals. Let me just go through them quickly. First was to acquire 100% of the Wealth Management joint venture. As you know, we closed on the final 35% of that joint venture on the last business day of the quarter. As we've taken through the benefits numerous times, I'm not going to spell them out again. Suffice it to say however, the deal was a game changer for this firm and for our shareholders now and for decades to come.
Secondly, we've put out a goal to achieve Wealth Management margins through expense management and to revenue growth. In addition to owning 100% of the business, one of the key drivers for ROE upside is the revenue and margin upside in the Wealth Management business, both were higher this quarter. The margin of 18.5% represented the fifth consecutive quarter of margin improvement excluding non-recurring costs associated with the integration in Q3 2012. We've reached our highest margin level since the first quarter of 2008.
In addition, we increased our margin goals for Wealth Management business at our Financials Conference in June to 20% to 22% by the end of 2015, without the benefit of high rates or markets and more than 23% if markets or rates increased. Why the increase? The margins reflect the simple math of the upside from a 100% ownership with ongoing investment in the business, using the first quarter of 2013 results as a base.
Our third objective was to significantly reduce RWAs in fixed income and commodities. We continue to make progress regarding our fixed income RWA reductions ending the quarter at $239 billion down from the first quarter. We continue to expect fixed income RWAs to be below $200 billion by the end of 2016.
Our fourth goal was to drive expenses lower in 2013, '14 and beyond. We are on track to meet our expense reduction targets, and Ruth will take you through these in more detail. As you can see clearly see, our expense ratios have improved as we said they would with revenue growth.