TD Bank Group Newsroom
TD Bank Financial Group Delivers Very Strong First Quarter 2007 Results, Raises Dividend
FIRST QUARTER FINANCIAL HIGHLIGHTS compared with the first quarter a year
ago:
- Reported diluted earnings per share(1) were $1.26, compared with
$3.20. The first quarter of last year included a dilution gain of
$2.32 from sale of TD Waterhouse U.S.A. to Ameritrade.
- Adjusted diluted earnings per share(2) were $1.38, compared with
$1.15.
- Reported net income was $921 million, compared with $2,307 million.
The first quarter of last year included a $1,670 million after-tax
dilution gain from the sale of TD Waterhouse U.S.A. to Ameritrade.
- Adjusted net income was $1,009 million, compared with $835 million.
FIRST QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The first quarter reported diluted earnings per share figures above
include the following items of note:
- Amortization of intangibles of $83 million after-tax (11 cents per
share), compared with $82 million after-tax (11 cents per share) in
the first quarter last year.
- A loss of $5 million after-tax (1 cent per share) due to the change
in fair value of credit default swaps hedging the corporate loan
book, compared with a gain of $10 million after-tax (2 cents per
share) in the same quarter last year.
All dollar amounts are expressed in Canadian currency unless otherwise
noted.
(1) Reported results are prepared in accordance with Canadian generally
accepted accounting principles (GAAP).
(2) Adjusted earnings and reported results referenced in this Press
Release and Report to Shareholders are explained in detail on page 5
under the "How the Bank Reports" section.
TORONTO, Feb. 22 /CNW/ - TD Bank Financial Group (TDBFG) today announced
its financial results for the first quarter ended January 31, 2007. Very
strong earnings growth was fuelled by Canadian Personal and Commercial Banking
and Wealth Management, including TD Ameritrade. TDBFG also announced an
increase in the quarterly dividend of 5 cents to 53 cents, representing an
increase of 10% per fully paid common share for the quarter ended April 30,
2007.
"I am extremely pleased with our earnings performance in the first
quarter," said Ed Clark, TD Bank Financial Group President and Chief Executive
Officer. "Our commitment to operational and customer service excellence and an
emphasis on organic growth across all our businesses, were key factors behind
these excellent results," Clark added.
FIRST QUARTER BUSINESS SEGMENT PERFORMANCE
Canadian Personal and Commercial Banking
TD Canada Trust saw continued momentum across all its operating
businesses, which led to record revenues and very strong earnings growth in
the quarter. Earnings were up 14% compared with the first quarter of last
year, attributable to robust results in real estate secured lending, life
insurance, core banking and personal lending, including Visa.
"Canadian Personal and Commercial Banking kept up its impressive track
record with double-digit earnings growth again this quarter," said Clark.
"Clearly our investment in future growth such as expanding our TD Canada Trust
branch network and adding more client-facing employees is paying off. We
continue to invest, while maintaining a healthy gap between revenue growth and
expense growth," Clark added.
Wealth Management
Wealth Management, including the Bank's equity share of TD Ameritrade,
produced a very strong quarter, with a 35% increase in earnings, compared with
the first quarter last year. In the first quarter, Canadian Wealth Management
saw strong transaction volumes and asset growth across its mutual funds,
discount brokerage and advice-based businesses.
TD Ameritrade generated record results, which translated into a net
income contribution of $64 million to the Bank's Wealth Management segment in
the quarter. TD Ameritrade demonstrated growth in assets and client trades per
day, while continuing to execute on the integration of TD Waterhouse U.S.A.
and its client segmentation strategy.
"We're extremely pleased with Wealth Management's record performance this
quarter, which was defined by broad-based volume and asset growth across the
platform," said Clark. "While buoyant capital markets were a factor, in
Canada, the investments we continue to make are positioning us well for
continued growth."
U.S. Personal and Commercial Banking
TDBFG's U.S. Personal and Commercial Banking segment through TD Banknorth
earned $64 million in the first quarter. During the quarter, TD Banknorth
maintained its ongoing focus on organic growth opportunities in loans and
deposits, combined with disciplined expense control. On January 1, 2007, TD
Banknorth completed the acquisition of Interchange Financial Services
Corporation, which enhances TD Banknorth's branch network and presence in
northern New Jersey.
The TD Banknorth going-private transaction, subject to both shareholder
and regulatory approval, is expected to close before the end of April 2007.
Upon completion, TD Banknorth will become a wholly-owned subsidiary of TD Bank
Financial Group.
"We are focused on TD Banknorth's potential to grow organically and
enhance value for our shareholders," said Clark. "We have a number of
initiatives in place to deliver that value. While we recognize that
improvement will take a lot of hard work and time, I know that TD Banknorth's
leadership team is taking all the right steps to make it happen," added Clark.
Wholesale Banking
Wholesale Banking delivered very strong results in the first quarter,
with earnings of $197 million, driven by strong trading revenues, a solid
domestic franchise and strong contributions from the equity investment
portfolio.
"Historically, the first quarter is our Wholesale Bank's strongest, and
this quarter is no exception," said Clark. "Although we don't see this run
rate level continuing for the remainder of the year, we expect Wholesale
Banking will produce a strong showing in 2007. We continue to focus on our
goal of being a top three dealer in Canada," Clark added.
Conclusion
"Our first quarter results marked a very strong start to 2007," said
Clark. "Our powerful domestic retail operations are showing consistently high
performance and we're optimistic that all our businesses have the right
strategies in place to deliver shareholder value this year and for the long
term," said Clark. "The Board's decision to increase the quarterly dividend by
10% from the current level reflects our strong performance and our confidence
in delivering continued superior earnings growth," Clark concluded.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, the Bank makes written and oral forward-looking
statements, including in this report, in other filings with Canadian
regulators or the U.S. Securities and Exchange Commission (SEC), and in other
communications. All such statements are made pursuant to the "safe harbour"
provisions of the U.S. Private Securities Litigation Reform Act of 1995 and
applicable Canadian securities legislation. Forward-looking statements
include, among others, statements regarding the Bank's objectives and targets
for 2007 and beyond and strategies to achieve them, the outlook for the Bank's
business lines, and the Bank's anticipated financial performance. The economic
assumptions for 2007 for each of the business segments are set out in the 2006
Annual Report under the headings "Economic Outlook" and "Business Outlook and
Focus for 2007". Forward-looking statements are typically identified by words
such as "believe", "expect", "anticipate", "intend", "estimate", "plan", "may"
and "could". By their very nature, these statements require the Bank to make
assumptions and are subject to inherent risks and uncertainties, general and
specific, which may cause actual results to differ materially from the
expectations expressed in the forward-looking statements. Some of the factors
that could cause such differences include: credit, market, liquidity, interest
rate, operational, reputational, insurance, strategic, foreign exchange,
regulatory, legal and other risks discussed in the management discussion and
analysis section in other regulatory filings made in Canada and with the SEC,
including the Bank's 2006 Annual Report; general business and economic
conditions in Canada, the U.S. and other countries in which the Bank conducts
business, as well as the effect of changes in monetary policy in those
jurisdictions and changes in the foreign exchange rates for the currencies of
those jurisdictions; the degree of competition in the markets in which the
Bank operates, both from established competitors and new entrants; legislative
and regulatory developments; the accuracy and completeness of information the
Bank receives on customers and counterparties; the development and
introduction of new products and services in markets; developing new
distribution channels and realizing increased revenue from these channels; the
Bank's ability to execute its integration, growth and acquisition strategies,
including those of its subsidiaries, particularly in the U.S.; changes in
accounting policies and methods the Bank uses to report its financial
condition, including uncertainties associated with critical accounting
assumptions and estimates; the effect of applying future accounting changes;
global capital market activity; the Bank's ability to attract and retain key
executives; reliance on third parties to provide components of the Bank's
business infrastructure; the failure of third parties to comply with their
obligations to the Bank or its affiliates as such obligations relate to the
handling of personal information; technological changes; the use of new
technologies in unprecedented ways to defraud the Bank or its customers;
change in tax laws; unexpected judicial or regulatory proceedings; continued
negative impact of the U.S. securities litigation environment; unexpected
changes in consumer spending and saving habits; the possible impact on the
Bank's businesses of international conflicts and terrorism; acts of God, such
as earthquakes; the effects of disease or illness on local, national or
international economies; the effects of disruptions to public infrastructure,
such as transportation, communication, power or water supply; and management's
ability to anticipate and manage the risks associated with these factors and
execute the Bank's strategies. A substantial amount of the Bank's business
involves making loans or otherwise committing resources to specific companies,
industries or countries. Unforeseen events affecting such borrowers,
industries or countries could have a material adverse effect on the Bank's
financial results, businesses, financial condition or liquidity. The preceding
list is not exhaustive of all possible factors. Other factors could also
adversely affect the Bank's results. For more information, see the discussion
starting on page 56 of the Bank's 2006 Annual Report. All such factors should
be considered carefully when making decisions with respect to the Bank, and
undue reliance should not be placed on the Bank's forward-looking statements.
The Bank does not undertake to update any forward-looking statements, whether
written or oral, that may be made from time to time by or on its behalf.
As in prior quarters, this document was reviewed by the Bank's Audit
Committee and was approved by the Bank's Board of Directors, on the Audit
Committee's recommendation, prior to its release.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE
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This Management's Discussion and Analysis (MD&A) is presented to enable
readers to assess material changes in the financial condition and operational
results of TD Bank Financial Group (the Bank) for the three months ended
January 31, 2007, compared with the three months ended October 31, 2006 and
January 31, 2006. This MD&A should be read in conjunction with the Bank's
unaudited Interim Consolidated Financial Statements and related Notes included
in this Report to Shareholders and with our 2006 Annual Report. This MD&A is
dated February 21, 2007. Unless otherwise indicated, all amounts are expressed
in Canadian dollars and have been primarily derived from the Bank's Annual or
Interim Consolidated Financial Statements prepared in accordance with Canadian
generally accepted accounting principles (GAAP). Certain comparative amounts
have been reclassified to conform to the presentation adopted in the current
period. Additional information relating to the Bank is on the Bank's website
www.td.com, as well as on SEDAR at www.sedar.com.
FINANCIAL HIGHLIGHTS
(unaudited)
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For the three months ended
-------------------------------
(millions of Canadian dollars, Jan. 31 Oct. 31 Jan. 31
except as noted) 2007 2006 2006
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Results of operations
Total revenues $3,473 $3,294 $3,404
Dilution gain, net - - 1,564
Provision for credit losses 163 170 114
Non-interest expenses 2,189 2,187 2,290
Net income - reported 921 762 2,307
Net income - adjusted(1) 1,009 875 835
Economic profit(2) 442 326 353
Return on common equity 18.2% 15.7% 55.4%
Return on invested capital(2) 16.8 15.2 16.5
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Financial position
Total assets $408,216 $392,914 $384,377
Total risk-weighted assets 149,090 141,879 135,883
Total shareholders' equity 21,017 19,632 18,473
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Financial ratios - reported (percent)
Efficiency ratio 63.0% 66.4% 46.1%
Tier 1 capital to risk-weighted assets 11.9 12.0 11.9
Tangible common equity as a % of
risk-weighted assets 9.0 9.1 8.8
Provision for credit losses as a % of
net average loans 0.38 0.40 0.29
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Common share information - reported
(Canadian dollars)
Per share
Basic earnings $1.27 $1.05 $3.23
Diluted earnings 1.26 1.04 3.20
Dividends 0.48 0.48 0.42
Book value 28.64 26.77 25.25
Closing share price 69.88 65.10 60.65
Shares outstanding (millions)
Average basic 718.3 719.7 712.5
Average diluted 724.9 726.0 718.9
End of period 719.0 717.4 714.7
Market capitalization (billions of
Canadian dollars) $50.2 $46.7 $43.3
Dividend yield 2.7% 2.8% 2.8%
Dividend payout ratio 37.7 45.8 13.0
Price to earnings multiple 15.9 10.3 11.1
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Common share information - adjusted
(Canadian dollars)
Per share
Basic earnings $1.40 $1.21 $1.16
Diluted earnings 1.38 1.20 1.15
Dividend payout ratio 34.4% 39.9% 36.1%
Price to earnings multiple 14.3 14.0 14.3
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(1) Reported and adjusted results are explained on page 5 under the "How
the Bank Reports" section, which includes a reconciliation between
reported and adjusted results.
(2) Economic profit and return on invested capital are non-GAAP financial
measures and are explained in detail on page 7 under the "Economic
Profit and Return on Invested Capital" section.
HOW WE PERFORMED
Corporate Overview
The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Financial Group. The Bank serves more than 14 million customers in
four key businesses operating in a number of locations in key financial
centres around the globe: Canadian Personal and Commercial Banking, including
TD Canada Trust; Wealth Management, including TD Waterhouse Canada, TD
Waterhouse U.K. and the Bank's investment in TD Ameritrade; U.S. Personal and
Commercial Banking through TD Banknorth; and Wholesale Banking, including TD
Securities. The Bank also ranks among the world's leading on-line financial
services firms, with more than 4.5 million on-line customers. The Bank had
$408 billion in assets as at January 31, 2007. The Bank is headquartered in
Toronto, Canada. The Bank's common stock is listed on the Toronto Stock
Exchange and the New York Stock Exchange under symbol: TD, as well as on the
Tokyo Stock Exchange.
How the Bank Reports
The Bank's financial results, as presented on pages 19 to 33 of this
Report to Shareholders, have been prepared in accordance with GAAP. The Bank
refers to results prepared in accordance with GAAP as "reported" results. The
Bank also utilizes non-GAAP financial measures referred to as "adjusted"
results to assess each of its businesses and to measure overall Bank
performance. To arrive at adjusted results, the Bank removes "items of note",
net of income taxes, from reported results. The items of note are listed in
the table on the following page. The items of note relate to items which
management does not believe are indicative of underlying business performance.
The items of note include the Bank's amortization of intangible assets which
primarily relate to the Canada Trust acquisition in 2000, TD Banknorth Inc.
(TD Banknorth) acquisition in 2005, and the acquisition by TD Banknorth of
Hudson United Bancorp (Hudson) in 2006. The Bank believes that adjusted
results provide the reader with a better understanding of how management views
the Bank's performance. As explained, adjusted results are different from
reported results determined in accordance with GAAP. Adjusted results and
related terms used in this report are not defined terms under GAAP, and,
therefore, may not be comparable to similar terms used by other issuers.
The tables below provide reconciliation between the Bank's reported and
adjusted results.
Operating Results - Reported (unaudited)
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For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
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Net interest income $1,671 $1,714 $1,607
Other income 1,802 1,580 1,797
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Total revenues 3,473 3,294 3,404
Provision for credit losses (163) (170) (114)
Non-interest expenses (2,189) (2,187) (2,290)
Dilution gain, net - - 1,564
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Income before provision for income taxes,
non-controlling interests in subsidiaries
and equity in net income of an associated
company 1,121 937 2,564
Provision for income taxes (218) (175) (220)
Non-controlling interests in subsidiaries,
net of income taxes (47) (48) (37)
Equity in net income of an associated
company, net of income taxes 65 48 -
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Net income - reported 921 762 2,307
Preferred dividends (6) (5) (5)
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Net income available to common
shareholders - reported $915 $757 $2,302
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Reconciliation of Non-GAAP Financial Measures(1) (unaudited)
Adjusted Net Income to Reported Results
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Operating results - adjusted For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Net interest income $1,671 $1,714 $1,607
Other income(2) 1,810 1,592 1,834
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Total revenues 3,481 3,306 3,441
Provision for credit losses(3) (163) (142) (114)
Non-interest expenses(4) (2,071) (2,061) (2,112)
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Income before provision for income taxes,
non-controlling interests in subsidiaries
and equity in net income of an associated
company 1,247 1,103 1,215
Provision for income taxes(5) (264) (236) (328)
Non-controlling interests in subsidiaries,
net of income taxes(6) (51) (52) (52)
Equity in net income of an associated
company, net of income taxes(7) 77 60 -
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Net income - adjusted 1,009 875 835
Preferred dividends (6) (5) (5)
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Net income available to common
shareholders - adjusted 1,003 870 830
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Items of note affecting net income,
net of income taxes
Amortization of intangibles (83) (87) (82)
Dilution gain on Ameritrade transaction,
net of costs - - 1,670
Dilution loss on the acquisition of
Hudson by TD Banknorth - - (72)
Balance sheet restructuring charge
in TD Banknorth - - (19)
Wholesale Banking restructuring charge - - (35)
Change in fair value of credit default
swaps hedging the corporate loan book(8) (5) (8) 10
Initial set up of specific allowance for
credit card and overdraft loans - (18) -
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Total items of note (88) (113) 1,472
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Net income available to common
shareholders - reported $915 $757 $2,302
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(1) Certain comparative amounts have been reclassified to conform to the
presentation adopted in the current period.
(2) Adjusted other income excludes the following items of note: first
quarter 2007 - $8 million loss due to change in fair value of credit
default swaps (CDS) hedging the corporate loan book; fourth quarter
2006 - $12 million loss due to change in fair value of CDS hedging
the corporate loan book; first quarter 2006 - $15 million gain due to
the change in fair value of CDS hedging the corporate loan book; and
$52 million balance sheet restructuring charge at TD Banknorth.
(3) Adjusted provision for credit losses excludes the following item of
note: fourth quarter 2006 - $28 million initial set up of specific
allowance for credit card and overdraft loans.
(4) Adjusted non-interest expenses excludes the following items of note:
first quarter 2007 - $118 million amortization of intangibles; fourth
quarter 2006 - $126 million amortization of intangibles; first
quarter 2006 - $128 million amortization of intangibles and
$50 million restructuring charge in connection with the decision to
reposition the Bank's global structured products businesses.
(5) For reconciliation between reported and adjusted provision for income
taxes, please refer to the reconciliation table on page 11.
(6) Adjusted non-controlling interests excludes the following items of
note: first quarter 2007 - $4 million amortization of intangibles;
fourth quarter 2006 - $4 million amortization of intangibles; first
quarter 2006 - $15 million balance sheet restructuring charge at TD
Banknorth.
(7) Adjusted equity in net income of an associated company excludes the
following items of note: first quarter 2007 - $12 million
amortization of intangibles; fourth quarter 2006 - $12 million
amortization of intangibles.
(8) The Bank purchases CDS to hedge the credit risk in Wholesale
Banking's corporate lending portfolio. These CDS do not qualify for
hedge accounting treatment and they are measured at fair value with
changes in fair value recognized in current period's earnings. The
related loans are accounted for at amortized cost. Management
believes that this asymmetry in the accounting treatment between CDS
and loans would result in periodic profit and loss volatility which
is not indicative of the economics of the corporate loan portfolio or
the underlying business performance in Wholesale Banking. As a
result, the CDS are accounted for on an accrual basis in the
Wholesale Banking segment and the gains and losses on the CDS, in
excess of the accrued cost, are reported in the Corporate segment.
Adjusted earnings excludes the gains and losses on the CDS in excess
of the accrued cost. Previously, this item was described as "Hedging
impact due to AcG-13". As part of the adoption of the new financial
instruments standards, the guidance under Accounting Guideline 13:
Hedging Relationships (AcG-13) was replaced by Canadian Institute of
Chartered Accountants (CICA) Handbook Section 3865, Hedges.
Reconciliation of Reported Earnings per Share (EPS) to Adjusted EPS
(unaudited)
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For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Diluted - reported $1.26 $1.04 $3.20
Items of note affecting income (as above) 0.12 0.16 (2.05)
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Diluted - adjusted $1.38 $1.20 $1.15
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Basic - reported $1.27 $1.05 $3.23
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Amortization of Intangibles, net of income taxes (unaudited)
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For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
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TD Canada Trust $49 $52 $64
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TD Banknorth
Reported amortization of
intangibles 20 20 14
Less: non-controlling interest 4 4 1
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Net amortization of intangibles 16 16 13
TD Ameritrade (included in equity in net
income of an associated company) 12 12 -
Other 6 7 5
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Amortization of intangibles, net of
income taxes(1) $83 $87 $82
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(1) Amortization of intangibles is included in the Corporate segment.
Economic Profit and Return on Invested Capital
The Bank utilizes economic profit as a tool to measure shareholder value
creation. Economic profit is adjusted net income available to common
shareholders less a charge for average invested capital. Average invested
capital is equal to average common equity for the period plus the average
cumulative after-tax goodwill and intangible assets amortized as of the
reporting date. The rate used in the charge for capital is the equity cost of
capital calculated using the capital asset pricing model. The charge
represents an assumed minimum return required by common shareholders on the
Bank's invested capital. The Bank's goal is to achieve positive and growing
economic profit.
Return on invested capital (ROIC) is adjusted net income available to
common shareholders divided by average invested capital. ROIC is a variation
of the economic profit measure that is useful in comparison to the equity cost
of capital. Both ROIC and the cost of capital are percentage rates, while
economic profit is a dollar measure. When ROIC exceeds the equity cost of
capital, economic profit is positive. The Bank's goal is to maximize economic
profit by achieving ROIC that exceeds the equity cost of capital.
Economic profit and ROIC are non-GAAP financial measures as these are not
defined terms under GAAP. Securities regulators require that companies caution
readers that earnings and other measures adjusted to a basis other than GAAP
do not have standardized meanings under GAAP and therefore, may not be
comparable to similar terms used by other issuers.
The following table reconciles between the Bank's economic profit, return
on invested capital and adjusted net income. Adjusted results and related
terms are discussed in the "How the Bank Reports" section.
Reconciliation of Economic Profit, Return on Invested Capital and
Adjusted Net Income (unaudited)
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For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Average common equity $19,969 $19,069 $16,476
Average cumulative goodwill/intangible
assets amortized, net of income taxes 3,715 3,641 3,432
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Average invested capital $23,684 $22,710 $19,908
Rate charged for invested capital 9.4% 9.5% 9.5%
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Charge for invested capital $(561) $(544) $(477)
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Net income available to common
shareholders - reported 915 757 2,302
Items of note impacting income,
net of income taxes 88 113 (1,472)
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Net income available to common
shareholders - adjusted 1,003 870 830
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Economic profit $442 $326 $353
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Return on invested capital 16.8% 15.2% 16.5%
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Significant Events in 2007
TD Banknorth
Acquisition of Interchange Financial Services Corporation
---------------------------------------------------------
TD Banknorth completed its acquisition of Interchange Financial Services
Corporation (Interchange) on January 1, 2007 for a total cash consideration of
$545 million (US$468.1 million), financed primarily through TD Banknorth's
sale of 13 million of its common shares to the Bank for $472 million
(US$405 million). As a result, $1.9 billion of assets and $1.4 billion of
liabilities were included in the Bank's Consolidated Balance Sheet. TD
Banknorth consolidates the financial results of Interchange. As the Bank
consolidates TD Banknorth on a one month lag, Interchange's income/(loss) for
the calendar month of January has not been included in the Bank's results for
the quarter but will be included in the next quarter.
Going-private transaction
-------------------------
On November 20, 2006, the Bank announced its intention to acquire all of
the outstanding common shares of TD Banknorth that it does not already own.
The acquisition will be accounted for by the purchase method. The offer
provides minority shareholders of TD Banknorth cash of US$32.33 per TD
Banknorth share. Total consideration will be approximately $3.6 billion. The
offer is subject to approval by regulators and TD Banknorth shareholders and,
if approved, is expected to close before the end of April 2007. Upon
completion of the transaction, TD Banknorth will become a wholly-owned
subsidiary of the Bank.
Increase in ownership in TD Banknorth
-------------------------------------
During the quarter, the Bank acquired approximately 0.9 million shares of
TD Banknorth pursuant to TD Banknorth's dividend reinvestment program. In
addition, on January 1, 2007, the Bank acquired 13 million shares of TD
Banknorth in connection with the acquisition of Interchange by TD Banknorth.
As a result, the Bank's ownership interest in TD Banknorth increased to 59.4%
as at January 31, 2007 from 57.0% as at October 31, 2006.
TD Ameritrade
TD Ameritrade announced two common stock repurchase programs in 2006 for
an aggregate 32 million shares. As a result of TD Ameritrade's repurchase
activity, the Bank's direct ownership position in TD Ameritrade has increased
to 40.2% as at January 31, 2007 from 39.8% as at October 31, 2006. In
accordance with the Stockholders' Agreement, the Bank does not intend to
reduce its direct ownership position in the near term and will not exercise
voting rights in respect of any shares it holds in excess of the 39.9%
ownership limit.
Moreover, as a result of consolidation of financial statements of
Lillooet Limited (Lillooet) in these Interim Consolidated Financial
Statements, TD Ameritrade shares held by Lillooet have been included in the
Bank's reported investment in TD Ameritrade. The Bank has recognized income of
TD Ameritrade related to the TD Ameritrade shares owned by Lillooet for the
three months ended December 31, 2006.
For more details, see Note 15 to the Interim Consolidated Financial
Statements for the quarter ended January 31, 2007.
FINANCIAL RESULTS OVERVIEW
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Performance Summary
An overview of the Bank's performance on an adjusted basis for the first
quarter of 2007 against the financial shareholder indicators included in the
2006 Annual Report is outlined below. Shareholder performance indicators help
guide and benchmark the Bank's accomplishments. For the purpose of this
analysis, the Bank utilizes adjusted earnings, which exclude items of note
from the reported results that are prepared in accordance with Canadian GAAP.
Adjusted earnings and reported results are explained in detail on page 5 under
the "How the Bank Reports" section.
Adjusted diluted earnings per share were up 20%, driven by strong
earnings growth in Canadian Personal and Commercial Banking as well as Wealth
Management. The Bank's goal is 7 - 10% adjusted earnings per share growth over
the longer term.
Adjusted return on risk- weighted assets was 2.7%, up from 2.5% in the
first quarter last year.
For the twelve months ended January 31, 2007, the total shareholder
return was 19%, in line with the peer average.
Net Income
Year-over-year comparison
-------------------------
Reported net income for the quarter was $921 million, down $1,386 million
from the first quarter last year. The decrease was mainly due to the
$1,670 million dilution gain on the sale of TD Waterhouse U.S.A. to
Ameritrade. This was partially offset by a dilution loss of $72 million on the
acquisition of Hudson by TD Banknorth and restructuring charges in Wholesale
Banking of $35 million in the prior year. Adjusted net income for the quarter
was $1,009 million, up $174 million, or 21%, from the prior year. The increase
was largely attributable to strong earnings growth in the Canadian Personal
and Commercial Banking and Wealth Management businesses.
Prior quarter comparison
------------------------
Reported net income for the quarter increased $159 million, or 21%, from
the prior quarter. Adjusted net income for the quarter increased by
$134 million, or 15%. The increase in reported and adjusted net income was
driven by higher net income contributions from all segments.
Net Interest Income
Year-over-year comparison
-------------------------
Net interest income was $1,671 million for the quarter, an increase of
$64 million, or 4%, compared with the same quarter last year.
Canadian Personal and Commercial Banking net interest income increased
$130 million, or 11%, driven by strong volume growth across most products and
higher margins. Net interest income from the Wealth Management segment was
down $101 million, or 57%. The decline was due to the sale of TD Waterhouse
U.S.A. to Ameritrade which was partially offset by an increase in domestic
Wealth Management net interest income attributable to higher margin loan
balances and client deposits, and improved spreads. Net interest income from
U.S. Personal and Commercial Banking increased $57 million, or 20%, due to the
Hudson acquisition, partially offset by lower revenues from the rest of TD
Banknorth. Wholesale Banking net interest income was down modestly from the
prior year, excluding taxable equivalent basis (TEB). Corporate segment net
interest income also declined as outstanding securitization volumes increased.
Prior quarter comparison
------------------------
Net interest income declined $43 million, or 3%, from the prior quarter.
Canadian Personal and Commercial Banking net interest income increased
$12 million as growth in interest earning assets was partially offset due to a
4 basis point (bps) decline in margins. Wealth Management net interest income
increased $8 million on solid growth in margin loans and client deposits, and
improved spreads. U.S. Personal and Commercial Banking net interest income
rose by $4 million as asset growth was partially offset due to a 6 bps
reduction in net interest margins. Wholesale Banking net interest income
(excluding TEB) was down marginally from the prior quarter. The increases in
the operating segments were more than offset by a decline in net interest
income in the Corporate segment, primarily due to higher outstanding
securitization balances.
Other Income
Year-over-year comparison
-------------------------
Reported other income of $1,802 million was up $5 million from last year.
On an adjusted basis, other income decreased $24 million, or 1%, from the
prior year.
Canadian Personal and Commercial Banking recorded an increase of
$76 million in other income supported by higher sales and service fee revenue
and insurance revenue. The increase in sales and service fees was due to
higher transaction volumes in Visa and core banking, while insurance revenues
rose due to higher insurance volumes. Wealth Management other income decreased
by $90 million. The reduction in year-over-year revenues due to the sale of
Waterhouse U.S.A. to Ameritrade was partially offset by higher revenue from
the domestic Wealth Management business. The domestic Wealth Management
businesses, driven by higher transaction volumes as well as assets under
management and administration, posted higher fees and commissions, full
service brokerage revenue and mutual fund management fees. U.S. Personal and
Commercial Banking also reported higher credit and service charges revenue,
mainly due to the addition of Hudson. Wholesale Banking other income declined
by $91 million, driven primarily by lower trading revenue in interest rate and
credit products. Other securitization revenue, reported in the Corporate
segment, was up from last year due to higher outstanding volumes and higher
gains from securitization in the current quarter.
Prior quarter comparison
------------------------
Reported other income increased $222 million, or 14%, from the prior
quarter. The adjusted other income rose $218 million.
Canadian Personal and Commercial Banking posted an increase in other
income on higher insurance revenues attributable to higher volumes. Wealth
Management also generated strong other revenue in discount brokerage, full
service brokerage and mutual fund management. Discount brokerage experienced
strong trade volume growth while the full service brokerage and mutual fund
management businesses had strong growth in assets under management. Wholesale
Banking other income rose by $77 million over the prior quarter as higher
trading revenues were partially offset by lower securities gains. Other
securitization revenue, reported in the Corporate segment, was up compared to
last quarter, largely due to higher outstanding balances.
Provision for Credit Losses
Year-over-year comparison
-------------------------
During the quarter, the Bank recorded a provision for credit losses of
$163 million, an increase of $49 million from the same quarter last year,
primarily due to higher specific provisions in Canadian Personal and
Commercial Banking and inclusion of an $11 million general allowance related
to VFC Inc. (VFC).
Prior quarter comparison
------------------------
Provision for credit losses for the quarter was down $7 million from
$170 million in the prior quarter. The decrease was primarily because the
prior quarter included $28 million being initial set up of specific allowance
for credit card and overdraft loans. This was partially offset by higher
provision for credit losses in the current quarter in Wholesale Banking and
Canadian Personal and Commercial Banking.
Provision for Credit Losses (unaudited)
-------------------------------------------------------------------------
For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Net new specifics (net of reversals) $184 $189 $151
Recoveries (31) (33) (31)
-------------------------------------------------------------------------
Provision for credit losses - specifics 153 156 120
Change in general allowance
VFC 11 9 -
TD Banknorth (1) 5 (6)
-------------------------------------------------------------------------
Total $163 $170 $114
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Non-Interest Expenses and Efficiency Ratio
Year-over-year comparison
-------------------------
Reported expenses for the quarter were $2,189 million, a decrease of
$101 million, or 4%, from the same quarter last year. Adjusted expenses of
$2,071 million, were down $41 million, or 2%, from the first quarter last
year. The reduction was driven largely by the sale of TD Waterhouse U.S.A. to
Ameritrade. This was partially offset by an increase in expenses in the
current quarter for Canadian and U.S. Personal and Commercial Banking as well
as Wealth Management. The Canadian Personal and Commercial Banking expense
increase was related to higher personnel and benefit costs as well as higher
marketing and business initiative expenditure. Wealth Management expenses
increased due to increase in payments made to sellers of the Bank's mutual
funds and increase in compensation to advice-based sales force. U.S. Personal
and Commercial Banking expenses rose mainly as a result of the Hudson
acquisition.
Reported efficiency ratio increased to 63.0% from 46.1% in the same
quarter last year. The Bank's adjusted efficiency ratio improved to 59.5% from
61.4% a year ago.
Prior quarter comparison
------------------------
Reported non-interest expenses of $2,189 were up $2 million from the
fourth quarter last year. Total adjusted expenses were $10 million higher than
the prior quarter. Wholesale Banking expenses were up $39 million from the
prior quarter due to higher variable compensation. This increase was partially
offset by lower expenses in Canadian Personal and Commercial Banking and the
Corporate segment.
Reported efficiency ratio was 63.0%, compared with 66.4% in the prior
quarter. The Bank's adjusted efficiency ratio improved to 59.5%, from 62.3% in
the prior quarter.
Taxes
As discussed in the "How the Bank Reports" section, the Bank adjusts its
reported results to assess each of its businesses and to measure overall Bank
performance. As such, the provision for income taxes is stated on a reported
and an adjusted basis.
The Bank's effective tax rate was 19.4% for the quarter, compared with
8.6% in the same quarter last year. The change was largely due to the
favourable tax impact from the TD Ameritrade dilution gain in the first
quarter of 2006.
Taxes(1) (unaudited)
-------------------------------------------------------------------------
For the three months ended
------------------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Income taxes at Canadian
statutory income tax rate $392 34.9% $329 35.0% $897 35.0%
Increase (decrease)
resulting from:
Dividends received (103) (9.2) (62) (6.6) (62) (2.4)
Rate differentials on
international operations (82) (7.4) (77) (8.3) (53) (2.1)
Items related to dilution
gains and losses - - - - (584) (22.8)
Future tax rate reduction -
future tax assets - - 10 1.1 - -
Other - net 11 1.1 (25) (2.5) 22 0.9
-------------------------------------------------------------------------
Provision for income taxes
and effective income
tax rate - reported $218 19.4% $175 18.7% $220 8.6%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Certain comparative amounts have been reclassified to conform to the
presentation adopted in the current period.
Reconciliation of Non-GAAP Provision for Income Taxes (unaudited)
-------------------------------------------------------------------------
For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
2007 2006 2006
-------------------------------------------------------------------------
Provision for income taxes - reported $218 $175 $220
Increase (decrease) resulting from
items of note:
Amortization of intangibles 43 47 46
Dilution gain on Ameritrade, net of costs - - 34
Balance sheet restructuring charge in
TD Banknorth - - 18
Wholesale Banking restructuring charge - - 15
Change in fair value of credit default swaps
hedging the corporate loan book 3 4 (5)
Initial set up of specific allowance for
credit card and overdraft loans - 10 -
-------------------------------------------------------------------------
Tax effect - items of note 46 61 108
-------------------------------------------------------------------------
Provision for income taxes - adjusted $264 $236 $328
-------------------------------------------------------------------------
-------------------------------------------------------------------------
HOW OUR BUSINESSES PERFORMED
For management reporting purposes, the Bank's operations and activities
are organized around the following operating business segments: Canadian
Personal and Commercial Banking, Wealth Management, including TD Ameritrade,
U.S. Personal and Commercial Banking, and Wholesale Banking. Canadian Personal
and Commercial Banking comprises the Bank's personal and business banking in
Canada, as well as the Bank's global insurance operations (excluding the
U.S.). The Bank's other activities are grouped into the Corporate segment.
Results of each business segment reflect revenues, expenses, assets and
liabilities generated by the business in that segment. The Bank measures and
evaluates the performance of each segment based on adjusted results where
applicable, and for those segments the Bank notes that the measure is
adjusted. Amortization of intangible expense is included in the Corporate
segment. Accordingly, net income for the operating business segments is
presented before amortization of intangibles, as well as any other items of
note not attributed to the operating segments. For further details, see the
"How the Bank Reports" section on page 5, the "Business Focus" section in the
2006 Annual Report and Note 24 to the 2006 audited Consolidated Financial
Statements. For information concerning the Bank's measures of economic profit
and return on invested capital, see page 7. Segmented information also appears
in Note 12 on page 31.
Net interest income, primarily within Wholesale Banking, is calculated on
a taxable equivalent basis (TEB), which means that the value of non-taxable or
tax-exempt income, including dividends, is adjusted to its equivalent before-
tax value. Using TEB allows the Bank to measure income from all securities and
loans consistently and makes for a more meaningful comparison of net interest
income with similar institutions. The TEB adjustment reflected primarily in
the Wholesale Banking segment is eliminated in the Corporate segment.
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking net income for the first quarter
was $544 million, an increase of $68 million, or 14%, from the first quarter
last year and an increase of $43 million, or 9%, from the previous quarter.
The annualized return on invested capital increased to 26%, compared with 25%,
in the first quarter last year and 25%, in the previous quarter. Economic
profit grew by $55 million, or 18%, compared with the first quarter last year
and increased by $41 million, or 13%, compared with the previous quarter.
Revenue grew by $206 million, or 11%, compared with the first quarter
last year and increased by $62 million, or 3%, from the previous quarter.
Volume growth across most banking products generated a significant portion of
the year-over-year and quarter-over-quarter growth. Net interest income also
increased year-over-year from margin improvements, predominantly in personal
deposits, benefiting from higher interest rates, and from real estate secured
lending. Margin on average earning assets increased by 2 bps from 3.01% to
3.03% when compared with the first quarter last year, and decreased 4 bps
compared with the previous quarter. Growth in personal and business deposits,
and sales and service fee income also contributed significantly to both year-
over-year and quarter-over-quarter revenue growth.
Compared with the first quarter last year, real estate secured lending
volume (including securitizations) grew by $12.7 billion or 11%, personal
deposit volume grew by $6.1 billion, or 7%, and consumer loans grew by
$2.0 billion, or 11%, and the acquisition of VFC accounted for $0.6 billion,
or 3%, of growth. Business deposits grew by $3.3 billion, or 10%, and business
loans and acceptances increased by $1.4 billion or 8%. Gross originated
insurance premiums grew by $40 million, or 8%. As at November 30, 2006,
personal deposit market share was 21.4%, up 0.1%, compared with last year and
down 0.1%, from the previous quarter. Personal lending market share was 20.2%,
up 0.1%, from both last year and the previous quarter. Small business lending
(credit limits of less than $250,000) market share as at September 30, 2006
was 17.7%, up 0.8%, from last year and up 0.1%, from the previous quarter.
Provision for credit losses for the quarter increased by $39 million, or
39%, compared with the first quarter last year. Personal provision for credit
losses of $128 million was $34 million higher than the first quarter last
year, due to the inclusion of VFC, and higher personal lending and credit card
volumes. Business banking provision for credit losses increased $5 million
from the first quarter last year on lower net reversals and recoveries this
quarter. Annualized provision for credit losses as a percentage of credit
volume was 0.32%, an increase of 0.07%, from the first quarter last year
relating primarily to the acquisition of VFC. Provision for credit losses
increased by $6 million, or 5%, from the previous quarter. Personal provisions
increased $14 million, or 12%, compared with the previous quarter, primarily
due to higher volumes while business banking provisions decreased by
$8 million mainly from lower commercial banking credit losses.
Expenses increased by $74 million, or 8%, compared with the first quarter
last year. Higher employee compensation and business volume related expenses
along with continued investment in infrastructure and marketing were the main
factors contributing to the expense increase year over year. A 4% positive
spread between revenue and expense growth resulted in a 1.9% improvement in
the efficiency ratio from the first quarter last year to 52.7%. The full time
equivalent (FTE) staffing levels increased by 903, or 3%, as compared with the
first quarter last year, predominantly due to additions from VFC, the internal
transfer of technology personnel, sales and service personnel in branches and
call centers, as well as growth in the insurance business. Expenses decreased
by $9 million, or 1%, from the previous quarter, mainly due to lower
initiative spending.
The outlook for net interest income and fee growth continues to remain
strong for both personal and business banking products. Growth in revenue is
expected to moderate, in the second half of the year. Provisions for credit
losses on both personal and business banking loans, in aggregate, are expected
to remain relatively stable. Expense growth is expected to continue to
moderate, particularly in the second half of the year, to maintain a healthy
gap between the growth in revenue and growth in expenses.
Wealth Management
Wealth Management's net income for the first quarter of 2007 was
$186 million, a strong quarter, and a significant increase of $48 million, or
35%, from the first quarter last year, and $38 million, or 26%, from the
previous quarter. The increase in net income for the quarter included the
results of the Bank's investment in TD Ameritrade, which generated $64 million
of net income. This represented an $11 million, or 21%, increase from last
quarter due to record earnings at TD Ameritrade, an increase in the Bank's
average direct ownership and reported investment in TD Ameritrade and a weaker
Canadian dollar relative to the U.S. dollar. The contribution was almost
double TD Waterhouse U.S.A.'s contribution of $33 million in the first quarter
last year. The return on invested capital for the quarter was 20%, a decrease
of 90 bps from the first quarter last year and 430 bps higher from the
previous quarter. Economic profit for the quarter was $89 million, an increase
of $25 million, or 39%, from the first quarter last year, and an increase of
$45 million, or 102%, compared with the previous quarter.
Total revenue for the quarter was $551 million, a decrease of
$191 million, or 26%, from the first quarter last year. The decline in total
revenue was because the first quarter last year included revenues of
$251 million relating to TD Waterhouse U.S.A. Revenues in Canadian Wealth
increased by 12%, due to a combination of higher transaction volumes in
discount and full service brokerage, higher net interest income, higher fee-
based income, and strong mutual fund management fees. Favorable capital
markets and solid growth in client assets also contributed to the increase.
Commissions in the discount brokerage business were negatively impacted by a
decline in commission per trade as a result of price reductions in the active
trader segment. However, this has been more than offset by increased trade
volumes. Total revenue grew from the previous quarter as a result of higher
net interest income due to increases in margin loan balances and customer
deposits and improvement in spreads. Solid growth in brokerage transaction
volumes and mutual fund management fees also contributed to the revenue
increase.
Expenses were $364 million in the quarter, a decrease of $161 million, or
31%, compared with the first quarter last year. The decline in total expenses
was because the first quarter last year included expenses of $193 million
relating to TD Waterhouse U.S.A. Expenses in Canadian Wealth increased by 10%,
due to higher volume-related payments to sellers of the Bank's mutual funds,
higher sales force compensation in our advice-based businesses driven by
increased revenues, and continued investment in client facing advisors,
related support staff and technology development. Expenses increased by
$7 million, or 2%, compared with the previous quarter, primarily due to higher
payments to sellers of the Bank's mutual funds and higher sales force
compensation.
Assets under management of $157 billion at January 31, 2007 increased
$6 billion, or 4%, from October 31, 2006 due to market appreciation and the
addition of net new client assets. Assets under administration totalled
$169 billion at the end of the quarter, increasing $8 billion, or 5%, from
October 31, 2006, due to market appreciation and the addition of net new
client assets.
The outlook for Wealth Management's earnings remains favourable for the
next quarter as solid client asset growth in the discount brokerage, advice-
based, and mutual fund businesses is expected to continue. Investment in the
growth of client facing advisors should also contribute to earnings growth.
Wealth Management (unaudited)
-------------------------------------------------------------------------
For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Canadian Wealth $122 $95 $105
TD Ameritrade/TD Waterhouse U.S.A. 64 53 33
-------------------------------------------------------------------------
Net income $186 $148 $138
-------------------------------------------------------------------------
-------------------------------------------------------------------------
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking reported net income for the first
quarter was $64 million, compared with $46 million in the first quarter last
year, and $63 million in the previous quarter. On an adjusted basis, net
income declined by $1 million, or 2%, from the first quarter last year.
Adjusted net income in the first quarter last year excluded the impact of a
$19 million after-tax charge, which related to restructuring of the balance
sheet. This was the Bank's share of TD Banknorth's $52 million pre-tax charge.
There were no items of note affecting earnings in the current quarter and the
previous quarter.
The annualized return on invested capital was 4.3%, compared with 5.4%,
in first quarter last year, and 4.2% in the previous quarter. The economic
loss was $70 million, compared with $43 million in the first quarter last year
and $70 million the previous quarter.
Total revenues were $486 million, compared with $357 million in the first
quarter last year. Total revenues increased from the first quarter last year
primarily due to the acquisition of Hudson, partially offset by lower revenues
in the rest of TD Banknorth resulting from margin compression and the stronger
Canadian dollar relative to the U.S. dollar. Total revenues were $478 million
in the previous quarter. The increase in total revenues from the previous
quarter was largely due to a weaker Canadian dollar, as revenues in the local
currency declined by 0.8%. The margin on average earning assets was 3.95%,
compared with 3.96%, in the first quarter last year and 4.01%, in the previous
quarter. Margins remain under pressure from stiff competition for loans and
deposits, a flat yield curve and higher cost term deposits comprising a larger
share of total deposits.
Provision for credit losses was $17 million, up from $7 million in the
first quarter last year and $15 million in the previous quarter. Although
asset quality remains solid, write-offs increased to $16 million, compared
with $13 million in both the first quarter last year and the previous quarter.
Net impaired loans increased by $62 million, or 141%, compared with the first
quarter last year, and $36 million, or 51%, from the previous quarter. Net
impaired loans as a percentage of total loans and leases was 0.36%, compared
with 0.19% as at the end of the first quarter last year, and 0.25% as at the
end of the previous quarter. Expenses were $299 million, up $74 million, or
33%, from the first quarter last year, primarily due to the Hudson
acquisition.
Expenses increased by $5 million, or 2%, from the previous quarter.
Excluding changes in currency rates and losses on discontinued operations,
expenses decreased $7 million, mainly due to lower advertising costs,
decreased salaries and benefits expense, and lower merger-related charges. The
average FTE staffing level was 8,672, compared with 7,313 in the first quarter
last year and 8,907 in the previous quarter. The increase in FTE from the
first quarter last year was largely due to the Hudson acquisition. The
efficiency ratio was 61.5%, compared with 63.0%, in the first quarter last
year and 61.5%, in the previous quarter.
Net interest income is expected to continue to be under pressure from
intense competition and deposit disintermediation. Management continues to
focus on stabilizing net interest income, integration and development of the
former Hudson franchise, organic growth of loans and deposits, and closely
managing and reducing non-interest expenses in light of recent revenue
declines. The expense reduction initiatives are expected to result in a 5 - 8%
decrease in ongoing operating expenses. A related restructuring charge will
likely be recognized later this year.
On January 1, 2007, TD Banknorth closed on the acquisition of Interchange
for approximately U.S. $468 million in cash. Interchange has 30 bank branches
in New Jersey.
Wholesale Banking
Wholesale Banking reported net income of $197 million, $33 million higher
than the first quarter last year and $51 million higher than the previous
quarter. On an adjusted basis, net income was $2 million lower than the first
quarter last year and $51 million higher than the previous quarter. The
annualized return on invested capital for the quarter was 30%, compared with
34%, in the first quarter last year and 24%, in the previous quarter. Economic
profit was $122 million in the quarter, compared with $132 million in the
first quarter last year and $74 million in the previous quarter.
Adjusted net income in the first quarter last year excluded the impact of
a $35 million after-tax restructuring charge ($50 million before-tax). This
adjustment related to the repositioning of the global structured products
businesses, which was announced in 2005. Repositioning of the global
structured products businesses was complete as at October 31, 2006. There are
no items of note affecting earnings in the current quarter.
Wholesale Banking revenues are derived primarily from capital markets,
investing and corporate lending activities. Revenue for the quarter was
$635 million, compared with $661 million in the first quarter last year and
$493 million in the previous quarter. The capital markets businesses generate
revenue from advisory, underwriting, trading, facilitation and execution
services. Capital markets revenue decreased from the first quarter last year
on weaker trading-related income in interest rate and credit portfolios but
increased from the previous quarter due to higher trading-related revenues in
most of the trading portfolios. The equity investment portfolio delivered
stronger security gains this quarter than the first quarter last year but
lower gains than the previous quarter. Corporate lending revenues were up from
the first quarter last year and up from the previous quarter due to increased
exposures related to mergers and acquisition activity.
Provision for credit losses comprises allowances for credit losses and
accrual costs for credit protection. Provision for credit losses was
$24 million in the quarter, compared with $29 million in the first quarter
last year and $13 million in the previous quarter. The current provision
included a specific allowance of $12 million related to a single credit
exposure in the corporate lending portfolio and the provision in the first
quarter last year included a specific allowance of $17 million related to a
single credit exposure in the merchant banking business. The $13 million
provision in the previous quarter was entirely related to the cost of credit
protection.
Wholesale Banking continues to proactively manage its credit risk and
currently holds $3 billion in notional credit default swap protection,
unchanged from the first quarter last year and up $0.2 billion from the
previous quarter.
Expenses were $332 million, a decrease of $63 million, or 16%, compared
with the first quarter last year. Expenses in the first quarter last year
included restructuring costs of $50 million in connection with the
repositioning of the global structured products businesses and included higher
variable compensation costs. Expenses were $39 million, or 13%, higher than
the previous quarter, largely due to higher variable compensation.
Overall, Wholesale Banking had a strong quarter, driven by strong trading
revenues, a solid domestic franchise, and a strong contribution from the
equity investment portfolio. Historically, the first quarter is Wholesale
Banking's strongest and it is not expected that this run rate level will
continue for the remainder of the year. Key priorities for 2007 include: focus
on being a top three dealer in Canada, seek opportunities to grow proprietary
trading in scalable and liquid markets, maintain a superior rate of return on
invested capital, and enhance the efficiency ratio through improved cost
control.
Corporate
Corporate segment reported a net loss of $70 million for the quarter,
compared with a net gain of $1,483 million in the first quarter last year and
a net loss of $96 million in the previous quarter. On an adjusted basis, the
first quarter results reflected a net gain of $18 million, compared with a net
loss of $43 million in the same quarter last year and a net gain of
$17 million in the previous quarter.
The adjusted net income year-over-year increase of $61 million resulted
from increases in securitization gains, an improvement in the non-core lending
portfolio, and included some favourable tax and other items. Adjusted net
income in the current quarter excluded amortization of intangibles of
$83 million after-tax and a $5 million after-tax loss, in excess of accrued
cost for the period, in credit default swaps (CDS) hedging the corporate loan
book. Adjusted net income in the same quarter last year excluded a
$1.67 billion after-tax dilution gain on the sale of TD Waterhouse U.S.A. to
Ameritrade, and a $72 million after-tax dilution loss related to the
acquisition of Hudson by TD Banknorth, as well as amortization of intangibles
of $82 million after-tax and a $10 million after-tax gain, in excess of
accrued cost for the period, on CDS hedging the corporate loan book.
Adjusted net income for the previous quarter excluded amortization of
intangibles of $87 million after-tax, an $18 million after-tax initial set up
of a specific allowance for credit card and overdraft loans and an $8 million
after-tax loss, in excess of accrued cost for the period, on CDS hedging the
corporate loan book.
BALANCE SHEET REVIEW
Total assets were $408.2 billion as at January 31, 2007, $15.3 billion
higher than at October 31, 2006. The main components of the increase were
$5.7 billion in securities, $5.6 billion in other assets, $2.3 billion in
loans, and $1.4 billion in securities purchased under resale agreements. The
increase in securities is primarily attributable to higher investment holdings
as well as recording available-for-sale securities at market value instead of
cost under the new financial instruments accounting standards. Total loans
increased as a result of the acquisition of Interchange by TD Banknorth,
growth in margin loans in Wealth Management, and higher loan balances in
Canadian Personal and Commercial Banking, partially offset by the impact of
securitization activities. The increase in other assets is driven primarily by
growth in broker receivables and the gross-up of non-trading derivatives as
required by the new financial instruments standards. It also includes the
investment in TD Ameritrade, which increased by $734 million due to higher
direct ownership and reported investment, as well as a weakening of the
Canadian dollar during the quarter.
Total deposits were $269.7 billion at the end of the quarter, an increase
of $8.8 billion from October 31, 2006. Personal deposits increased
$4.0 billion due to higher retail money market deposits from TD Ameritrade,
increased retail volumes from Canadian Personal and Commercial Banking and the
acquisition of Interchange by TD Banknorth. Other deposits increased
$4.8 billion, largely due to growth in term deposits in the U.S. wholesale
business. Obligations related to securities sold short under repurchase
agreements increased by $1.9 billion due to increased activity in Wholesale
Banking. Other liabilities rose $2.8 billion due to higher broker payables and
the gross up of non-trading derivatives as required by the new financial
instruments standards. Subordinated notes and debentures also increased
$2.3 billion, mainly as a result of new issuance in the quarter.
The Bank enters into structured transactions on behalf of clients which
results in assets recorded on the Bank's Consolidated Balance Sheet for which
market risk has been transferred to third parties via total return swaps. As
at January 31, 2007, assets under such arrangements amounted to $17.5 billion,
compared with $16.1 billion as at October 31, 2006. The Bank also acquires
market risk on certain assets via total return swaps, without acquiring the
cash instruments directly. Assets under such arrangements amounted to
$5.4 billion as at January 31, 2007, compared with $5.0 billion at October 31,
2006. Market risk for all such positions is tracked and monitored, and
regulatory market risk capital is maintained.
CREDIT PORTFOLIO QUALITY
Gross impaired loans were $462 million at January 31, 2007, $51 million
higher than at October 31, 2006, largely due to the addition of impaired loans
in U.S. Personal and Commercial Banking. Net impaired loans, after deducting
specific and general allowances, totalled $(904) million, compared with
$(993) million in the same quarter last year and $(906) million in the
previous quarter.
The total allowance for credit losses of $1,366 million at the end of the
quarter was composed of total specific allowances of $192 million and a
general allowance of $1,174 million. Specific allowances increased by
$20 million from October 31, 2006. The general allowance for credit losses at
the end of the quarter was up by $29 million, compared with October 31, 2006,
due to the consolidation of Interchange and the inclusion of an $11 million
general allowance related to VFC. The Bank establishes general allowances to
recognize losses that management estimates to have occurred in the portfolio
at the balance sheet date for loans or credits not yet specifically identified
as impaired.
Changes in Gross Impaired Loans and Acceptances (unaudited)
-------------------------------------------------------------------------
For the three months ended
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Balance at beginning of period $411 $357 $349
Additions 332 299 263
Return to performing status, repaid or sold (116) (81) (95)
Write-offs (170) (164) (152)
Foreign exchange and other adjustments 5 - -
-------------------------------------------------------------------------
Balance at end of period $462 $411 $365
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Allowance for Credit Losses (unaudited)
-------------------------------------------------------------------------
As at
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(millions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Specific allowance $192 $172 $155
General allowance 1,174 1,145 1,203
-------------------------------------------------------------------------
Total allowance for credit losses $1,366 $1,317 $1,358
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total net impaired loans $(904) $(906) $(993)
Net impaired loans as a percentage
of net loans (0.5)% (0.5)% (0.6)%
Provision for credit losses as a
percentage of net average loans 0.38% 0.40% 0.29%
-------------------------------------------------------------------------
CAPITAL POSITION
The Bank's capital ratios are calculated using the guidelines of the
Office of the Superintendent of Financial Institutions (OSFI). As at
January 31, 2007, the Bank's Tier 1 capital ratio was 11.9%, compared with
12.0%, at October 31, 2006 and 11.9%, at January 31, 2006. The Bank's overall
Tier 1 capital was up $0.6 billion and $1.6 billion from October 31, 2006 and
January 31, 2006 respectively. The decrease in the Tier 1 capital ratio from
October 31, 2006 was largely the result of TD Banknorth's acquisition of
Interchange during the quarter, mostly offset by the Bank's earnings. Risk-
weighted assets were up $7.2 billion from October 31, 2006, primarily due to
the consolidation of Interchange's assets and the overall growth in assets
within the Bank, including those resulting from changes in foreign exchange
rates and the implementation of the new financial instruments accounting
standards. The Bank continues to hold sufficient capital levels to ensure that
flexibility is maintained to grow operations, both organically and through
strategic acquisitions. The strong capital ratios are the result of the Bank's
internal capital generation, management of the balance sheet and periodic
issuance of capital securities.
During the quarter, the Bank issued $2.25 billion of medium-term notes
constituting subordinated indebtedness which qualify as Tier 2A regulatory
capital. The Bank also commenced a new normal course issuer bid (NCIB) during
the quarter allowing for the repurchase of up to 5 million common shares. No
shares were repurchased under the NCIB during the quarter.
Capital Structure and Ratios (unaudited)
-------------------------------------------------------------------------
As at
-------------------------------
Jan. 31 Oct. 31 Jan. 31
(billions of Canadian dollars) 2007 2006 2006
-------------------------------------------------------------------------
Tier 1 capital ratio 11.9% 12.0% 11.9%
Total capital $21.0 $18.6 $18.8
Total capital ratio 14.1% 13.1% 13.8%
Risk- weighted assets $149.1 $141.9 $135.9
Tangible common equity $13.4 $12.9 $12.0
Tangible common equity as a percentage
of risk-weighted assets 9.0% 9.1% 8.8%
-------------------------------------------------------------------------
MANAGING RISK
Interest Rate Risk
The objective of interest rate risk management for the non-trading
portfolio is to ensure that stable and predictable earnings are realized over
time. In this context, the Bank has adopted a disciplined hedging approach to
profitably manage its asset and liability positions, including a modeled
maturity profile for non-rate sensitive assets, liabilities and equity. Key
aspects of this approach are:
- minimizing the impact of interest rate risk on net interest income
and economic value within Canadian Personal and Commercial Banking;
and
- measuring the contribution of each product on a risk adjusted, fully-
hedged basis, including the impact of financial options granted to
customers.
The Bank uses derivative financial instruments, wholesale instruments and
other capital market alternatives and, less frequently, product pricing
strategies to manage interest rate risk. As at January 31, 2007, an immediate
and sustained 100 bps increase in rates would have increased the economic
value of shareholders' equity by $11 million after-tax or 0.05%. An immediate
and sustained 100 bps decrease in rates would have decreased the economic
value of shareholders' equity by $37 million after- tax or 0.18%.
Liquidity Risk
The Bank holds a sufficient amount of liquidity to fund its obligations
as they become due under normal operating conditions as well as under a base
case stress scenario that defines the minimum amount of liquidity that must be
held at all times. The surplus liquid asset position is defined as total
available liquid assets, less the Bank's total maturing wholesale funding,
potential non-wholesale deposit run-off and contingent liabilities, measured
at a number of points in time up to and including 90 days forward. As at
January 31, 2007, the Bank's consolidated surplus liquid asset position, on a
cumulative basis, up to 90 days forward, was $21.7 billion, compared with a
consolidated surplus liquid asset position of $18.8 billion as at October 31,
2006. The Bank ensures that funding obligations are fulfilled by managing its
cash flows and holding highly liquid assets that can be readily converted into
cash. The Bank manages liquidity on a global basis, ensuring prudent
management of liquidity risk in all its operations. In addition to a large
base of stable retail and commercial deposits, the Bank has an active
wholesale funding program, including asset securitization. This funding is
highly diversified as to source, type, currency and geographical location.
Market Risk
The Bank manages market risk in its trading books by using several key
controls. The Bank's market risk policy sets out detailed limits for each
trading business, including Value-at-Risk (VaR), stress test, stop loss, and
sensitivity to various market risk factors. Policy controls are augmented
through active oversight by independent market risk staff and frequent
management reporting. VaR is a statistical loss threshold, which should not be
exceeded, on average, more than once in 100 days. It is also the basis for
regulatory capital for market risk. The following table presents average and
end-of-quarter general market risk VaR usage for the quarter ended January 31,
2007, as well as the fiscal 2006 average. For the quarter, net daily capital
markets revenues were positive for 93.94% of the trading days. Losses in the
quarter never exceeded the Bank's statistically predicted VaR for the total of
the Bank's trading-related businesses.
Value-at-Risk Usage (unaudited)
-------------------------------------------------------------------------
For the
For the three twelve
months ended months ended
--------------------------------------
As at Average Average
Jan. 31, Jan. 31, Oct. 31,
(millions of Canadian dollars) 2007 2007 2006
-------------------------------------------------------------------------
Interest rate risk $7.1 $7.5 $8.2
Equity risk 10.9 7.2 5.6
Foreign exchange risk 2.0 2.0 2.1
Commodity risk 3.8 1.6 1.3
Diversification effect (11.5) (8.0) (7.3)
-------------------------------------------------------------------------
General market Value-at-Risk $12.3 $10.3 $9.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
QUARTERLY RESULTS
The following table provides summary information related to the Bank's
eight most recently completed quarters.
Quarterly Results (unaudited)
-------------------------------------------------------------------------
For the three months ended
-------------------------------------------------------------------------
(millions of 2007 2006
Canadian dollars) Jan. 31 Oct. 31 July 31 Apr. 30 Jan. 31
-------------------------------------------------------------------------
Net interest income $1,671 $1,714 $1,623 $1,427 $1,607
Other income 1,802 1,580 1,665 1,691 1,797
-------------------------------------------------------------------------
Total revenues 3,473 3,294 3,288 3,118 3,404
Provision for (reversal
of) credit losses 163 170 109 16 114
Non-interest expenses 2,189 2,187 2,147 2,103 2,290
Dilution gain, net - - - (5) 1,564
-------------------------------------------------------------------------
Income before provision
for income taxes,
non-controlling
interests in
subsidiaries and equity
in net income of an
associated company 1,121 937 1,032 994 2,564
Provision for income
taxes 218 175 235 244 220
Non-controlling
interests in
subsidiaries, net of
income taxes 47 48 52 47 37
Equity in net income of
an associated company,
net of income taxes 65 48 51 35 -
-------------------------------------------------------------------------
Net income - reported 921 762 796 738 2,307
Adjustments for items
of note, net of income
taxes(1) 88 113 90 42 (1,472)
-------------------------------------------------------------------------
Net income - adjusted 1,009 875 886 780 835
Preferred dividends 6 5 6 6 5
-------------------------------------------------------------------------
Net income available to
common shareholders -
adjusted(2) $1,003 $870 $880 $774 $830
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Canadian dollars)
-------------------------------------------------------------------------
Basic earnings per share
- reported $1.27 $1.05 $1.10 $1.02 $3.23
- adjusted 1.40 1.21 1.22 1.10 1.16
Diluted earnings per share
- reported 1.26 1.04 1.09 1.01 3.20
- adjusted 1.38 1.20 1.21 1.09 1.15
Return on common
shareholders' equity 18.2% 15.7% 16.8% 16.5% 55.4%
-------------------------------------------------------------------------
-----------------------------------------------------
For the three months ended
-----------------------------------------------------
(millions of 2005
Canadian dollars) Oct. 31 July 31 Apr. 30
-----------------------------------------------------
Net interest income $1,641 $1,563 $1,393
Other income 1,442 1,535 1,517
-----------------------------------------------------
Total revenues 3,083 3,098 2,910
Provision for (reversal
of) credit losses (15) 40 20
Non-interest expenses 2,203 2,577 2,057
Dilution gain, net - - -
-----------------------------------------------------
Income before provision
for income taxes,
non-controlling
interests in
subsidiaries and equity
in net income of an
associated company 895 481 833
Provision for income
taxes 253 12 213
Non-controlling
interests in
subsidiaries, net of
income taxes 53 58 21
Equity in net income of
an associated company,
net of income taxes - - -
-----------------------------------------------------
Net income - reported 589 411 599
Adjustments for items
of note, net of income
taxes(1) 176 328 73
-----------------------------------------------------
Net income - adjusted 765 739 672
Preferred dividends - - -
-----------------------------------------------------
Net income available to
common shareholders -
adjusted(2) $765 $739 $672
-----------------------------------------------------
-----------------------------------------------------
(Canadian dollars)
-----------------------------------------------------
Basic earnings per share
- reported $0.83 $0.58 $0.87
- adjusted 1.08 1.04 1.00
Diluted earnings per share
- reported 0.82 0.58 0.86
- adjusted 1.06 1.04 1.00
Return on common
shareholders' equity 14.8% 10.4% 17.2%
-----------------------------------------------------
(1) For description of items of note, see the table on page 6.
(2) For a detailed reconciliation with net income available to common
shareholders - reported, see the table on page 6.
ACCOUNTING POLICIES AND ESTIMATES
The Bank's unaudited Interim Consolidated Financial Statements, as
presented on pages 19 to 33 of this Report to Shareholders, have been prepared
in accordance with GAAP. These Consolidated Financial Statements should be
read in conjunction with the Bank's audited Consolidated Financial Statements
for the year ended October 31, 2006. The accounting policies used in the
preparation of these Consolidated Financial Statements are consistent with
those used in the Bank's October 31, 2006 audited Consolidated Financial
Statements, except as described below.
Changes in Significant Accounting Policies
Effective November 1, 2006, the Bank adopted the Canadian Institute of
Chartered Accountants (CICA) Handbook Section 3855, Financial Instruments -
Recognition and Measurement; Section 3865, Hedges; Section 1530, Comprehensive
Income and Section 3861, Financial Instruments - Disclosure and Presentation.
The adoption of the new standards resulted in changes in the accounting for
financial instruments and hedges as well as the recognition of certain
transition adjustments that have been recorded in opening retained earnings or
opening accumulated other comprehensive income. The comparative Interim
Consolidated Financial Statements have not been restated. With the adoption of
these standards, the Bank's accounting for financial instruments is now
largely harmonized with U.S. generally accepted accounting principles for this
area. For a description of the principal changes in accounting for financial
instruments and hedges due to the adoption of the accounting standards and for
further details on changes in significant accounting policies, see Note 2 to
the Interim Consolidated Financial Statements for the quarter ended
January 31, 2007.
Critical Accounting Estimates
The critical accounting estimates remain unchanged from those disclosed
in the Bank's 2006 Annual Report.
Future Changes in Accounting Policies
Determining Variable Interest Entities
In September 2006, the Emerging Issues Committee of the CICA issued
EIC-163, Determining the Variability to be Considered in Applying AcG-15,
which provides additional guidance on how to analyze and consolidate variable
interest entities. The guidance is effective February 1, 2007 for the Bank.
The new guidance is not expected to have a material effect on the financial
position or earnings of the Bank.
Capital Disclosures
The CICA issued a new accounting standard, Section 1535, Capital
Disclosures, which requires the disclosure of both qualitative and
quantitative information that enables users of financial statements to
evaluate the entity's objectives, policies and processes for managing capital.
This new standard is effective for the Bank beginning November 1, 2007.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent interim period, there have been no changes in the
Bank's policies and procedures and other processes that comprise its internal
control over financial reporting, that have materially affected, or are
reasonably likely to materially affect, the Bank's internal control over
financial reporting.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
INTERIM CONSOLIDATED BALANCE SHEET (unaudited)
-------------------------------------------------------------------------
As at
---------------------
Jan. 31 Oct. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
ASSETS
Cash and due from banks $2,113 $2,019
Interest-bearing deposits with banks 8,724 8,763
-------------------------------------------------------------------------
10,837 10,782
-------------------------------------------------------------------------
Securities
Trading 78,071 77,482
Designated as trading under the fair value
option (Note 14) 1,916 -
Available-for-sale 38,394 -
Held-to-maturity 11,810 -
Investment - 46,976
-------------------------------------------------------------------------
130,191 124,458
-------------------------------------------------------------------------
Securities purchased under reverse
repurchase agreements 32,357 30,961
-------------------------------------------------------------------------
Loans
Residential mortgages 51,794 53,425
Consumer instalment and other personal 63,520 63,130
Credit card 5,175 4,856
Business and government 43,748 40,514
-------------------------------------------------------------------------
164,237 161,925
Allowance for credit losses (Note 4) (1,366) (1,317)
-------------------------------------------------------------------------
Loans, net of allowance for credit losses 162,871 160,608
-------------------------------------------------------------------------
Other
Customers' liability under acceptances 8,425 8,676
Investment in TD Ameritrade (Note 15) 5,113 4,379
Trading derivatives 26,871 27,845
Goodwill 8,176 7,396
Other intangibles 1,896 1,946
Land, buildings and equipment 1,877 1,862
Other assets 19,602 14,001
-------------------------------------------------------------------------
71,960 66,105
-------------------------------------------------------------------------
Total assets $408,216 $392,914
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------
Deposits
Personal $150,638 $146,636
Banks 9,033 14,186
Business and government 73,780 100,085
Trading 36,237 -
-------------------------------------------------------------------------
269,688 260,907
-------------------------------------------------------------------------
Other
Acceptances 8,425 8,676
Obligations related to securities sold short 26,230 27,113
Obligations related to securities sold under
repurchase agreements 20,597 18,655
Trading derivatives 28,322 29,337
Other liabilities 20,321 17,461
-------------------------------------------------------------------------
103,895 101,242
-------------------------------------------------------------------------
Subordinated notes and debentures (Note 6) 9,209 6,900
-------------------------------------------------------------------------
Liabilities for preferred shares and capital
trust securities (Note 7) 1,800 1,794
-------------------------------------------------------------------------
Non-controlling interests in subsidiaries 2,607 2,439
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares (millions of shares issued and
outstanding: Jan. 31, 2007 - 719.0 and Oct. 31,
2006 - 717.4) (Note 8) 6,417 6,334
Preferred shares (millions of shares issued and
outstanding: Jan. 31, 2007 - 17.0 and Oct. 31,
2006 - 17.0) (Note 8) 425 425
Contributed surplus 68 66
Retained earnings 14,375 13,725
Accumulated other comprehensive income (268) (918)
-------------------------------------------------------------------------
21,017 19,632
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $408,216 $392,914
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
The accompanying notes are an integral part of these Interim Consolidated
Financial Statements.
INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Interest income
Loans $3,074 $2,452
Securities
Dividends 273 222
Interest 986 1,037
Deposits with banks 47 80
-------------------------------------------------------------------------
4,380 3,791
-------------------------------------------------------------------------
Interest expense
Deposits 2,048 1,534
Subordinated notes and debentures 108 86
Preferred shares and capital trust securities 30 39
Other liabilities 523 525
-------------------------------------------------------------------------
2,709 2,184
-------------------------------------------------------------------------
Net interest income 1,671 1,607
-------------------------------------------------------------------------
Other income
Investment and securities services 548 642
Credit fees 96 86
Net securities gains 70 23
Trading income 216 292
Service charges 249 221
Loan securitizations (Note 5) 134 92
Card services 110 81
Insurance, net of claims 254 224
Trust fees 31 29
Other 94 107
-------------------------------------------------------------------------
1,802 1,797
-------------------------------------------------------------------------
Total revenues 3,473 3,404
-------------------------------------------------------------------------
Provision for credit losses (Note 4) 163 114
-------------------------------------------------------------------------
Non-interest expenses
Salaries and employee benefits 1,157 1,174
Occupancy, including depreciation 175 166
Equipment, including depreciation 144 147
Amortization of other intangibles 118 128
Restructuring costs - 50
Marketing and business development 113 133
Brokerage-related fees 36 53
Professional and advisory services 128 105
Communications 49 49
Other 269 285
-------------------------------------------------------------------------
2,189 2,290
-------------------------------------------------------------------------
Dilution gain, net - 1,564
-------------------------------------------------------------------------
Income before provision for income taxes,
non-controlling interests in subsidiaries and
equity in net income of an associated company 1,121 2,564
Provision for income taxes 218 220
Non-controlling interests in subsidiaries,
net of income taxes 47 37
Equity in net income of an associated company,
net of income taxes 65 -
-------------------------------------------------------------------------
Net income 921 2,307
Preferred dividends 6 5
-------------------------------------------------------------------------
Net income available to common shareholders $915 $2,302
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of common shares outstanding
(millions)
Basic 718.3 712.5
Diluted 724.9 718.9
Earnings per share (in dollars)
Basic $1.27 $3.23
Diluted 1.26 3.20
Dividends per share (in dollars) 0.48 0.42
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
The accompanying notes are an integral part of these Interim Consolidated
Financial Statements.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Common shares
Balance at beginning of period $6,334 $5,872
Proceeds from shares issued on exercise
of options 34 45
Shares issued as a result of dividend
reinvestment plan 19 100
Impact of shares sold (acquired) in
Wholesale Banking 30 (2)
-------------------------------------------------------------------------
Balance at end of period 6,417 6,015
-------------------------------------------------------------------------
Preferred shares
Balance at beginning of period 425 -
Share issues - 425
-------------------------------------------------------------------------
Balance at end of period 425 425
-------------------------------------------------------------------------
Contributed surplus
Balance at beginning of period 66 40
Stock options (Note 9) 2 7
-------------------------------------------------------------------------
Balance at end of period 68 47
-------------------------------------------------------------------------
Retained earnings
Balance at beginning of period 13,725 10,650
Transition adjustment on adoption of Financial
Instruments standards (Note 2) 80 -
Net income 921 2,307
Common dividends (345) (300)
Preferred dividends (6) (5)
-------------------------------------------------------------------------
Balance at end of period 14,375 12,652
-------------------------------------------------------------------------
Accumulated other comprehensive income,
net of income taxes
Balance at beginning of period (918) (696)
Transition adjustment on adoption of Financial
Instrument standards 426 -
Other comprehensive income for the period 224 30
-------------------------------------------------------------------------
Balance at end of period (Note 17) (268) (666)
-------------------------------------------------------------------------
Total shareholders' equity at end of period $21,017 $18,473
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Net income $921 $2,307
Other comprehensive income (loss),
net of income taxes
Change in unrealized gains and (losses)
on available-for-sale securities, net of
cash flow hedges(a),(b) 53 -
Reclassification to earnings in respect of
available-for-sale securities(c) (29) -
Change in foreign currency translation gains
and (losses) on investments in subsidiaries,
net of hedging activities(d),(e) 323 30
Change in gains and (losses) on derivative
instruments designated as cash flow hedges(f) (127) -
Reclassification to earnings of gains and
(losses) on cash flow hedges(g) 4 -
-------------------------------------------------------------------------
Other comprehensive income for the period 224 30
-------------------------------------------------------------------------
Comprehensive income for the period $1,145 $2,337
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(a) The amount of cumulative loss related to available-for-sale
securities measured at fair value as at January 31, 2007 was
$49 million after tax.
(b) Net of income taxes of $24 million.
(c) Net of income tax benefit of $14 million.
(d) Net of income tax (benefit) of $(279) million (2006 - $172 million).
(e) Fiscal 2007 include $848 million (2006 - $528 million) of after-tax
gains (losses) arising from hedges of the Bank's investment in
foreign operations.
(f) Net of income tax benefit of $79 million.
(g) Net of income taxes of $3 million.
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
The accompanying notes are an integral part of these Interim Consolidated
Financial Statements.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Cash flows from (used in) operating activities
Net income $921 $2,307
Adjustments to determine net cash flows from
(used in) operating activities:
Provision for credit losses 163 114
Restructuring costs - 50
Depreciation 82 85
Amortization of other intangibles 118 128
Stock option 2 7
Dilution gain, net - (1,564)
Net securities gains (70) (23)
Net gain on securitizations (Note 5) (47) (33)
Equity in net income of an associated company (65) -
Non-controlling interests 47 37
Future income taxes 170 169
Changes in operating assets and liabilities:
Current income taxes payable (358) (47)
Interest receivable and payable 72 (44)
Trading securities (2,505) (9,225)
Unrealized gains and amounts receivable
on derivative contracts 974 (130)
Unrealized losses and amounts payable on
derivative contracts (1,015) 1,436
Other (2,737) (1,021)
-------------------------------------------------------------------------
Net cash used in operating activities (4,248) (7,754)
-------------------------------------------------------------------------
Cash flows from (used in) financing activities
Change in deposits 7,449 5,000
Securities sold under repurchase agreements 1,942 530
Securities sold short (883) 1,951
Issue of subordinated notes and debentures 2,274 1,800
Repayment of subordinated notes and debentures - (150)
Subordinated notes and debentures (acquired)
sold in Wholesale Banking (7) 1
Liability for preferred shares and capital
trust securities 6 (2)
Translation adjustment on subordinated notes
and debentures issued in a foreign currency 42 -
Common shares issued on exercise of options 34 45
Common shares (acquired) sold in Wholesale Banking 30 (2)
Repurchase of common shares - -
Dividends paid in cash on common shares (326) (200)
Issuance of preferred shares - 425
Dividends paid on preferred shares (6) (5)
-------------------------------------------------------------------------
Net cash from financing activities 10,555 9,393
-------------------------------------------------------------------------
Cash flows from (used in) investing activities
Interest-bearing deposits with banks 39 519
Activity in available-for-sale, held-to-maturity
and investment securities:
Purchases (48,230) (56,865)
Proceeds from maturities 40,478 51,117
Proceeds from sales 4,540 4,724
Activity in lending activities:
Origination and acquisitions (39,496) (49,148)
Proceeds from maturities 34,602 46,510
Proceeds from sales 598 333
Proceeds from loan securitizations (Note 5) 3,124 1,057
Land, buildings and equipment (97) (75)
Securities purchased under reverse
repurchase agreements (1,396) 1,536
Acquisitions and dispositions less cash and
cash equivalents acquired (Note 15) (426) (819)
-------------------------------------------------------------------------
Net cash used in investing activities (6,264) (1,111)
-------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents 51 (43)
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 94 485
Cash and cash equivalents at beginning of period 2,019 1,673
-------------------------------------------------------------------------
Cash and cash equivalents at end of period,
represented by cash and due from banks $2,113 $2,158
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary disclosure of cash flow information
Amount of interest paid during the period $2,472 $2,281
Amount of income taxes paid during the period 398 343
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
The accompanying notes are an integral part of these Interim Consolidated
Financial Statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
-------------------------------------------------------------------------
Note 1: BASIS OF PRESENTATION
-------------------------------------------------------------------------
These Interim Consolidated Financial Statements have been prepared in
accordance with Canadian generally accepted accounting principles (GAAP)
and follow the same accounting policies and methods of application as the
Bank's Consolidated Financial Statements for the year ended October 31,
2006, except as described in Note 2. Under GAAP, additional disclosures
are required in the annual financial statements and accordingly, these
Interim Consolidated Financial Statements should be read in conjunction
with the audited Consolidated Financial Statements for the year ended
October 31, 2006 and the accompanying notes included on pages 71 to 113
of the Bank's 2006 Annual Report. The Interim Consolidated Financial
Statements include all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the
periods presented.
Note 2: CHANGES IN ACCOUNTING POLICIES
-------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
The Bank adopted the Canadian Institute of Chartered Accountants (CICA)
Handbook Section 3855, Financial Instruments - Recognition and
Measurement; Section 3865, Hedges; Section 1530, Comprehensive Income and
Section 3861, Financial Instruments - Disclosure and Presentation on
November 1, 2006. The adoption of these new Financial Instruments
standards resulted in changes in the accounting for financial instruments
and hedges as well as the recognition of certain transition adjustments
that have been recorded in opening retained earnings or opening
accumulated other comprehensive income as described below. The
comparative Interim Consolidated Financial Statements have not been
restated. With the adoption of these standards, the Bank's accounting for
financial instruments is now largely harmonized with U.S. generally
accepted accounting principles for this area. The principal changes in
the accounting for financial instruments and hedges due to the adoption
of these accounting standards are described below.
(a) Financial Assets and Financial Liabilities
Prior to the adoption of the new standards, the Bank classified all of
its financial assets as trading securities, investment securities or
loans and receivables. Trading securities were accounted for at fair
value. Investment securities were accounted for at cost or amortized
cost, net of any adjustment for other-than-temporary impairment. Loans
and receivables were accounted for at amortized cost using the effective
interest rate method. All of the Bank's financial liabilities, except
those classified as trading and short positions in securities, were
accounted for on an accrual basis.
Under the new standards, financial assets and financial liabilities are
initially recognized at fair value and are subsequently accounted for
based on their classification as described below. The classification
depends on the purpose for which the financial instruments were acquired
and their characteristics. Except in very limited circumstances, the
classification is not changed subsequent to initial recognition.
Financial assets purchased and sold, where the contract requires the
asset to be delivered within an established time frame, are recognized on
a trade-date basis. Transaction costs are recognized immediately in
income or are capitalized, depending upon the nature of the transaction
and the associated product.
Trading
-------
Financial assets and financial liabilities that are purchased and
incurred with the intention of generating profits in the near term are
classified as trading. These instruments are accounted for at fair value
with the change in the fair value recognized in trading income.
Investments totalling $76.4 billion, previously disclosed as trading in
the audited Consolidated Financial Statements for the year ended
October 31, 2006, were classified as trading on November 1, 2006.
On transition, retained interests with a carrying value of $216 million,
previously accounted for at amortized costs, were reclassified to trading
securities. Deposit liabilities totaling $35.5 billion were classified as
trading on November 1, 2006.
Available-for-sale
------------------
Financial assets classified as available-for-sale are carried at fair
value with the changes in fair value recorded in other comprehensive
income. Securities that are classified as available-for-sale and do not
have a readily available market value are recorded at cost.
Available-for-sale securities are written down to fair value through
income whenever it is necessary to reflect other-than-temporary
impairment. Previously, such write-downs were to net realizable value.
Gains and losses realized on disposal of available-for-sale securities,
which are calculated on an average cost basis, are recognized in net
securities gains in other income. Investments totalling $34.8 billion,
previously disclosed as "Investment Securities" in the the audited
Consolidated Financial Statements for the year ended October 31, 2006,
were designated as available-for-sale on November 1, 2006. The change in
accounting policy related to other-than-temporary impairment was not
material.
Held-to-maturity
----------------
Securities that have a fixed maturity date, where the Bank intends and
has the ability to hold to maturity, are classified as held-to-maturity
and accounted for at amortized cost using the effective interest rate
method. Investments totalling $10.1 billion were reclassified from
investment securities to held-to-maturity securities on November 1, 2006.
Bonds totalling $1.1 billion were reclassified from trading securities to
held-to-maturity securities on November 1, 2006.
Loans
-----
Loans are accounted for at amortized cost using the effective interest
rate method. This classification is consistent with the classification
under the prior accounting standards.
Financial assets and financial liabilities designated as trading under
the fair value option
---------------------
Financial assets and financial liabilities, other than those classified
as trading, are designated as trading under the fair value option if they
are reliably measurable, meet one or more of the criteria set out below,
and are so designated by the Bank. The Bank may designate financial
assets and financial liabilities as trading when the designation:
(i) eliminates or significantly reduces valuation or recognition
inconsistencies that would otherwise arise from measuring financial
assets or financial liabilities, or recognizing gains and losses on
them, on different bases; or
(ii) applies to groups of financial assets, financial liabilities or
combinations thereof that are managed, and their performance
evaluated, on a fair value basis in accordance with a documented
risk management or investment strategy, and where information about
the groups of financial instruments is reported to management on
that basis.
Financial instruments designated as trading under the fair value option
are accounted for at fair value with the change in the fair value
recognized in trading income.
On November 1, 2006 the Bank designated $2 billion of financial assets as
trading under the fair value option.
Determination of fair value
---------------------------
The fair value of a financial instrument on initial recognition is
normally the transaction price, i.e. the fair value of the consideration
given or received. In certain circumstances, however, the initial fair
value may be based on other observable current market transactions in the
same instrument, without modification or repackaging, or on a valuation
technique whose variables include only data from observable markets.
Subsequent to initial recognition, the fair values of financial
instruments measured at fair value that are quoted in active markets are
based on bid prices for financial assets held and offer prices for
financial liabilities. When independent prices are not available, fair
values are determined by using valuation techniques which refer to
observable market data. These include comparisons with similar
instruments where market observable prices exist, discounted cash flow
analysis, option pricing models and other valuation techniques commonly
used by market participants.
For certain derivatives, fair values may be determined in whole or in
part from valuation techniques using non-observable market data or
transaction prices.
A number of factors such as bid-offer spread, credit profile and model
uncertainty are taken into account, as appropriate, when values are
calculated using valuation techniques.
If the fair value of a financial asset measured at fair value becomes
negative, it is recorded as a financial liability until its fair value
becomes positive, at which time it is recorded as a financial asset, or
it is extinguished.
(b) Derivatives and Hedge Accounting
Embedded derivatives
--------------------
Derivatives may be embedded in other financial instruments (the "host
instrument"). Prior to the adoption of the new standards, such embedded
derivatives were not accounted for separately from the host instrument
except in the case of derivatives embedded in equity-linked deposit
contracts within the scope of Accounting Guideline 17. Under the new
standards, embedded derivatives are treated as separate derivatives when
their economic characteristics and risks are not clearly and closely
related to those of the host instrument, the terms of the embedded
derivative are the same as those of a stand-alone derivative, and the
combined contract is not held for trading or designated at fair value.
These embedded derivatives are measured at fair value with subsequent
changes recognized in trading income. The change in accounting policy
related to embedded derivatives was not material.
Hedge accounting
----------------
At the inception of a hedging relationship, the Bank documents the
relationship between the hedging instrument and the hedged item, its risk
management objective and its strategy for undertaking the hedge. The Bank
also requires a documented assessment, both at hedge inception and on an
ongoing basis, of whether or not the derivatives that are used in hedging
transactions are highly effective in offsetting the changes attributable
to the hedged risks in the fair values or cash flows of the hedged items.
Under the previous standards, derivatives that met the requirements for
hedge accounting were generally accounted for on an accrual basis. Under
the new standards, all derivatives are recorded at fair value. Non-
trading derivatives are recorded in other assets or other liabilities.
The method of recognizing fair value gains and losses depends on whether
derivatives are held for trading or are designated as hedging
instruments, and, if the latter, the nature of the risks being hedged.
All gains and losses from changes in the fair value of derivatives held
for trading are recognized in the statement of income. These gains and
losses are reported in other income.
When derivatives are designated as hedges, the Bank classifies them
either as: (i) hedges of the change in fair value of recognized assets or
liabilities or firm commitments (fair value hedges); (ii) hedges of the
variability in highly probable future cash flows attributable to a
recognized asset or liability, or a forecasted transaction (cash flow
hedges); or (iii) hedges of net investments in a foreign operation (net
investment hedges).
Fair value hedge
----------------
The Bank's fair value hedges principally consist of interest rate swaps
that are used to protect against changes in the fair value of fixed-rate
long-term financial instruments due to movements in market interest
rates.
Changes in the fair value of derivatives that are designated and qualify
as fair value hedging instruments are recorded in the statement of
income, along with changes in the fair value of the assets, liabilities
or group thereof that are attributable to the hedged risk. Any gain or
loss in fair value relating to the ineffective portion of the hedging
relationship is recognized immediately in the statement of income in
other income.
If a hedging relationship no longer meets the criteria for hedge
accounting, the cumulative adjustment to the carrying amount of the
hedged item is amortized to the statement of income based on a
recalculated effective interest rate over the residual period to
maturity, unless the hedged item has been derecognized in which case it
is released to the statement of income immediately. Upon adoption of the
new standards, the Bank recorded a net increase in derivative liabilities
designated as fair value hedges of $3 million, an increase of $14 million
in loans and an increase of $11 million in deposits.
Cash flow hedge
---------------
The Bank is exposed to variability in future interest cash flows on non-
trading assets and liabilities that bear interest at variable rates or
are expected to be refunded or reinvested in the future. The amounts and
timing of future cash flows, representing both principal and interest
flows, are projected for each portfolio of financial assets and
liabilities on the basis of their contractual terms and other relevant
factors, including estimates of prepayments and defaults. The aggregate
principal balances and interest cash flows across all portfolios over
time form the basis for identifying the effective portion of gains and
losses on the derivatives designated as cash flow hedges of forecasted
transactions.
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognized in other
comprehensive income. Any gain or loss in fair value relating to the
ineffective portion is recognized immediately in the statement of income
in other income.
Amounts accumulated in other comprehensive income are reclassified to the
statement of income in the period in which the hedged item affects
income. However, when the forecast transaction that is hedged results in
the recognition of a non-financial asset or a non-financial liability,
the gains and losses previously deferred in other comprehensive income
are transferred from other comprehensive income and included in the
initial measurement of the cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss
existing in other comprehensive income at that time remains in other
comprehensive income until the forecasted transaction is eventually
recognized in the statement of income. When a forecasted transaction is
no longer expected to occur, the cumulative gain or loss that was
reported in other comprehensive income is immediately transferred to the
statement of income. Upon adoption of the new standards, the Bank
recorded a net increase in derivative assets of $212 million designated
as cash flow hedges and an increase of $212 million pre-tax in
accumulated other comprehensive income.
Net investment hedges
---------------------
Hedges of net investments in foreign operations are accounted for similar
to cash flow hedges. Any gain or loss on the hedging instrument relating
to the effective portion of the hedge is recognized in other
comprehensive income. The gain or loss relating to the ineffective
portion is recognized immediately in the statement of income. Gains and
losses accumulated in other comprehensive income are included in the
statement of income upon the repatriation or disposal of the investment
in the foreign operation. The adoption of the new standards resulted in
the reclassification of $918 million previously recorded in the foreign
currency translation adjustment account to opening accumulated other
comprehensive income.
(c) Comprehensive Income
Comprehensive income is composed of the Bank's net income and other
comprehensive income. Other comprehensive income includes unrealized
gains and losses on available-for-sale securities, foreign currency
translation gains and losses on the net investment in self-sustaining
operations and changes in the fair market value of derivative instruments
designated as cash flow hedges, all net of income taxes. The components
of comprehensive income are disclosed in the Interim Consolidated
Statement of Comprehensive Income.
The following table summarizes the adjustments required to adopt the new
standards.
Transition Adjustments, net of income taxes
-------------------------------------------------------------------------
Retained earnings Accumulated other
comprehensive
income
---------------------------------------
Net of Net of
income income
(millions of Canadian dollars) Gross taxes Gross taxes
-------------------------------------------------------------------------
Classification of securities
as available-for-sale $- $- $440 $287
Classification of securities
as trading 76 50 - -
Designation of securities as
trading under the fair value option 7 4 - -
Reversal of transition balances
deferred upon adoption of AcG-13 37 25 - -
Fair value hedges
Cash flow hedges - - 212 139
Other (4) 1 - -
-------------------------------------------------------------------------
Total $116 $80 $652 $426
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note 3: FUTURE ACCOUNTING CHANGES IN ACCOUNTING POLICIES
-------------------------------------------------------------------------
Determining Variable Interest Entities
In September 2006, the Emerging Issues Committee of the CICA issued
EIC-163, Determining the Variability to be Considered in Applying AcG-15,
which provides additional guidance on how to analyze and consolidate
variable interest entities. The guidance is effective February 1, 2007
for the Bank. The new guidance is not expected to have a material effect
on the financial position or earnings of the Bank.
Capital Disclosures
The CICA issued a new accounting standard, Section 1535, Capital
Disclosures, which requires the disclosure of both qualitative and
quantitative information that enables users of financial statements to
evaluate the entity's objectives, policies and processes for managing
capital. This new standard is effective for the Bank beginning
November 1, 2007.
Note 4: ALLOWANCE FOR CREDIT LOSSES
-------------------------------------------------------------------------
The allowance for credit losses is recorded in the Consolidated Balance
Sheet and maintained at a level which is considered adequate to absorb
credit-related losses on loans, customers' liability under acceptances
and other credit instruments. The change in the Bank's allowance for
credit losses for the three months ended January 31 is shown in the table
below.
Allowance for Credit Losses
-------------------------------------------------------------------------
Jan. 31, 2007 Jan. 31, 2006
------------------------------------------------------
(millions of Specific General Specific General
Canadian dollars) allowance allowance Total allowance allowance Total
-------------------------------------------------------------------------
Balance at
beginning of period $172 $1,145 $1,317 $153 $1,140 $1,293
Acquisitions of TD
Banknorth (including
Hudson and
Interchange) and VFC - 14 14 - 69 69
Provision for
(reversal of)
credit losses 153 10 163 120 (6) 114
Write-offs (170) - (170) (152) - (152)
Recoveries 31 - 31 31 - 31
Other(1) 6 5 11 3 - 3
-------------------------------------------------------------------------
Allowance for credit
losses at end
of period $192 $1,174 $1,366 $155 $1,203 $1,358
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes foreign exchange rate changes.
Note 5: LOAN SECURITIZATIONS
-------------------------------------------------------------------------
The following tables summarize the Bank's securitization activity for the
three months ended January 31. In most cases, the Bank has retained
responsibility for servicing the assets securitized.
New Securitization Activity
-------------------------------------------------------------------------
For the three months ended
---------------------------------------------------------
Jan. 31, 2007
-------------------------------------------------------------------------
Residential Credit Commercial
(millions of mortgage Personal card mortgage
Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gross proceeds $2,333 $2,396 $800 $- $5,529
Retained interests 48 32 8 - 88
Cash flows
received on
retained interests 41 28 17 - 86
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended
---------------------------------------------------------
Jan. 31, 2006
-------------------------------------------------------------------------
Residential Credit Commercial
(millions of mortgage Personal card mortgage
Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gross proceeds $1,056 $737 $1,300 $- $3,093
Retained interests 16 5 26 - 47
Cash flows
received on
retained interests 34 13 44 - 91
-------------------------------------------------------------------------
The following table summarizes the impact of securitizations on the
Bank's Interim Consolidated Statement of Income for the three months
ended January 31.
Securitization Gains and Income on Retained Interests
-------------------------------------------------------------------------
For the three months ended
---------------------------------------------------------
Jan. 31, 2007
-------------------------------------------------------------------------
Residential Credit Commercial
(millions of mortgage Personal card mortgage
Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gain on sale(1) $7 $34 $7 $(1) $47
Income on retained
interests 45 13 29 - 87
-------------------------------------------------------------------------
Total $52 $47 $36 $(1) $134
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended
---------------------------------------------------------
Jan. 31, 2006
-------------------------------------------------------------------------
Residential Credit Commercial
(millions of mortgage Personal card mortgage
Canadian dollars) loans loans loans loans Total
-------------------------------------------------------------------------
Gain on sale(1) $3 $5 $25 $- $33
Income on retained
interests 37 4 18 - 59
-------------------------------------------------------------------------
Total $40 $9 $43 $- $92
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For term loans, the gain on sale is after the impact of hedges on
assets sold.
The key assumptions used to value the retained interests are as follows:
Key Assumptions
-------------------------------------------------------------------------
2007
----------------------------------------------
Residential Credit Commercial
mortgage Personal card mortgage
loans loans loans loans
-------------------------------------------------------------------------
Prepayment rate(1) 20.0% 6.2% 42.5% 9.1%
Excess spread(2) .7 1.1 7.0 1.0
Discount rate 6.0 6.0 6.1 5.8
Expected credit losses(3) - - 2.0 0.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2006
----------------------------------------------
Residential Credit Commercial
mortgage Personal card mortgage
loans loans loans loans
-------------------------------------------------------------------------
Prepayment rate(1) 20.0% 5.9% 43.1% 1.9%
Excess spread(2) .6 1.0 14.4 -
Discount rate 5.1 3.6 4.2 9.8
Expected credit losses(3) - - 2.6 0.1
-------------------------------------------------------------------------
(1) Represents monthly payment rate for secured personal and credit card
loans.
(2) The excess spread for credit card loans reflects the net portfolio
yield, which is interest earned less funding costs and losses.
(3) There are no expected credit losses for residential mortgage loans as
these mortgages are government guaranteed.
During the three months ended January 31, 2007, there were maturities of
previously securitized loans and receivables of $2,405 million (three
months ended January 31, 2006 - $2,036 million). Proceeds from new
securitizations were $3,124 million for the three months ended
January 31, 2007 (three months ended January 31, 2006 - $1,057 million).
Note 6: SUBORDINATED NOTES AND DEBENTURES
-------------------------------------------------------------------------
During the three months ended January 31, 2007, the Bank issued
subordinated reset medium-term notes of $2.25 billion pursuant to its
medium-term note program. The notes pay a coupon of 4.779% until
December 14, 2016, and then reset every five years to the 5-year
Government of Canada yield plus 1.74% thereafter until maturity on
December 14, 2105. The notes are redeemable at the Bank's option at par
on December 14, 2016. The Bank has included the issue as Tier 2A
regulatory capital.
Note 7: LIABILITIES FOR PREFERRED SHARES AND CAPITAL TRUST SECURITIES
-------------------------------------------------------------------------
The Bank's liabilities for preferred shares and capital trust securities
are as follows:
Liabilities
-------------------------------------------------------------------------
Jan. 31, Oct. 31,
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Preferred Shares
Preferred shares issued by the Bank
(thousands of shares):
Class A - 14,000 Series M $350 $350
Class A - 8,000 Series N 200 200
-------------------------------------------------------------------------
550 550
Preferred shares issued by TD Mortgage
Investment Corporation (thousands of shares):
350 non-cumulative preferred shares, Series A 350 344
-------------------------------------------------------------------------
Total preferred shares 900 894
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital Trust Securities(1)
Trust units issued by TD Capital Trust
(thousands of units)
900 Capital Trust Securities - Series 2009 900 900
-------------------------------------------------------------------------
Total Capital Trust Securities 900 900
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total preferred shares and Capital Trust Securities $1,800 $1,794
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Included in deposit liabilities on the Interim Consolidated Balance
Sheet is $350 million due to TD Capital Trust II.
Note 8: SHARE CAPITAL
-------------------------------------------------------------------------
Common Shares
The Bank is authorized by the shareholders to issue an unlimited number
of common shares, without par value, for unlimited consideration. The
common shares are not redeemable or convertible. Dividends are typically
declared by the Board of Directors of the Bank on a quarterly basis and
the amount may vary from quarter to quarter.
Shares Issued and Outstanding
-------------------------------------------------------------------------
For the three months ended
--------------------------------------------
Jan. 31, 2007 Jan. 31, 2006
--------------------------------------------
(millions of shares
and millions of Number of Number of
Canadian dollars) shares Amount shares Amount
-------------------------------------------------------------------------
Common:
Balance at beginning of period 717.4 $6,334 711.8 $5,872
Issued on exercise of options 0.9 34 1.3 45
Issued as a result of dividend
reinvestment plan 0.3 19 1.6 100
Impact of shares (acquired) sold
in Wholesale Banking 0.4 30 - (2)
-------------------------------------------------------------------------
Balance at end of period
- common 719.0 $6,417 714.7 $6,015
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Preferred (Class A - Series O):
Balance at beginning of period 17.0 $425 - $-
Issued during the period - - 17.0 425
-------------------------------------------------------------------------
Balance at end of period
- preferred 17.0 $425 17.0 $425
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Normal Course Issuer Bid
On December 20, 2006, the Bank commenced a normal course issuer bid,
effective for up to one year, to repurchase for cancellation, up to
five million common shares, representing approximately 0.7% of the Bank's
outstanding common shares as at December 13, 2006. No purchases were made
under this bid during the three months ended January 31, 2007.
The Bank repurchased four million common shares at a cost of $264 million
under its previous normal course issuer bid which commenced on
September 18, 2006 and was completed in October 2006.
Note 9: STOCK BASED COMPENSATION
-------------------------------------------------------------------------
The following table summarizes the compensation expense recognized by the
Bank for stock option awards for the three months ended January 31.
For the three months ended
-------------------------------------------------------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
TD Bank $2 $7
TD Banknorth 2 2
-------------------------------------------------------------------------
During the three months ended January 31, 2007, 1.5 million (three months
ended January 31, 2006 - 1.9 million) options were granted by TD Bank
with a weighted average fair value of $11.46 per option (three months
ended January 31, 2006 - $11.27 per option). During the three months
ended January 31, 2007, 27 thousand (three months ended January 31,
2006 - 2.3 million) options were granted by TD Banknorth with a weighted
average fair value of $5.83 per option (three months ended January 31,
2006 - $6.01 per option).
The fair value of options granted were estimated at the date of grant
using the Black-Scholes valuation model with the following assumptions:
For the three months ended
----------------------------
Jan. 31 Jan. 31
TD Bank 2007 2006
-------------------------------------------------------------------------
Risk-free interest rate 3.90% 3.91%
Expected option life 5.2 years 5.1 years
Expected volatility 19.5% 21.9%
Expected dividend yield 2.92% 2.88%
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
TD Banknorth 2007 2006
-------------------------------------------------------------------------
Risk-free interest rate 4.45% 4.46%
Expected option life 6.0 years 7.5 years
Expected volatility 15.07% 15.08%
Expected dividend yield 2.98% 2.78%
-------------------------------------------------------------------------
Note 10: EMPLOYEE FUTURE BENEFITS
-------------------------------------------------------------------------
The Bank's pension plans and principal non-pension post-retirement
benefit plans expenses are as follows:
Principal Pension Plan Pension Expense
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Elements of pension plan expense before adjustments
to recognize the long term nature of the cost:
Service cost - benefits earned $16 $18
Interest cost on projected benefit obligation 28 26
Actual return on plan assets (87) 12
Adjustments to recognize the long-term
nature of plan cost:
Difference between costs arising in the period
and costs recognized in the period in respect of:
Return on plan assets(1) 53 (44)
Actuarial (gains) losses(2) 3 5
Plan amendments(3) 2 2
-------------------------------------------------------------------------
Total $15 $19
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the three months ended January 31, 2007, includes expected return
on plan assets of $34 million (three months ended January 31, 2006 -
$32 million) less actual return on plan assets of $87 million (three
months ended January 31, 2006 - $(12) million).
(2) For the three months ended January 31, 2007, includes loss recognized
of $3 million (three months ended January 31, 2006 - $5 million) less
actuarial losses on projected benefit obligation of nil (three months
ended January 31, 2006 - nil).
(3) For the three months ended January 31, 2007, includes amortization of
costs for plan amendments of $2 million (three months ended
January 31, 2006 - $2 million) less actual cost amendments of nil
(three months ended January 31, 2006 - nil).
Other Pension Plans' Expense
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
CT defined benefit pension plan $1 $1
TD Banknorth defined benefit pension plans 2 2
Supplemental employee retirement plans 8 8
-------------------------------------------------------------------------
Total $11 $11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Principal Non-Pension Post-Retirement Benefit Plans Expense
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Service cost - benefits earned $3 $3
Interest cost on projected benefit obligation 5 5
Plan amendments - (65)
Difference between costs arising in the period
and costs recognized in the period in respect of:
Actuarial (gains) losses 1 2
Plan amendments (1) 64
-------------------------------------------------------------------------
Total $8 $9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash Flows
The Bank's contributions to its pension plans and its principal non-
pension post-retirement benefit plans are as follows:
Pension Plan Contributions
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
(millions of Canadian dollars) 2007 2006
-------------------------------------------------------------------------
Principal pension plan $17 $15
CT defined benefit pension plan 1 1
TD Banknorth defined benefit pension plans 47 32
Supplemental employee retirement plans 3 2
Non-pension post-retirement benefit plans 2 2
-------------------------------------------------------------------------
Total $70 $52
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at January 31, 2007, the Bank expects to contribute an additional
$48 million to its principal pension plan, $2 million to its CT defined
benefit pension plan, $47 million to its TD Banknorth defined benefit
pension plans, $9 million to its supplemental employee retirement plans
and $6 million to its non-pension post-retirement benefit plans by the
end of the year. However, future contribution amounts may change upon the
Bank's review of the current contribution levels during the year.
Note 11: EARNINGS PER SHARE
-------------------------------------------------------------------------
The Bank's basic and diluted earnings per share at January 31 are as
follows:
Basic and Diluted Earnings per Share
-------------------------------------------------------------------------
For the three months ended
----------------------------
Jan. 31 Jan. 31
2007 2006
-------------------------------------------------------------------------
Basic Earnings per Share
Net income available to common shares
($ millions) $915 $2,302
Average number of common shares outstanding
(millions) 718.3 712.5
Basic earnings per share ($) $1.27 $3.23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted Earnings per Share
Net income available to common shares
($ millions) $915 $2,302
Average number of common shares outstanding
(millions) 718.3 712.5
Stock options potentially exercisable as
determined under the treasury stock method(1) 6.6 6.4
-------------------------------------------------------------------------
Average number of common shares outstanding
- diluted (millions) 724.9 718.9
-------------------------------------------------------------------------
Diluted earnings per share ($) $1.26 $3.20
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the three months ended January 31, 2007, all options outstanding
were included in the computation of diluted earnings per common share
as the options' exercise prices were less than the average market
price of the Bank's common shares. For the three months ended
January 31, 2006, the computation of diluted earnings per common
share excluded weighted average options outstanding of 945 thousand
with a weighted exercise price of $60.02 as the options' price was
greater than the average market price of the Bank's common shares.
Note 12: SEGMENTED INFORMATION
-------------------------------------------------------------------------
The Bank's operations and activities are organized around the following
businesses: Canadian Personal and Commercial Banking, Wealth Management,
U.S. Personal and Commercial Banking and Wholesale Banking. Results for
these segments for the three months ended January 31 are presented in the
following table:
Results by Business Segment
-------------------------------------------------------------------------
Canadian Personal U.S. Personal
(millions of and Commercial Wealth and Commercial
Canadian dollars) Banking Management Banking
-------------------------------------------------------------------------
For the three Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31
months ended 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
Net interest income $1,307 $1,177 $77 $178 $341 $284
Other income 703 627 474 564 145 73
-------------------------------------------------------------------------
Total revenue 2,010 1,804 551 742 486 357
Provision for
(reversal of)
credit losses 138 99 - - 17 7
Non-interest
expenses 1,059 985 364 525 299 225
Dilution gain, net - - - - - -
-------------------------------------------------------------------------
Income (loss)
before provision
for (benefit of)
income taxes 813 720 187 217 170 125
Provision for
(benefit of)
income taxes 269 244 65 79 55 42
Non-controlling
interests in
subsidiaries,
net of income taxes - - - - 51 37
Equity in net
income of an
associated company,
net of income taxes - - 64 - - -
-------------------------------------------------------------------------
Net income (loss) $544 $476 $186 $138 $64 $46
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets
(billions of
Canadian dollars)
- balance sheet $137.9 $133.5 $15.0 $23.9 $47.5 $48.0
- securitized 46.7 33.6 - - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions of Wholesale
Canadian dollars) Banking(1) Corporate(1) Total
-------------------------------------------------------------------------
For the three Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31 Jan. 31
months ended 2007 2006 2007 2006 2007 2006
-------------------------------------------------------------------------
Net interest income $203 $138 $(257) $(170) $1,671 $1,607
Other income 432 523 48 10 1,802 1,797
-------------------------------------------------------------------------
Total revenue 635 661 (209) (160) 3,473 3,404
Provision for
(reversal of)
credit losses 24 29 (16) (21) 163 114
Non-interest
expenses 332 395 135 160 2,189 2,290
Dilution gain, net - - - 1,564 - 1,564
-------------------------------------------------------------------------
Income (loss)
before provision
for (benefit of)
income taxes 279 237 (328) 1,265 1,121 2,564
Provision for
(benefit of)
income taxes 82 73 (253) (218) 218 220
Non-controlling
interests in
subsidiaries,
net of income taxes - - (4) - 47 37
Equity in net
income of an
associated company,
net of income taxes - - 1 - 65 -
-------------------------------------------------------------------------
Net income (loss) $197 $164 $(70) $1,483 $921 $2,307
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets
(billions of
Canadian dollars)
- balance sheet $172.3 $165.1 $35.5 $13.9 $408.2 $384.4
- securitized - - (16.7) (9.9) 30.0 23.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The taxable equivalent basis increase to net interest income and
provision for income taxes reflected in the Wholesale Banking segment
results is reversed in the Corporate segment.
Note 13: DERIVATIVES
-------------------------------------------------------------------------
Hedge accounting results for the three months ended January 31, 2007 are
as follows:
Hedge Accounting Results
-------------------------------------------------------------------------
For the three months ended
(millions of Canadian dollars) Jan. 31, 2007
-------------------------------------------------------------------------
Fair value hedges
Hedge ineffectiveness $(0.4)
Net gain (loss) excluded from the assessment
of effectiveness (0.8)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flow hedges
Hedge ineffectiveness $0.5
Net gain (loss) excluded from the assessment
of effectiveness -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the three months ended January 31, 2007, there were no firm
commitments that no longer qualified as hedges.
Over the next twelve months, the Bank expects an estimated $46 million in
net losses reported in other comprehensive income as at January 31, 2007
to be reclassified to net income. The maximum length of time over which
the Bank is hedging its exposure to the variability in future cash flows
for anticipated transactions is 18 years. During the three months ended
January 31, 2007, there were no forecasted transactions that failed to
occur.
Note 14: FINANCIAL ASSETS DESIGNATED AS TRADING
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For the three months ended January 31, 2007, a loss of $7 million was
recognized in trading income for financial assets designated as trading
under the fair value option.
Note 15: ACQUISITIONS AND DISPOSITIONS
-------------------------------------------------------------------------
(a) TD Banknorth
Interchange Financial Services Corporation
------------------------------------------
TD Banknorth completed its acquisition of Interchange Financial Services
Corporation (Interchange) on January 1, 2007 for a total cash
consideration of $545 million (US$468.1 million), financed primarily
through TD Banknorth's sale of 13 million of its common shares to the
Bank for $472 million (US$405 million). As a result, the following assets
and liabilities of Interchange were included in the Bank's Consolidated
Balance Sheet: $1,283 million of personal/business loans and mortgages,
$495 million of goodwill and intangibles, $123 million of other assets,
$1,332 million of deposits and $97 million of other liabilities. TD
Banknorth consolidates the financial results of Interchange. As the Bank
consolidates TD Banknorth on a one month lag, Interchange's income/(loss)
for the calendar month of January has not been included in the Bank's
results for the three months ended January 31, 2007 but will be included
in the next reporting period.
Going-private transaction
-------------------------
On November 20, 2006, the Bank announced its intention to acquire all of
the outstanding common shares of TD Banknorth that it does not already
own. The acquisition will be accounted for by the purchase method. The
offer provides minority shareholders of TD Banknorth cash of US$32.33 per
TD Banknorth share. Total consideration will be approximately
$3.6 billion (US$3.2 billion). The offer is subject to approval by
regulators and TD Banknorth shareholders, including an affirmative vote
by the holders of a majority of the outstanding common shares not held by
the Bank or its affiliates, and, if approved, is expected to close before
the end of April 2007. Upon completion of the going-private transaction,
TD Banknorth will become a wholly-owned subsidiary of the Bank.
Increase in ownership in TD Banknorth
-------------------------------------
During the three months ended January 31, 2007, the Bank acquired
approximately 0.9 million shares of TD Banknorth pursuant to TD
Banknorth's dividend reinvestment program. In addition, on January 1,
2007, the Bank acquired 13 million shares of TD Banknorth in connection
with the acquisition of Interchange by TD Banknorth. As a result, the
Bank's ownership interest in TD Banknorth increased to 59.4% as at
January 31, 2007 from 57.0% as at October 31, 2006.
(b) TD Ameritrade
-------------
TD Ameritrade announced two common stock repurchase programs in 2006 for
an aggregate 32 million shares. As a result of TD Ameritrade's repurchase
activity, the Bank's direct ownership position in TD Ameritrade has
increased to 40.2% as at January 31, 2007 from 39.8% as at October 31,
2006. In accordance with the Stockholders' Agreement, the Bank does not
intend to reduce its direct ownership position in the near term and will
not exercise voting rights in respect of any shares it holds in excess of
the 39.9% ownership limit.
Moreover, as a result of consolidation of financial statements of
Lillooet Limited (Lillooet) in these Interim Consolidated Financial
Statements, TD Ameritrade shares held by Lillooet have been included in
the Bank's reported investment in TD Ameritrade. The Bank has recognized
income of TD Ameritrade related to the TD Ameritrade shares owned by
Lillooet for the three months ended December 31, 2006.
Note 16: CONTINGENCIES
-------------------------------------------------------------------------
The two principal legal actions regarding Enron to which the Bank is a
party are the securities class action and the bankruptcy proceeding. In
2006, the Bank settled the bankruptcy court claims in this matter for
approximately $145 million (US$130 million). As at January 31, 2007, the
total contingent litigation reserve for Enron-related claims was
approximately $486 million (US$413 million). It is possible that
additional reserves above the current level could be required. Additional
reserves, if required, cannot be reasonably determined for many reasons,
including that other settlements are not generally appropriate for
comparison purposes, the lack of consistency in other settlements and the
difficulty in predicting the future actions of other parties to the
litigation.
The Bank and its subsidiaries are involved in various other legal actions
in the ordinary course of business, many of which are loan-related. In
management's opinion, the ultimate disposition of these actions,
individually or in the aggregate, will not have a material adverse effect
on the financial condition of the Bank.
Note 17: ACCUMULATED OTHER COMPREHENSIVE INCOME
-------------------------------------------------------------------------
Accumulated other comprehensive income (loss) includes the after-tax
change in unrealized gains and losses on available-for-sale securities,
cash flow hedging activities and foreign currency translation
adjustments.
Accumulated Other Comprehensive Income, net of income taxes
-------------------------------------------------------------------------
As at
(millions of Canadian dollars) Jan. 31, 2007
-------------------------------------------------------------------------
Unrealized gain on available-for-sale securities,
net of cash flow hedges $311
Unrealized foreign currency translation losses on
investments in subsidiaries, net of hedging activities (595)
Gains on derivatives designated as cash flow hedges 16
-------------------------------------------------------------------------
Accumulated other comprehensive income balance
as at January 31, 2007 $(268)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SHAREHOLDER AND INVESTOR INFORMATION
Shareholder Services
For shareholder inquiries relating to missing dividends, lost share
certificates, estate questions, address changes to the share register,
dividend bank account changes or the dividend re-investment program, please
contact our transfer agent: CIBC Mellon Trust Company, P.O. Box 7010, Adelaide
Street Postal Station, Toronto, Ontario, M5C 2W9, 1-800-387-0825 or
416-643-5500 (www.cibcmellon.com or inquiries@cibcmellon.com).
For all other shareholder inquiries, please contact TD Shareholder
Relations at 416-944-6367 or 1-866-756-8936 or email tdshinfo@td.com.
Internet website: www.td.com
Internet e-mail: customer.service@td.com
General Information
Contact Corporate & Public Affairs:
(416) 982-8578
Products and services: Contact TD Canada Trust, 24 hours a day, seven
days a week:
1-866-567-8888
French: 1-866-233-2323
Cantonese/Mandarin: 1-800-328-3698
Telephone device for the deaf: 1-800-361-1180
On-line Investor Presentation: Full quarterly report and a presentation
to investors and analysts (available on February 22, 2007) are accessible from
the home page of the TD Bank Financial Group website,
www.td.com/investor/calendar.jsp.
Quarterly Earnings Conference Call: Instant replay of the teleconference
is available from February 22, 2007 to March 22, 2007. Please call
1-877-289-8525 toll free, in Toronto (416) 640-1917, passcode 21217832 (pound
key).
Webcast of Call: A live audio and video internet webcast of TD Bank
Financial Group's quarterly earnings conference call with investors and
analysts is scheduled on February 22, 2007 at 3:00 p.m. ET. The call is
webcast via the TD Bank Financial Group website at www.td.com/investor. In
addition, recordings of the presentations are archived on TD's website and
will be available for replay for a period of at least one month.
Common Share Repurchase
The Bank has filed a notice with the Toronto Stock Exchange of a normal
course issuer bid through the facilities of the Exchange. A copy of the notice
of the bid may be obtained, without charge, by contacting TD Shareholder
Relations at 416-944-6367 or 1-866-756-8936 or email tdshinfo@td.com.
Further information regarding the bid is available on our web site at
www.td.com under Investor Relations/Share Information/Common Shares.
Annual Meeting
Thursday, March 29, 2007
9:30 a.m. ET
Fairmont The Queen Elizabeth Hotel
Montreal, Quebec
About TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Financial Group. TD Bank Financial Group serves more than 14 million
customers in four key businesses operating in a number of locations in key
financial centres around the globe: Canadian Personal and Commercial Banking,
including TD Canada Trust; Wealth Management, including TD Waterhouse and an
investment in TD Ameritrade; U.S. Personal and Commercial Banking through TD
Banknorth; and Wholesale Banking, including TD Securities. TD Bank Financial
Group also ranks among the world's leading on-line financial services firms,
with more than 4.5 million on-line customers. TD Bank Financial Group had
CDN$408 billion in assets, as of January 31, 2007. The Toronto-Dominion Bank
trades on the Toronto and New York Stock Exchanges under the symbol "TD", as
well as on the Tokyo Stock Exchange.
For further information: Colleen Johnston, Executive Vice President and Chief Financial Officer, (416) 308-8279; Tim Thompson, Vice President, Investor Relations, (416) 982- 6346; or Simon Townsend, Senior Manager, External Communications, (416) 944-7161
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