TD Bank Group Newsroom
TD Bank Financial Group Reports Fourth Quarter and Fiscal 2008 Results
-------------------------------------------------------------------------
TD Bank Financial Group's audited Consolidated Financial Statements
(including Notes to the Consolidated Financial Statements) for the year
ended October 31, 2008, and accompanying Management's Discussion and
Analysis is available at http://www.td.com/investor.
-------------------------------------------------------------------------
FOURTH QUARTER FINANCIAL HIGHLIGHTS compared with the fourth quarter a
year ago:
- Reported diluted earnings per share(1) were $1.22, down 19% from
$1.50.
- Adjusted diluted earnings per share(2) were $0.79, down 44% from
$1.40.
- Reported net income was $1,014 million, compared with $1,094 million.
- Adjusted net income was $665 million, compared with $1,021 million.
FULL YEAR FINANCIAL HIGHLIGHTS compared with last year:
- Reported diluted earnings per share(1) for fiscal 2008 were $4.87,
compared with $5.48 for fiscal 2007.
- Adjusted diluted earnings per share(2) for fiscal 2008 were $4.88,
compared with $5.75 for fiscal 2007.
- Reported net income was $3,833 million for fiscal 2008, compared with
$3,997 million for fiscal 2007.
- Adjusted net income was $3,813 million for fiscal 2008, compared with
$4,189 million for fiscal 2007.
FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The fourth quarter reported diluted earnings per share figures above
include the following items of note:
- Amortization of intangibles of $126 million after tax (16 cents per
share), compared with $99 million after tax (14 cents per share) in
the fourth quarter last year.
- A positive adjustment of $323 million after tax (40 cents per share)
resulting from the reversal of a substantial part of TDBFG's reserve
related to Enron litigation. This reversal reflects TDBFG's re-
evaluation of the reserve in light of the recent favourable evolution
of case law in similar securities class actions.(3)
- A gain of $118 million after tax (15 cents per share) due to the
change in fair values of derivatives hedging the reclassified
available-for-sale debt securities portfolio. This represents the
gain in excess of the accrued amount of derivatives.(4)
- Restructuring and integration charges of $25 million after tax
(3 cents per share), relating to acquisition of Commerce.
- A gain of $59 million after tax (7 cents per share) due to the change
in fair value of credit default swaps hedging the corporate loan
book, compared with a loss of $2 million after tax in the fourth
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 news
release are explained in detail under the "How the Bank Reports"
section. The items of note include the TDBFG's amortization of
intangible assets.
(3) For details, see the Significant Events section, and Note 28 to the
2008 Consolidated Financial Statements.
(4) For details, see the Significant Events section, and Notes 1 and 2 to
the 2008 Consolidated Financial Statements.
TORONTO, Dec. 4 /CNW/ - TD Bank Financial Group (TDBFG) today announced
its financial results for the fourth quarter ended October 31, 2008. Overall
results for the quarter reflected solid earnings contributions from TDBFG's
retail businesses in both Canada and the United States, while illiquid and
volatile markets affected the performance of Wholesale Banking. TDBFG today
also released its 2008 audited Consolidated Financial Statements and
Management's Discussion and Analysis.
"On the whole, we're proud of what we've accomplished in 2008. Our retail
businesses are performing very well and, even though TD Securities had a tough
year and a particularly tough fourth quarter, we're pleased that its strategic
positioning has protected our investors from the worst of the current
turmoil," said Ed Clark, TD Bank Financial Group President and Chief Executive
Officer.
"In this environment, our strategy has been the right one, and we remain
conservatively positioned with over 90% of our earnings coming from retail
businesses. This has allowed us to generate adjusted earnings of $3.8 billion
in 2008 during the most challenging financial times we've ever seen. Our
Canadian and U.S. retail operations delivered very strong results and we're
well into a successful integration at TD Bank, America's Most Convenient
Bank."
FOURTH QUARTER BUSINESS SEGMENT PERFORMANCE
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking generated net income of $600
million in the quarter, an increase of 5% from the same period last year.
Broad-based volume growth in banking products and insurance drove a 6% year-
over-year increase in revenue. Strength in personal deposits, business banking
and life insurance led earnings growth in the quarter.
TD Canada Trust (TDCT) opened 11 new branches during the quarter and
achieved its target of opening 30 new branches for the year, increasing sales
capacity and customer growth across its personal, small business and
commercial banking businesses. In 2008, TDCT was ranked first for overall
quality of customer service among Canada's five major banks for the fourth
year in a row by the independent market research firm Synovate. TDCT was also
ranked first in overall customer satisfaction for the third consecutive year
by J.D. Power and Associates.
"Canadian Personal and Commercial Banking reported record earnings for
2008, following up on a tremendous 2007. Just as impressive, TD Canada Trust
reinforced its reputation as the leader in customer service excellence," said
Clark.
"Looking forward, while we expect revenue growth to step down in 2009, we
will continue to invest in our future success by maintaining our longer hours
while adding more branches and customer-facing employees."
Wealth Management
Wealth Management, including TDBFG's equity share in TD Ameritrade,
produced $170 million in earnings in the fourth quarter. Global Wealth
Management, which excludes TD Ameritrade, generated net income of $110
million, down 8% from the same period last year. In Canada, very strong
volumes in discount brokerage were offset by decreases in revenue from mutual
funds, investment management and advice channels. TD Ameritrade's fourth
quarter contributed $60 million in net income to the Wealth Management
segment, down 20% from the same period last year, primarily due to a one-time
expense related to supporting client assets in the Reserve Primary Fund.
"In these difficult markets, Wealth Management continued to perform well
on a relative basis this quarter," said Clark. "While the impact of declining
capital markets is unavoidable, we've continued to invest in our businesses
for future growth, meeting our target of adding 130 new client-facing advisors
in 2008."
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated adjusted net income of
$276 million in the fourth quarter, an increase of 123% from the same period
last year, primarily due to the addition of Commerce earnings, which were
included for the first time in the third quarter of 2008. The fourth quarter
saw good loan growth while overall asset quality remained better than the
industry as a whole. A major highlight at the end of the quarter was the
successful re-branding of over 575 Commerce and TD Banknorth locations in the
Mid-Atlantic, metro Washington, D.C. and Florida markets to TD Bank, America's
Most Convenient Bank. This convenience brand was endorsed again this quarter
with another first-place ranking in customer satisfaction from J.D. Power and
Associates.
"On a full-year basis, our U.S. Personal and Commercial Banking
operations delivered $806 million in adjusted earnings, well ahead of our $750
million target for the year. This is terrific performance in a challenging
environment," said Clark. "On top of that, our organic growth plans are on
track, with 29 new branches added in 2008, and the Commerce integration passed
a crucial test with the successful launch of our new brand, TD Bank, America's
Most Convenient Bank. This huge re-branding was executed with speed and
precision, a clear display of the operational excellence of our employees,"
Clark added.
"Looking at next year, while we can't outrun a recession, our U.S. retail
operations are demonstrating that they can perform and grow even in what many
are calling the toughest operating environment for financial services in U.S.
history."
Wholesale Banking
As previously announced, Wholesale Banking reported a net loss for the
quarter of $228 million, a decrease of $385 million compared with the fourth
quarter of last year, primarily due to mark-to-market losses in the credit
trading business. On a full year basis, Wholesale reported net income of $65
million for 2008, reflecting weak capital markets and broad-based
deterioration in market conditions stemming from the global credit and
liquidity crisis.
"Although TD Securities had a tough year and a particularly tough fourth
quarter, even with the credit trading losses in the fourth quarter, they still
earned a 5% return since the start of the global financial turmoil," said
Clark.
"We have been repositioning TD Securities for the last five years,
aggressively working to lower its risk profile. We're focused on continuing
this work, evaluating each business and removing any risk we're not
comfortable with," Clark added. "At the same time, we're going to continue
strengthening wholesale's franchise operations - supporting our clients and
solidifying our position as a top 3 dealer in Canada."
Corporate
As previously announced, TDBFG's Corporate segment reported an adjusted
net loss of $153 million for the quarter, compared with a net loss of $26
million in the same period last year and a net loss of $40 million in the
third quarter of 2008. The loss in the Corporate segment was largely due to
illiquid markets, which contributed to losses on securitization and negative
carry on some investments, where TDBFG chose to have lower yielding, safer
investments, given uncertain times.
Conclusion
"As the economy slows, understandably there's concern from governments
and the public that banks may restrict credit. What's clear from our reporting
today is that TD continues to supply credit to its customers and clients,"
said Clark. "We have included details on our overall lending, as well as a
specific look at commercial lending, and both underscore this point. Our
personal and commercial lending in Canada has continued to grow through each
quarter of 2008, despite a general slowdown in credit growth. In fact, the
growth rate of our small business and commercial lending has not only
increased, the rate at which it's increasing has also moved up, from a growth
rate of 7-10% to 14-15% in recent quarters, well above the average growth
rates for these areas of lending."
"While the lack of visibility on the economic environment calls for
caution, we have a strategy and competitive position that will help us weather
the storm, and I know our teams are focused on delivering growth despite
significant headwinds. We're building the first truly North American bank, one
that's focused on franchise earnings and maintaining a business mix that
supports our lower risk profile," added Clark.
"Throughout what has been a very tough year in financial services, I'm
extremely proud of our dedicated team of 74,000 employees, who have continued
to deliver outstanding customer service across all our businesses. It's their
passion that continues to drive our success," Clark concluded.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, the Bank makes written and oral forward-looking
statements, including in this document, in other filings with Canadian
regulators or the U.S. Securities and Exchange Commission (SEC), and in other
communications. In addition, the Bank's senior management may make forward-
looking statements orally to analysts, investors, representatives of the media
and others. 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 2009 and beyond, and strategies to achieve them, the outlook for the
Bank's business lines, and the Bank's anticipated financial performance. The
forward-looking information contained in this document is presented for the
purpose of assisting our shareholders and analysts in understanding our
financial position as at and for the periods ended on the dates presented and
our strategic priorities and objectives, and may not be appropriate for other
purposes. The economic assumptions for 2009 for the Bank are set out in the
2008 Annual Report under the heading "Economic Summary and Outlook" and for
each of our business segments, under the heading "Business Outlook and Focus
for 2009", as updated in the subsequently filed quarterly Reports to
Shareholders. Forward-looking statements are typically identified by words
such as "will", "should", "believe", "expect", "anticipate", "intend",
"estimate", "plan", "may" and "could". By their very nature, these statements
require us 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 - many of which are beyond our control - that could cause
such differences include: credit, market (including equity and commodity),
liquidity, interest rate, operational, reputational, insurance, strategic,
foreign exchange, regulatory, legal and other risks discussed in the Bank's
2008 Annual Report and in other regulatory filings made in Canada and with the
SEC; 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 existing and the introduction of new monetary and economic policies
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;
defaults by other financial institutions in Canada, the U.S. and other
countries; 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
strategies, including its integration, growth and acquisition strategies and
those of its subsidiaries, particularly in the U.S.; changes in accounting
policies (including future accounting changes) and methods the Bank uses to
report its financial condition, including uncertainties associated with
critical accounting assumptions and estimates; changes to our credit ratings;
global capital market activity; increased funding costs for credit due to
market illiquidity and increased competition for funding; 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; legislative and regulatory developments; 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 adequacy of the Bank's risk management
framework, including the risk that the Bank's risk management models do not
take into account all relevant factors; 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; and the effects of disruptions to public
infrastructure, such as transportation, communication, power or water supply.
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 64 of the
Bank's 2008 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, except as required
under applicable securities legislation.
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.
ANALYSIS OF OPERATING PERFORMANCE
This analysis of operating performance is presented to enable readers to
assess material changes in the operational results of TD Bank Financial Group
(the Bank) for the quarter ended October 31, 2008, compared with the
corresponding periods. This analysis should be read in conjunction with our
unaudited consolidated financial results included in this Press Release and
with our 2008 Consolidated Financial Statements. This analysis is dated
December 3, 2008. 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 with the presentation adopted in the current
period. Additional information relating to the Bank is on the Bank's website
http://www.td.com, as well as on SEDAR at http://www.sedar.com and on the U.S.
Securities and Exchange Commission's (SEC's) website at http://www.sec.gov
(EDGAR filers section).
FINANCIAL HIGHLIGHTS(1)
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
(millions of ----------------------------- -------------------
Canadian dollars, Oct. 31 July 31 Oct.31 Oct. 31 Oct. 31
except as noted) 2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Results of operations
Total revenue $3,640 $4,037 $3,550 $14,669 $14,281
Provision for credit
losses 288 288 139 1,063 645
Non-interest expenses 2,367 2,701 2,241 9,502 8,975
Net income - reported(2) 1,014 997 1,094 3,833 3,997
Net income - adjusted(2) 665 1,115 1,021 3,813 4,189
Economic profit(3) (150) 321 430 932 1,876
Return on common equity
- reported 13.3% 13.4% 20.8% 14.4% 19.3%
Return on invested
capital(3) 7.5% 13.1% 16.3% 12.4% 17.1%
-------------------------------------------------------------------------
Financial position
Total assets $563,214 $508,839 $422,124 $563,214 $422,124
Total risk-weighted
assets(4) 211,750 184,674 152,519 211,750 152,519
Total shareholders'
equity 31,674 31,293 21,404 31,674 21,404
-------------------------------------------------------------------------
Financial ratios -
reported (per cent)
Efficiency ratio 65.0% 66.9% 63.1% 64.8% 62.8%
Tier 1 capital to
risk-weighted assets 9.8 9.5 10.3 9.8 10.3
Provision for credit
losses as a % of net
average loans 0.52 0.54 0.30 0.54 0.37
-------------------------------------------------------------------------
Common share information
- reported (Canadian
dollars)
Per share
Basic earnings $1.23 $1.22 $1.52 $4.90 $5.53
Diluted earnings 1.22 1.21 1.50 4.87 5.48
Dividends 0.61 0.59 0.57 2.36 2.11
Book value 36.78 36.75 29.23 36.78 29.23
Closing share price 56.92 62.29 71.35 56.92 71.35
Shares outstanding
(millions)
Average basic 808.0 804.0 717.3 769.6 718.6
Average diluted 812.8 811.0 724.4 775.7 725.5
End of period 810.1 807.3 717.8 810.1 717.8
Market capitalization
(billions of Canadian
dollars) $46.1 $50.3 $51.2 $46.1 $51.2
Dividend yield 4.1% 3.7% 3.0% 3.8% 3.0%
Dividend payout ratio 49.7 48.5 37.6 49.0 38.1
Price to earnings multiple 11.7 12.1 13.0 11.7 13.0
-------------------------------------------------------------------------
Common share information
- adjusted (Canadian
dollars)
Per share
Basic earnings $0.79 $1.37 $1.42 $4.92 $5.80
Diluted earnings 0.79 1.35 1.40 4.88 5.75
Dividend payout ratio 76.8% 43.3% 40.3% 49.3% 36.4%
Price to earnings multiple 11.6 11.3 12.4 11.6 12.4
-------------------------------------------------------------------------
(1) Certain comparative amounts have been restated and reclassified to
conform to the presentation adopted in the current period.
(2) Reported and adjusted results are explained under the "How the Bank
Reports" section, which includes a reconciliation between reported
and adjusted results.
(3) Economic profit and return on invested capital are non-GAAP financial
measures and are explained under the "Economic Profit and Return on
Invested Capital" section.
(4) The Bank adopted the "International Convergence of Capital
Measurement and Capital Standards - A Revised Framework" (Basel II),
issued by the Basel Committee on Banking Supervision for calculating
risk-weighted assets (RWA) and regulatory capital starting November
1, 2007. Prior period numbers are based on the Basel I Capital Accord
(Basel I).
HOW WE PERFORMED
How the Bank Reports
The Bank prepares its consolidated financial statements in accordance
with GAAP and 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 relate to
items which management does not believe are indicative of underlying business
performance. The Bank believes that adjusted results provide the reader with a
better understanding of how management views the Bank's performance. The items
of note are listed in the table on the following page. As explained, adjusted
results are different from reported results determined in accordance with
GAAP. Adjusted results, items of note and related terms used in this document
are not defined terms under GAAP, and, therefore, may not be comparable to
similar terms used by other issuers.
The following tables provide reconciliation between the Bank's reported
and adjusted results.
Operating results - reported(1)
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
----------------------------- -------------------
(millions of Oct. 31 July 31 Oct. 31 Oct. 31 Oct. 31
Canadian dollars) 2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Net interest income $2,449 $2,437 $1,808 $8,532 $6,924
Other income 1,191 1,600 1,742 6,137 7,357
-------------------------------------------------------------------------
Total revenue 3,640 4,037 3,550 14,669 14,281
Provision for credit
losses (288) (288) (139) (1,063) (645)
Non-interest expenses (2,367) (2,701) (2,241) (9,502) (8,975)
-------------------------------------------------------------------------
Income before provision
for income taxes,
non-controlling
interests in
subsidiaries and equity
in net income of
associated company 985 1,048 1,170 4,104 4,661
Provision for income taxes (20) (122) (153) (537) (853)
Non-controlling
interests, net of tax (18) (8) (8) (43) (95)
Equity in net income of
associated company, net
of tax 67 79 85 309 284
-------------------------------------------------------------------------
Net income - reported 1,014 997 1,094 3,833 3,997
Preferred dividends (23) (17) (5) (59) (20)
-------------------------------------------------------------------------
Net income available to
common shareholders
- reported $991 $980 $1,089 $3,774 $3,977
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Certain comparative amounts have been restated to conform with the
presentation adopted in the current quarter.
Reconciliation of non-GAAP measures(1)
Adjusted net income to reported results
-------------------------------------------------------------------------
Operating results For the twelve
- adjusted For the three months ended months ended
----------------------------- -------------------
(millions of Oct. 31 July 31 Oct. 31 Oct. 31 Oct. 31
Canadian dollars) 2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Net interest income $2,449 $2,437 $1,808 $8,532 $6,924
Other income(2) 954 1,566 1,582 5,840 7,148
-------------------------------------------------------------------------
Total revenues 3,403 4,003 3,390 14,372 14,072
Provision for credit
losses(3) (288) (288) (199) (1,046) (705)
Non-interest expenses(4) (2,632) (2,512) (2,103) (9,291) (8,390)
-------------------------------------------------------------------------
Income before provision
for income taxes,
non-controlling interests
in subsidiaries and
equity in net income of
associated company 483 1,203 1,088 4,035 4,977
Provision for income
taxes(5) 116 (175) (156) (554) (1,000)
Non-controlling interests,
net of tax(6) (18) (8) (8) (43) (119)
Equity in net income of
associated company, net
of tax(7) 84 95 97 375 331
-------------------------------------------------------------------------
Net income - adjusted 665 1,115 1,021 3,813 4,189
Preferred dividends (23) (17) (5) (59) (20)
-------------------------------------------------------------------------
Net income available to
common shareholders
- adjusted $642 $1,098 $1,016 $3,754 $4,169
-------------------------------------------------------------------------
Items of note affecting
net income, net of
income taxes
Amortization of
intangibles $(126) $(111) $(99) $(404) $(353)
Reversal of Enron
litigation reserve(8) 323 - - 323 -
Change in fair value of
derivatives hedging
the reclassified
available-for-sale
debt securities
portfolio(9) 118 - - 118 -
Gain relating to
restructuring of
Visa(10) - - 135 - 135
TD Banknorth
restructuring,
privatization and
merger related
charges(11) - - - - (43)
Restructuring and
integration charges
relating to the Commerce
acquisition(12) (25) (15) - (70) -
Change in fair value of
credit default swaps
hedging the corporate
loan book, net of
provision for credit
losses(13) 59 22 (2) 107 30
General allowance release - - 39 - 39
Other tax items(14) - (14) - (34) -
Provision for insurance
claims(15) - - - (20) -
-------------------------------------------------------------------------
Total items of note 349 (118) 73 20 (192)
-------------------------------------------------------------------------
Net income available
to common shareholders
- reported $991 $980 $1,089 $3,774 $3,977
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Reconciliation of reported earnings per share (EPS) to adjusted EPS(16)
(unaudited)
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
----------------------------- -------------------
Oct. 31 July 31 Oct. 31 Oct. 31 Oct. 31
(Canadian dollars) 2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Diluted - reported $1.22 $1.21 $1.50 $4.87 $5.48
Items of note affecting
income (as above) (0.43) 0.14 (0.10) (0.03) 0.27
Items of note affecting
EPS only(17) - - - 0.04 -
-------------------------------------------------------------------------
Diluted - adjusted $0.79 $1.35 $1.40 $4.88 $5.75
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic - reported $1.23 $1.22 $1.52 $4.90 $5.53
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1. Certain comparative amounts have been restated and reclassified to
conform to the presentation adopted in the current period.
2. Adjusted other income excludes the following items of note: fourth
quarter 2008 - $96 million gain due to change in fair value of credit
default swaps (CDS) hedging the corporate loan book; $141 million
gain due to change in derivatives hedging the reclassified
available-for-sale debt securities portfolio, as explained in
footnote 9; third quarter 2008 - $34 million gain due to change in
fair value of CDS hedging the corporate loan book; second quarter
2008 - $1 million gain due to change in fair value of CDS hedging the
corporate loan book; first quarter 2008 - $55 million gain due to
change in fair value of CDS hedging the corporate loan book;
$30 million provision for insurance claims, as explained in footnote
15; fourth quarter 2007 - $3 million loss due to change in fair value
of CDS hedging the corporate loan book; $163 million gain relating to
restructuring of Visa, as explained in footnote 10; third quarter
2007 - $46 million gain due to change in fair value of CDS hedging
the corporate loan book; second quarter 2007 - $11 million gain due
to change in fair value of CDS hedging the corporate loan book; first
quarter 2007 - $8 million loss due to change in fair value of CDS
hedging the corporate loan book.
3. Adjusted provision for credit losses excludes the following item of
note: first quarter 2008 - $17 million related to the portion that
was hedged via the CDS; fourth quarter 2007 - $60 million general
allowance release.
4. Adjusted non-interest expenses excludes the following items of note:
fourth quarter 2008 - $172 million amortization of intangibles;
$40 million restructuring and integration charges related to the
Commerce acquisition, as explained in footnote 12; $477 million
positive adjustment related to the reversal of Enron litigation
reserve, as explained in footnote 8; third quarter 2008 -
$166 million amortization of intangibles; $23 million restructuring
and integration charges relating to the Commerce acquisition; second
quarter 2008 - $117 million amortization of intangibles; $48 million
restructuring and integration charges relating to the Commerce
acquisition; first quarter 2008 - $122 million amortization of
intangibles; fourth quarter 2007 - $138 million amortization of
intangibles; third quarter 2007 - $131 million amortization of
intangibles; second quarter 2007 - $112 million amortization of
intangibles; $86 million TD Banknorth restructuring, privatization
and merger-related charges, as explained in footnote 11; first
quarter 2007 - $118 million amortization of intangibles.
5. For reconciliation between reported and adjusted provision for income
taxes, see the table below.
6. Adjusted non-controlling interests excludes the following items of
note: third quarter 2007 - $1 million amortization of intangibles;
second quarter 2007 - $4 million amortization of intangibles;
$15 million due to TD Banknorth restructuring, privatization and
merger-related charges; first quarter 2007 - $4 million amortization
of intangibles.
7. Adjusted equity in net income of an associated company excludes the
following items of note: fourth quarter 2008 - $17 million
amortization of intangibles; third quarter 2008 - $16 million
amortization of intangibles; second quarter 2008 - $17 million
amortization of intangibles; first quarter 2008 - $16 million
amortization of intangibles; fourth quarter 2007 - $12 million
amortization of intangibles; third quarter 2007 - $11 million
amortization of intangibles; second quarter 2007 - $12 million
amortization of intangibles; first quarter 2007 - $12 million
amortization of intangibles.
8. The Enron contingent liability for which the Bank established a
reserve was re-evaluated in light of the favourable evolution of case
law in similar securities class actions following the U.S. Supreme
Court's ruling in Stoneridge Partners, LLC v. Scientific-Atlanta,
Inc. During the fourth quarter of 2008, the Bank recorded an after-
tax positive adjustment of $323 million ($477 million before tax),
reflecting the substantial reversal of the reserve. For details, see
Note 28 to the 2008 Consolidated Financial Statements.
9. Effective August 1, 2008, as a result of recent deterioration in
markets and severe dislocation in the credit market, the Bank changed
its trading strategy with respect to certain trading debt securities.
The Bank no longer intends to actively trade in these debt
securities. Accordingly, the Bank reclassified certain debt
securities from trading to available-for-sale category in accordance
with the Amendments to the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 3855, Financial Instruments -
Recognition and Measurement. As part of the Bank's trading strategy,
these debt securities are economically hedged, primarily with CDS and
interest rate swap contracts. These derivatives are not eligible for
reclassification and are recorded on a fair value basis with changes
in fair value recorded in the period's earnings. Management believes
that this asymmetry in the accounting treatment between derivatives
and the reclassified debt securities results in volatility in
earnings from period to period that is not indicative of the
economics of the underlying business performance in Wholesale
Banking. As a result, the derivatives are accounted for on an accrual
basis in Wholesale Banking and the gains and losses related to the
derivatives in excess of the accrued amounts are reported in the
Corporate segment and disclosed as an item of note. Adjusted results
of the Bank exclude the gains and losses of the derivatives in excess
of the accrued amount.
10. As part of the global restructuring of Visa USA Inc., Visa Canada
Association and Visa International Service Association, which closed
on October 3, 2007 (restructuring date), the Bank received shares of
the new global entity (Visa Inc.) in exchange for the Bank's
membership interest in Visa Canada Association. As required by the
applicable accounting standards, the shares the Bank received in Visa
Inc. were measured at fair value and an estimated gain of
$135 million after tax was recognized in the Corporate segment, based
on results of an independent valuation of the shares. The gain may be
subject to further adjustment based on the finalization of the Bank's
ownership percentage in Visa Inc.
11. The TD Banknorth restructuring, privatization and merger-related
charges include the following: $31 million restructuring charge,
which primarily consisted of employee severance costs, the costs of
amending certain executive employment and award agreements and write-
down of long-lived assets due to impairment, included in U.S.
Personal and Commercial Banking; $4 million restructuring charge
related to the transfer of functions from TD Bank USA, N.A. (TD Bank
USA) to TD Banknorth, included in the Corporate segment; $5 million
privatization charges, which primarily consisted of legal and
investment banking fees, included in U.S. Personal and Commercial
Banking; and $3 million merger-related charges related to conversion
and customer notices in connection with the integration of Hudson and
Interchange with TD Banknorth, included in U.S. Personal and
Commercial Banking. In the Interim Consolidated Statement of Income,
the restructuring, privatization and merger-related charges are
included in non-interest expenses.
12. As a result of the acquisition of Commerce and related restructuring
and integration initiatives undertaken, the Bank incurred
restructuring and integration charges. Restructuring charges
consisted of employee severance costs, the costs of amending certain
executive employment and award agreements and the write-down of long-
lived assets due to impairment. Integration charges consisted of
costs related to employee retention, external professional consulting
charges and marketing (including customer communication and
rebranding). In the Interim Consolidated Statement of Income, the
restructuring and integration charges are included in non-interest
expenses.
13. 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 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 Wholesale
Banking and the gains and losses on the CDS, in excess of the accrued
cost, are reported in the Corporate segment. Adjusted results exclude
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 CICA Section 3865, Hedges.
14. Third quarter 2008 - As a result of the Commerce acquisition, the
combined overall tax rate for the U.S. Personal and Commercial
Banking segment declined, resulting in a negative impact on future
income tax assets of $14 million related to non-intangible future
income tax assets. First quarter 2008 - The negative impact of the
scheduled reductions in the income tax rate, resulting in a decrease
of $20 million in the net future income tax assets.
15. The provision for insurance claims relates to a court decision in
Alberta. The Alberta government's legislation effectively capping
minor injury insurance claims was challenged and held to be
unconstitutional in early calendar 2008. While the government of
Alberta has appealed the decision, the ultimate outcome remains
uncertain. As a result, the Bank accrued an additional actuarial
liability for potential claims in the first quarter of 2008.
16. EPS is computed by dividing net income available to common
shareholders by the weighted-average number of shares outstanding
during the period. As a result, the sum of the quarterly EPS may not
equal to year-to-date EPS.
17. The diluted EPS figures do not include Commerce earnings for the
month of April 2008 due to a one month lag between fiscal quarter
ends, while share issuance on close resulted in a one-time negative
earnings impact of 4 cents per share.
Reconciliation of non-GAAP provision for income taxes
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
----------------------------- -------------------
Oct. 31 July 31 Oct. 31 Oct. 31 Oct. 31
2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Provision for income
taxes - reported $20 $122 $153 $537 $853
-------------------------------------------------------------------------
Increase (decrease)
resulting from items
of note:
Amortization of
intangibles 63 71 51 239 184
Reversal of Enron
litigation reserve (154) - - (154) -
Change in fair value
of derivatives hedging
the reclassified
available-for-sale debt
securities portfolio (23) - - (23) -
Gain relating to
restructuring of Visa - - (28) - (28)
TD Banknorth restructuring
privatization and
merger related charges - - - - 28
Restructuring and
integration charges
relating to the
Commerce acquisition 15 8 - 41 -
Change in fair value
of credit default
swaps hedging the
corporate loan book,
net of provision for
credit losses (37) (12) 1 (62) (16)
Other tax items - (14) - (34) -
General allowance release - - (21) - (21)
Provision for
insurance claims - - - 10 -
-------------------------------------------------------------------------
Tax effect - items of note (136) 53 3 17 147
-------------------------------------------------------------------------
Provision for income
taxes - adjusted $(116) $175 $156 $554 $1,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Effective income tax
rate - adjusted (24.0)% 14.5% 14.3% 13.7% 20.1%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 and are not
defined terms under GAAP. Readers are cautioned 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, items of note
and related terms are discussed in the "How the Bank Reports" section.
Reconciliation of Economic Profit, Return on Invested Capital and
Adjusted Net Income
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
----------------------------- -------------------
Oct. 31 July 31 Oct. 31 Oct. 31 Oct. 31
2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Average common equity $29,615 $29,065 $20,808 $26,213 $20,572
Average cumulative
goodwill/intangible
assets amortized,
net of income taxes 4,269 4,171 3,941 4,136 3,825
-------------------------------------------------------------------------
Average invested
capital $33,884 $33,236 $24,749 $30,349 $24,397
Rate charged for
invested capital 9.3% 9.3% 9.4% 9.3% 9.4%
-------------------------------------------------------------------------
Charge for invested
capital $(792) $(777) $(586) $(2,822) $(2,293)
-------------------------------------------------------------------------
Net income available
to common shareholders
- reported $991 $980 $1,089 $3,774 $3,977
Items of note impacting
income, net of income
taxes (349) 118 (73) (20) 192
-------------------------------------------------------------------------
Net income available to
common shareholders
- adjusted $642 $1,098 $1,016 $3,754 $4,169
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Economic profit $(150) $321 $430 $932 $1,876
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Return on invested
capital 7.5% 13.1% 16.3% 12.4% 17.1%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Significant Events
Enron
The Bank is a party to certain legal actions regarding Enron, principally
the securities class action. As at July 31, 2008, the Bank's total contingent
litigation reserve for Enron-related claims was approximately $497 million
(US$413 million). The Bank re-evaluated the reserve in light of the favourable
evolution of case law in similar securities class actions following the U.S.
Supreme Court's ruling in Stoneridge Partners, LLC v. Scientific-Atlanta, Inc.
During the fourth quarter of 2008, the Bank recorded an after-tax positive
adjustment of $323 million (pre-tax $477 million), reflecting the substantial
reversal of the reserve. Due to the pending nature of the securities class
action and other Enron-related claims to which the Bank is a party, the Bank
retained $20 million (US$17 million) of the reserve. Given the uncertainties
of the timing and outcome of securities litigation, the Bank will continue to
assess evolving case law as it relates to the Bank's Enron reserve to
determine whether the reserve should be further reduced. The Bank will
continue to defend itself vigorously in these cases and work to resolve them
in the best interest of its shareholders. For details, see Note 28 to the 2008
Consolidated Financial Statements.
Deterioration in Markets and Severe Dislocation in Credit Market
During the fourth quarter of 2008, as a result of recent deterioration in
markets and severe dislocation in the credit market, the Bank changed its
trading strategy with respect to certain trading debt securities. These debt
securities were previously recorded at fair value with changes in fair value,
as well as any gains or losses realized on disposal, recognized in trading
income. Since the Bank no longer intends to actively trade in these debt
securities, the Bank reclassified these debt securities from trading to the
available-for-sale category effective August 1, 2008 in accordance with the
Amendments to CICA Section 3855, Financial Instruments - Recognition and
Measurement.
The fair value of the reclassified debt securities was $7,355 million, as
at October 31, 2008. In the fourth quarter of 2008, net interest income of
$110 million after tax was recorded relating to the reclassified debt
securities. The change in fair value of $561 million after tax for these
securities was recorded in other comprehensive income. Had the Bank not
reclassified these debt securities on August 1, 2008, the change in the fair
value of these debt securities would have been included as part of trading
income, the impact of which would have resulted in a reduction of net income
of $561 million in the fourth quarter of 2008, and a reduction in adjusted net
income of $443 million after taking into account the change in the fair value
of derivatives hedging the reclassified debt securities portfolio.
For further details, see Note 2 to the 2008 Consolidated Financial
Statements.
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, including TD Canada Trust and TD Insurance;
Wealth Management, including TD Ameritrade; U.S. Personal and Commercial
Banking, including TD Banknorth and Commerce; and Wholesale Banking. The
Bank's other activities are grouped into the Corporate segment. Effective the
third quarter of 2008, U.S. insurance and credit card businesses were
transferred to the Canadian Personal and Commercial Banking segment, and the
U.S. Wealth Management businesses to the Wealth Management segment for
management reporting purposes to align with how these businesses are being
managed on a North American basis. Prior periods have not been reclassified as
the impact was not material. Results of each business segment reflect revenue,
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, the "Business Focus" section in the 2008
Management's Discussion and Analysis and Note 31 to the 2008 Consolidated
Financial Statements. For information concerning the Bank's measures of
economic profit and return on invested capital, which are non-GAAP measures,
see page 7. Segmented information also appears in Appendix A on page 17.
Net interest income 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 in Wholesale
Banking is eliminated in the Corporate segment. The TEB adjustment for the
quarter was $142 million, compared with $247 million in the fourth quarter
last year, and $129 million in the prior quarter. On a full year basis, the
TEB adjustment was $513 million, compared with $664 million in the last year.
As noted in Note 4 to the 2008 Consolidated Financial Statements, the
Bank securitizes retail loans and receivables held by Canadian Personal and
Commercial Banking in transactions that are accounted for as sales. For the
purpose of segmented reporting, Canadian Personal and Commercial Banking
accounts for the transactions as though they are financing arrangements.
Accordingly, the interest income earned on the assets sold net of the funding
costs incurred by the purchaser trusts is recorded in net interest income and
the provision for credit losses related to these assets is charged to
provision for (reversal of) credit losses. This accounting is reversed in the
Corporate segment and the gain recognized on sale which is in compliance with
appropriate accounting standards together with income earned on the retained
interests net of credit losses incurred are included in other income.
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking net income for the quarter was
$600 million, an increase of $28 million, or 5%, compared with the fourth
quarter last year, and a decrease of $44 million, or 7%, compared with the
prior quarter. The annualized return on invested capital for the quarter was
29%, compared with 27% in the fourth quarter last year and 31% in the prior
quarter.
Revenue grew by $131 million, or 6%, compared with the fourth quarter
last year, primarily due to volume growth across most banking products,
particularly in real-estate secured lending, deposits and personal lending.
The inclusion of revenue from the U.S. businesses contributed to the growth as
well. Revenue increased by $21 million, or 1%, compared with the prior quarter
due mainly to volume growth in real-estate secured lending and personal
lending. Margin on average earning assets decreased by 14 basis points (bps)
from 3.03% compared with the fourth quarter last year due to higher funding
costs, price competition in high yield savings and term deposits, and customer
preference towards lower margin products. Margin on average earning assets
decreased 9 bps compared with the prior quarter.
Compared with the fourth quarter last year, real-estate secured lending
volume (including securitizations) grew by $15.9 billion or 11.1%; personal
deposit volume grew by $12.6 billion or 12.2%; and consumer loan volume grew
by $2.7 billion or 11.6%. Business deposits volume increased by $4.7 billion,
or 12.0% and business loans and acceptances volume grew by $2.7 billion or
13.6%. Gross originated domestic insurance premiums grew by $62 million or
10%. As at August 2008, personal deposit market share was 21.2% and personal
lending market share was 19.9% consistent with last quarter's market share.
Small business lending (credit limits of less than $250,000) market share as
at June 30, 2008 was 18.2%.
Provision for credit losses (PCL) for the quarter was $209 million, which
increased by $33 million, or 19%, compared with the fourth quarter last year.
Personal banking PCL of $198 million was $30 million higher than the fourth
quarter last year, primarily due to credit quality challenges and higher
bankruptcies, and higher personal lending and credit card volumes. Business
banking PCL was $11 million for the quarter, compared with $8 million in the
fourth quarter last year. Annualized PCL as a percentage of credit volume was
0.40%, an increase of 3 bps, compared with the fourth quarter last year. PCL
increased by $15 million, or 8%, compared with the prior quarter. Personal
banking provisions increased $19 million, or 11%, compared with the prior
quarter primarily due to higher bankruptcies and delinquencies. Business
banking provisions decreased slightly by $4 million, compared with the prior
quarter.
Non-interest expenses increased by $88 million, or 8%, compared with the
fourth quarter last year. Primary drivers of the expense growth were
investments in new branches, higher employee compensation, inclusion of U.S.
businesses and provisions related to the termination of the Truncation and
Electronic Cheque Presentment (TECP) initiative by the Canadian Payments
Association. Non-interest expenses increased by $73 million, or 6%, compared
with the prior quarter, mainly due to higher seasonal business related costs
and provisions related to the TECP initiative. The average full time
equivalent (FTE) staffing levels increased by 1,426, or 5%, compared with the
fourth quarter last year, mainly as a result of increases in branch network,
insurance and the inclusion of personnel in U.S. businesses. The average FTE
increased by 61, or 0.2%, compared with the prior quarter. The efficiency
ratio for the current quarter weakened slightly to 52.7%, compared with 51.8%
in the fourth quarter last year and 49.9% in the prior quarter.
Volume growth and margins continue to be vulnerable to economic pressures
and changing cost of funds. The outlook for revenue growth is expected to
moderate in 2009 as volume growth slows primarily in real-estate secured
lending. Revenue growth should benefit from increasing our leadership position
in branch hours and new branch and marketing investments, as well as improved
customer cross-sell and productivity improvements. PCL rates as a function of
loan volumes are expected to increase due to deteriorating conditions in the
Canadian economy. Expense growth is expected to be lower relative to last year
with the view to maintaining a positive operating leverage.
Wealth Management
Wealth Management's net income for the quarter was $170 million, a
decrease of $24 million, or 12%, compared with the fourth quarter last year,
and a decrease of $31 million, or 15%, compared with the prior quarter. The
Bank's investment in TD Ameritrade generated net income of $60 million, a
decrease of $15 million, or 20%, compared with the fourth quarter last year,
and a decrease of $14 million, or 19% compared with the prior quarter
primarily due to a one-time expense TD Ameritrade incurred reimbursing clients
for losses resulting from decline in value of investments in the Reserve
Primary Fund. The annualized return on invested capital decreased to 19%,
compared with 20% in the fourth quarter last year and 21% to the prior
quarter.
Revenue was $591 million which increased by $10 million, or 2%, compared
with the fourth quarter last year, mainly due to the inclusion of the U.S.
Wealth Management businesses, higher trading volumes in online brokerage due
to higher frequency of trading by active investors in these volatile markets
enhanced by strategic pricing changes introduced last year, and increased net
interest income from the growth in client cash deposits, partially offset by
decreased margin loans. These revenue gains were partially offset by lower
commissions in online brokerage due to the strategic price reductions
introduced last year, lower fees in the Mutual Funds business and lower new
issues and transactional revenues in the advice-based businesses. Revenue for
the quarter decreased by $18 million, or 3%, compared with the prior quarter,
primarily due to lower fees in mutual funds driven by lower assets and lower
trading revenues in our advice-based businesses as a result of market
declines.
Non-interest expenses increased by $29 million, or 7%, compared with the
fourth quarter last year, primarily due to inclusion of U.S. Wealth Management
businesses and the continued investment in growing our sales force where the
target of growing by 130 net new client facing Advisors was achieved. Non-
interest expenses increased slightly by $7 million, or 1%, compared with the
prior quarter. The efficiency ratio for the current quarter was 72.4%,
compared with 68.7% in the fourth quarter last year and 69.1% in the prior
quarter.
Assets under administration of $173 billion at October 31, 2008,
decreased by $12 billion, or 7%, from October 31, 2007, primarily due to
declines driven by capital markets volatility, partially offset by the
inclusion of assets from U.S. Wealth Management businesses of $10 billion and
the addition of net new client assets. Assets under management of $170 billion
at October 31, 2008 grew $10 billion, or 6%, from October 31, 2007, mainly due
to the inclusion of assets from U.S. Wealth Management businesses of $8
billion and other items, such as addition of net new client assets and
additional mutual fund assets under management from TD Ameritrade, which were
partially offset by the impact of market-related declines.
Current challenging market conditions for the next few quarters may
continue to negatively impact growth in assets under management, assets under
administration and loans with a corresponding impact to fee-based revenues and
net interest income. Longer term prospects for Wealth Management continue to
be positive. Investment in client facing Advisors, products and technology
continues in order to position the business for future growth.
Total Wealth Management
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
----------------------------- -------------------
(millions of Oct. 31 July 31 Oct. 31 Oct. 31 Oct. 31
Canadian dollars) 2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Global Wealth(1) $110 $127 $119 $480 $501
TD Ameritrade 60 74 75 289 261
-------------------------------------------------------------------------
Net income $170 $201 $194 $769 $762
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Effective the third quarter of 2008, the Bank transferred the U.S.
Wealth Management businesses to the Wealth Management segment for
management reporting purposes. Prior periods have not been
reclassified as the impact was not material to segment results.
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking's reported net income for the fourth
quarter was $251 million and the annualized return on invested capital was
6.4%. Net income increased by $127 million from the fourth quarter of 2007 and
increased by $7 million from the prior quarter. Excluding items of note
relating to integration and restructuring charges in the current and prior
quarters, adjusted net income for the fourth quarter was $276 million,
compared to $124 million in the same quarter last year and $273 million in the
prior quarter. Much of the increase over last year relates to the earnings
from Commerce since its acquisition on March 31, 2008. Integration and
restructuring charges for the quarter totalled $39 million, an increase of $16
million over the prior quarter as plans around the operational and customer
conversion efforts have been finalized and we have begun executing against
them, informing customers and hitting significant milestones, including the
brand launch of TD Bank, America's Most Convenient Bank in the Mid-Atlantic.
Revenue increased by $569 million, or 120%, from the fourth quarter of
last year, principally due to the Commerce acquisition while revenue was up 2%
over the prior quarter as a strengthening U.S. dollar, higher non-interest
income, and strong loan growth served to more than offset margin compression.
Margin on average earning assets declined by 19 bps compared with the fourth
quarter last year, while decreasing 11 bps compared with the prior quarter.
Net interest income remained under pressure from a flat yield curve and
continued strong competition for deposits.
Provision for credit losses for the quarter increased by $43 million,
compared with the fourth quarter last year, and by $2 million over the prior
quarter. The increased PCL compared with the fourth quarter last year was
primarily due to higher levels of impaired loans and increased loans
outstanding as a result of the Commerce acquisition. Net impaired loans
totalled $343 million, an increase of $144 million over the fourth quarter of
last year and an increase of $28 million from the prior quarter. The increase
over the prior year was due primarily to the acquisition of Commerce, while
the increase over the prior quarter was due to continued weakness in the
economy. Net impaired loans as a percentage of total loans and leases were
0.65%, compared with 0.76% as at the end of last year and were the same at the
end of the prior quarter.
Reported non-interest expenses increased by $386 million, or 146%,
compared with the fourth quarter last year, primarily due to costs of the
acquired Commerce franchise and increased integration and restructuring
charges. Non-interest expenses increased by $39 million, or 6%, compared with
the prior quarter due to increased spending on marketing campaigns and higher
integration and restructuring charges. While staffing levels were up
significantly over the fourth quarter of last year due to the Commerce
acquisition, the FTE staffing levels have declined by approximately 3% since
the acquisition of Commerce, primarily due to staff reductions related to
integration efforts and branch consolidations. The efficiency ratio was 62.2%,
compared with 55.4% in the fourth quarter last year, and 59.5% in the prior
quarter, due to the higher marketing spend in this quarter.
The banking environment in the U.S. is expected to remain challenging,
and there is uncertainty as to the length and depth of the economic recession
and the continuing effects of the ongoing market issues related to liquidity.
It is expected that the weak economy and markets will continue to affect PCL
and deposit spreads negatively. However, a weaker Canadian dollar, attainment
of synergies, and strong loan growth should more than offset these conditions.
Wholesale Banking
Wholesale Banking reported net loss for the quarter of $228 million, a
decrease in net income of $385 million, compared with the fourth quarter of
last year, and a decrease of $265 million, compared with the prior quarter.
Results in the quarter were substantially impacted by a significant decline in
global liquidity and reduced market activity as the weakness in global
financial markets continued to broaden and intensify. This led to significant
credit trading losses which were a primary contributor to the loss in the
quarter. In addition, strong trading revenues in fixed income and foreign
exchange were largely offset by write downs in the public equity portfolio and
a decline in the mark-to-market of loan commitments. The annualized return on
invested capital was (21)% in the current quarter, compared with 21% in the
fourth quarter last year and 4% in the prior quarter.
Wholesale Banking revenue was derived primarily from capital markets,
investing and corporate lending activities. Revenue for the quarter was ($114)
million, compared with $525 million in the fourth quarter last year and $328
million in the prior quarter. Capital markets revenues were impacted from
broad-based deterioration in market conditions stemming from the global credit
and liquidity crisis.
The decline in revenue from the fourth quarter last year was attributable
to:
- Substantial credit trading losses. These losses were mainly
attributable to weaker proprietary trading revenues and a dramatic
decline in global market liquidity. The decline in liquidity led to
mark-to-market trading losses due to significant widening in the
pricing relationship between assets and credit default swaps (CDS) as
well as lower valuations on trading positions due to a widening in
the bid/ask spread. As a result of this continuing deterioration,
Wholesale Banking has repositioned its credit trading business to
focus on North America. In addition, effective August 1, 2008,
Wholesale Banking reclassified certain debt securities into the
available-for-sale category. The debt securities in the available-
for-sale category will be managed with the goal of recapturing value
over time as the market stabilizes.
- The decline in market liquidity also led to lower mark-to-market
values on loan commitments.
- Decline in equity trading revenue, primarily due to higher volatility
and a significant decline in global equity prices as well as lower
non-taxable transaction revenue compared with the same quarter last
year.
- Advisory and underwriting revenues were down, reflecting lower levels
of market activity driven by weaker financial valuations, higher
corporate funding costs and a decline in investor demand for new
issues.
Capital markets revenue decreased from the prior quarter, primarily due
to:
- Substantial credit trading losses, driven by a significant decline in
market liquidity.
- Higher mark-to-market losses on loan commitments.
- Decline in equity trading revenue due to higher market volatility and
decline in global equity markets.
The decreases from the prior year and prior quarter noted above were
partially offset by strong foreign exchange and interest rate revenue. This
increase was primarily attributable to significant global financial market
volatility which led to an increase in client activity and higher revenues on
trading positions, including the replacement of trading positions that were
closed out with derivative counterparties.
The equity investment portfolio posted lower net security gains this
quarter compared with the fourth quarter last year and the prior quarter as
gains in our private equity portfolio were largely offset by write downs in
our public equity portfolio due to a significant decline in North American
equity markets. Corporate lending revenue was up compared with the fourth
quarter last year and the prior quarter, due to higher lending volume. In
addition Wholesale Banking results benefited from favourable tax items.
Provision for credit losses is composed of allowances for credit losses
and accrual costs for credit protection. PCL was $10 million in the quarter,
compared with $4 million in the fourth quarter of last year and $30 million in
the prior quarter. The provision for the quarter is related to the cost of
credit protection. The prior quarter included the cost of credit protection
and $19 million in PCL, primarily related to a single credit exposure in the
private equity portfolio. Wholesale Banking continues to proactively manage
its credit risk and currently holds $2.3 billion in notional CDS protection.
Expenses for the quarter were $306 million, an increase of $32 million,
or 12%, compared with the fourth quarter last year, due primarily to higher
severance and continuing investments in risk and control areas. Expenses
increased $25 million, or 9%, from the prior quarter primarily due to higher
severance.
Overall, Wholesale Banking had a very weak quarter leading to a net loss.
The operating environment weakened significantly characterized by dramatic
declines in global liquidity, equity markets, and capital markets activity. As
a result of the significant weakness in market conditions, Wholesale Banking
realigned its strategy for credit trading to a North American focused
business. We expect the current operating challenges - lower liquidity, higher
market volatility, lower capital markets activity, and potential for higher
corporate defaults - to continue into 2009 which may impact Wholesale Banking
results.
Corporate
Corporate segment had reported net income of $221 million for the
quarter, compared with a reported net income of $47 million in the fourth
quarter last year and a reported net loss of $129 million in the prior
quarter. On an adjusted basis, the net loss for the quarter was $153 million,
compared with a net loss of $26 million last year and a net loss of $40
million in the third quarter. The year-over-year increase in adjusted net loss
of $127 million was driven by securitization losses, higher unallocated
corporate expenses, the impact of retail hedging activity and costs associated
with corporate financing activity. The current quarter adjusted net loss was
$113 million higher than the prior quarter and was attributable to
securitization losses, costs associated with financing activity and the impact
of tax benefits reported last quarter.
The difference between reported and adjusted net income for the Corporate
segment was due to items of note as outlined below. These items are described
more fully in the Reconciliation of Non-GAAP Financial Measures table.
Reconciliation of Corporate Segment Reported and Adjusted Net Income
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
---------------------------- -------------------
(millions of Oct 31 July 31 Oct 31 Oct 31 Oct 31
Canadian dollars) 2008 2008 2007 2008 2007
-------------------------------------------------------------------------
Net income (loss) -
reported $221 $(129) $47 $(147) $(162)
-------------------------------------------------------------------------
Items of note affecting
net income, net of
income taxes:
Amortization of
intangibles 126 111 99 404 353
Reversal of Enron
litigation reserve (323) - - (323) -
Change in fair value
of derivatives hedging
the reclassified
available-for-sale
securities portfolio (118) - - (118) -
Gain relating to
restructuring of Visa - - (135) - (135)
TD Banknorth restructuring,
privatization and
merger-related charges - - - - 4
Change in fair value of
credit default swaps
hedging the corporate
loan book, net of
provision for credit
losses (59) (22) 2 (107) (30)
Other tax items - - - 20 -
Provision for
insurance claims - - - 20 -
General allowance
release - - (39) - (39)
-------------------------------------------------------------------------
Total items of note (374) 89 (73) (104) 153
-------------------------------------------------------------------------
Net (loss) - adjusted $(153) $(40) $(26) $(251) $(9)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Decomposition of Material
Items included in Net
(Loss) - Adjusted
Interest on income tax
refunds $1 $21 $- $23 $11
Securitization gain (loss) (44) 4 2 (28) 5
Unallocated Corporate
expenses (83) (77) (51) (268) (189)
Other (27) 12 23 22 164
-------------------------------------------------------------------------
Net (loss) - adjusted $(153) $(40) $(26) $(251) $(9)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The Bank's unaudited consolidated financial results, as presented on pages
13 to 17 of this Press Release, have been prepared in accordance with GAAP.
However, certain additional disclosures required by GAAP have not been
presented in this document. These consolidated financial results should be
read in conjunction with the Bank's 2008 Consolidated Financial Statements.
The accounting policies used in the preparation of these consolidated
financial results are consistent with those used in the Bank's October 31,
2008 Consolidated Financial Statements.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
-------------------------------------------------------------------------
INTERIM CONSOLIDATED BALANCE SHEET (unaudited)
-------------------------------------------------------------------------
As at
--------------------
Oct. 31 Oct. 31
(millions of Canadian dollars) 2008 2007
-------------------------------------------------------------------------
ASSETS
Cash and due from banks $2,517 $1,790
Interest-bearing deposits with banks 15,429 14,746
-------------------------------------------------------------------------
17,946 16,536
-------------------------------------------------------------------------
Securities
Trading 53,095 77,637
Designated as trading under the fair value option 6,402 2,012
Available-for-sale 75,121 35,650
Held-to-maturity 9,507 7,737
-------------------------------------------------------------------------
144,125 123,036
-------------------------------------------------------------------------
Securities purchased under reverse repurchase
agreements 42,425 27,648
-------------------------------------------------------------------------
Loans
Residential mortgages 63,003 58,485
Consumer installment and other personal 79,610 67,532
Credit card 7,387 5,700
Business and government 70,650 44,258
Business and government designated as trading
under the fair value option 510 1,235
-------------------------------------------------------------------------
221,160 177,210
Allowance for credit losses (1,536) (1,295)
-------------------------------------------------------------------------
Loans, net of allowance for credit losses 219,624 175,915
-------------------------------------------------------------------------
Other
Customers' liability under acceptances 11,040 9,279
Investment in TD Ameritrade 5,159 4,515
Derivatives 83,548 38,918
Goodwill 14,842 7,918
Other intangibles 3,141 2,104
Land, buildings and equipment 3,833 1,822
Other assets 17,531 14,433
-------------------------------------------------------------------------
139,094 78,989
-------------------------------------------------------------------------
Total assets $563,214 $422,124
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------
Deposits
Personal $192,234 $147,561
Banks 9,680 10,162
Business and government 129,086 73,322
Trading 44,694 45,348
-------------------------------------------------------------------------
375,694 276,393
-------------------------------------------------------------------------
Other
Acceptances 11,040 9,279
Obligations related to securities sold short 18,518 24,195
Obligations related to securities sold under
repurchase agreements 18,654 16,574
Derivatives 74,473 41,621
Other liabilities 17,721 21,236
-------------------------------------------------------------------------
140,406 112,905
-------------------------------------------------------------------------
Subordinated notes and debentures 12,436 9,449
-------------------------------------------------------------------------
Liability for preferred shares 550 550
-------------------------------------------------------------------------
Liability for capital trust securities 894 899
-------------------------------------------------------------------------
Non-controlling interests in subsidiaries 1,560 524
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares (millions of shares issued and
outstanding: Oct. 31, 2008 - 810.1 and Oct. 31,
2007 - 717.8) 13,241 6,577
Preferred shares (millions of shares issued and
outstanding: Oct. 31, 2008 - 75.0 and Oct. 31,
2007 - 17.0) 1,875 425
Contributed surplus 350 119
Retained earnings 17,857 15,954
Accumulated other comprehensive income (loss) (1,649) (1,671)
-------------------------------------------------------------------------
31,674 21,404
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $563,214 $422,124
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
-------------------------------------------------------------------------
For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
(millions of Canadian dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Interest income
Loans $3,455 $3,310 $13,501 $12,729
Securities
Dividends 226 256 987 928
Interest 1,296 983 4,467 3,838
Deposits with banks 162 152 629 357
-------------------------------------------------------------------------
5,139 4,701 19,584 17,852
-------------------------------------------------------------------------
Interest expense
Deposits 2,103 2,223 8,481 8,247
Subordinated notes and debentures 172 127 654 484
Preferred shares and
capital trust securities 24 28 94 109
Other liabilities 391 515 1,823 2,088
-------------------------------------------------------------------------
2,690 2,893 11,052 10,928
-------------------------------------------------------------------------
Net interest income 2,449 1,808 8,532 6,924
-------------------------------------------------------------------------
Other income
Investment and securities
services 531 574 2,245 2,400
Credit fees 129 112 459 420
Net securities gains 55 60 331 326
Trading (loss) income (654) (52) (794) 591
Income (loss) from financial
instruments designated as
trading under the fair
value option (83) 36 (137) (55)
Service charges 363 263 1,237 1,019
Loan securitizations (13) 80 231 397
Card services 179 118 589 451
Insurance, net of claims 248 243 927 1,005
Trust fees 34 31 140 133
Other 402 277 909 670
-------------------------------------------------------------------------
1,191 1,742 6,137 7,357
-------------------------------------------------------------------------
Total revenue 3,640 3,550 14,669 14,281
-------------------------------------------------------------------------
Provision for credit losses 288 139 1,063 645
-------------------------------------------------------------------------
Non-interest expenses
Salaries and employee benefits 1,334 1,119 4,984 4,606
Occupancy, including depreciation 287 188 935 736
Equipment, including depreciation 203 167 683 614
Amortization of other intangibles 172 138 577 499
Restructuring costs - - 48 67
Marketing and business development 148 115 491 445
Brokerage-related fees 66 61 252 233
Professional and advisory services 205 135 569 488
Communications 61 49 210 193
Other (109) 269 753 1,094
-------------------------------------------------------------------------
2,367 2,241 9,502 8,975
-------------------------------------------------------------------------
Income before provision for
income taxes, non-controlling
interests in subsidiaries and
equity in net income of an
associated company 985 1,170 4,104 4,661
Provision for income taxes 20 153 537 853
Non-controlling interests in
subsidiaries, net of
income taxes 18 8 43 95
Equity in net income of an
associated company, net of
income taxes 67 85 309 284
-------------------------------------------------------------------------
Net income 1,014 1,094 3,833 3,997
Preferred dividends 23 5 59 20
-------------------------------------------------------------------------
Net income available to
common shareholders $991 $1,089 $3,774 $3,977
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of common
shares outstanding (millions)
Basic 808.0 717.3 769.6 718.6
Diluted 812.8 724.4 775.7 725.5
Earnings per share (in dollars)
Basic $1.23 $1.52 $4.90 $5.53
Diluted 1.22 1.50 4.87 5.48
Dividends per share (in dollars) 0.61 0.57 2.36 2.11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
-------------------------------------------------------------------------
For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
(millions of Canadian dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Common shares
Balance at beginning of period $13,090 $6,525 $6,577 $6,334
Proceeds from shares issued
on exercise of options 55 41 255 173
Shares issued as a result of
dividend reinvestment plan 89 23 274 85
Impact of shares (acquired)
sold for trading purposes(1) 7 4 (12) 30
Repurchase of common shares - (16) - (45)
Issued on acquisition of Commerce - - 6,147 -
Issued on acquisition of VFC - - - -
-------------------------------------------------------------------------
Balance at end of period 13,241 6,577 13,241 6,577
-------------------------------------------------------------------------
Preferred shares
Balance at beginning of period 1,625 425 425 425
Shares issued 250 - 1,450 -
-------------------------------------------------------------------------
Balance at end of period 1,875 425 1,875 425
-------------------------------------------------------------------------
Contributed surplus
Balance at beginning of period 355 118 119 66
Stock options (5) 1 (32) 1
Conversion of TD Banknorth
options on privatization - - - 52
Conversion of Commerce options
on acquisition - - 263 -
-------------------------------------------------------------------------
Balance at end of period 350 119 350 119
-------------------------------------------------------------------------
Retained earnings
Balance at beginning of period 17,362 15,378 15,954 13,725
Transition adjustment on
adoption of Financial
Instruments standards - - - 80
Net income 1,014 1,094 3,833 3,997
Common dividends (493) (409) (1,851) (1,517)
Preferred dividends (23) (5) (59) (20)
Premium paid on repurchase
of common shares - (104) - (311)
Other (3) - (20) -
-------------------------------------------------------------------------
Balance at end of period 17,857 15,954 17,857 15,954
-------------------------------------------------------------------------
Accumulated other comprehensive
income (loss), net of income
taxes
Balance at beginning of period (1,139) (1,443) (1,671) (918)
Transition adjustment on
adoption of Financial
Instruments standards - - - 426
Other comprehensive income
(loss) for the period (510) (228) 22 (1,179)
-------------------------------------------------------------------------
Balance at end of period (1,649) (1,671) (1,649) (1,671)
-------------------------------------------------------------------------
Total shareholders' equity $31,674 $21,404 $31,674 $21,404
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Purchased by subsidiaries of the Bank, which are regulated securities
entities in accordance with Regulation 92-313 under the Bank Act.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
-------------------------------------------------------------------------
For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
(millions of Canadian dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net income $1,014 $1,094 $3,833 $3,997
-------------------------------------------------------------------------
Other comprehensive income
(loss), net of income taxes
Change in unrealized gains and
(losses) on available-for-sale
securities, net of hedging
activities(1) (1,645) 211 (1,725) 135
Reclassification to earnings
in respect of
available-for-sale
securities(2) 5 (17) (53) (53)
Change in foreign currency
translation gains and (losses)
on investments in subsidiaries,
net of hedging
activities(3),(4) 432 (604) 440 (1,155)
Change in gains and (losses)
on derivative instruments
designated as cash
flow hedges(5) 758 164 1,522 (146)
Reclassification to earnings
of losses on cash flow
hedges(6) (60) 18 (162) 40
-------------------------------------------------------------------------
Other comprehensive income
(loss) for the year (510) (228) 22 (1,179)
-------------------------------------------------------------------------
Comprehensive income for
the year $504 $866 $3,855 $2,818
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Net of income tax benefit of $821 million and $904 million for the
three and twelve months ended Oct. 31, 2008, respectively (income tax
expense of $112 million and $78 million for the three and twelve
months ended Oct. 31, 2007, respectively).
(2) Net of income tax expense of $2 million and $22 million for the three
and twelve months ended Oct. 31, 2008, respectively (income tax
expense of $8 million and $32 million for the three and twelve months
ended Oct. 31, 2007, respectively).
(3) Net of income tax benefit of $971 million for the three months ended
Oct. 31, 2008 (three months ended Oct. 31, 2007 - income tax expense
of $640 million). Net of income tax benefit of $1,363 million for the
twelve months ended Oct. 31, 2008 (twelve months ended Oct. 31, 2007
- income tax expense of $909 million).
(4) Includes $(1,992) million for the three months ended Oct. 31, 2008
(three months ended Oct. 31, 2007 - $1,304 million) of after-tax
gains (losses) arising from hedges of the Bank's investment in
foreign operations. Includes $(2,881) million for the twelve months
ended Oct. 31, 2008 (twelve months ended Oct. 31, 2007 -
$1,864 million) of after-tax gains (losses) arising from hedges of
the Bank's investment in foreign operations.
(5) Net of income tax expense of $341 million and $669 million for the
three and twelve months ended Oct. 31, 2008 respectively (income tax
expense of $79 million and income tax benefit of $76 million for the
three and twelve months ended Oct. 31, 2007, respectively).
(6) Net of income tax expense of $25 million and $70 million for the
three and twelve months ended Oct. 31, 2008, respectively (income tax
benefit of $11 million and $22 million for the three and
twelve months ended Oct. 31, 2007, respectively).
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
-------------------------------------------------------------------------
For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
(millions of Canadian dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash flows from (used in)
operating activities
Net income $1,014 $1,094 $3,833 $3,997
Adjustments to determine net
cash from (used in)
operating activities
Provision for credit losses 288 139 1,063 645
Restructuring costs - - 48 67
Depreciation 136 100 438 362
Amortization of other
intangibles 172 138 577 499
Stock options 6 5 22 20
Net securities gains (55) (60) (331) (326)
Net gain on securitizations 44 (28) (41) (141)
Equity in net income of an
associated company (67) (85) (309) (284)
Non-controlling interests 18 8 43 95
Future income taxes 724 (216) 108 (121)
Changes in operating assets
and liabilities
Current income taxes payable (895) 376 (2,857) 558
Interest receivable and payable 159 101 27 (296)
Trading securities 16,210 (4,958) 26,302 (2,167)
Unrealized gains and amounts
receivable on derivatives
contracts (42,375) (6,418) (44,630) (10,228)
Unrealized losses and amounts
payable on derivatives
contracts 34,601 9,277 32,852 12,284
Other 2,271 1,326 2,837 (891)
-------------------------------------------------------------------------
Net cash from (used in)
operating activities 12,251 799 19,982 4,073
-------------------------------------------------------------------------
Cash flows from (used in)
financing activities
Change in deposits 21,476 8,657 52,030 14,154
Change in securities sold
under repurchase agreements 3,596 416 2,080 (2,081)
Change in securities sold short (5,975) (2,429) (5,677) (2,918)
Issue of subordinated notes
and debentures - - 4,025 4,072
Repayment of subordinated
notes and debentures (1,079) (525) (1,079) (1,399)
Liability for preferred shares
and capital trust securities (4) (349) (5) (345)
Translation adjustment on
subordinated notes and
debentures issued in a
foreign currency and other 37 (31) 41 (124)
Common shares issued on
exercise of options 44 37 201 154
Common shares (acquired)
sold in Wholesale Banking 7 4 (12) 30
Repurchase of common shares - (16) - (45)
Dividends paid in cash on
common shares (404) (386) (1,577) (1,432)
Premium paid on common shares
repurchased - (104) - (311)
Net proceeds from issuance
of preferred shares 247 - 1,430 -
Dividends paid on
preferred shares (23) (5) (59) (20)
-------------------------------------------------------------------------
Net cash from financing
activities 17,922 5,269 51,398 9,735
-------------------------------------------------------------------------
Cash flows from (used in)
investing activities
Interest-bearing deposits
with banks (2,984) (3,403) (683) (5,983)
Activity in available-for-sale
and held-to-maturity
securities:
Purchases (43,137) (6,475) (120,077) (96,846)
Proceeds from maturities 8,870 7,262 29,209 92,880
Proceeds from sales 15,455 2,264 63,995 10,372
Activity in lending activities:
Origination and acquisitions (50,728) (45,412) (162,727) (150,671)
Proceeds from maturities 43,354 39,932 123,619 122,509
Proceeds from sales 1,624 303 2,449 5,084
Proceeds from loan
securitizations 5,561 1,223 10,370 9,937
Land, buildings and equipment (282) (98) (532) (322)
Securities purchased under
reverse repurchase agreements (8,287) (1,743) (14,777) 3,313
Acquisitions and dispositions
less cash and cash
equivalents acquired - - (1,759) (4,139)
-------------------------------------------------------------------------
Net cash used in investing
activities (30,554) (6,147) (70,913) (13,866)
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents 179 (117) 260 (171)
-------------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents (202) (196) 727 (229)
Cash and cash equivalents
at beginning of period 2,719 1,986 1,790 2,019
-------------------------------------------------------------------------
Cash and cash equivalents at
end of period, represented
by cash and due from banks $2,517 $1,790 $2,517 $1,790
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary disclosure of
cash flow information
Amount of interest paid
during the period $2,192 $2,618 $10,678 $10,947
Amount of income taxes paid
during the period (40) 325 1,905 1,099
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform to the
current period's presentation.
APPENDIX A
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 and twelve months ended October 31, 2008 and 2007 are
presented in the following tables:
Results by Business Segment
-------------------------------------------------------------------------
Canadian Personal U.S. Personal
(millions of and Commercial Wealth and Commercial
Canadian dollars) Banking(1) Management(1) Banking(2),(3)
-------------------------------------------------------------------------
For the three Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2008 2007 2008 2007 2008 2007
-------------------------------------------------------------------------
Net interest
income $1,489 $1,408 $88 $83 $764 $335
Other income 794 744 503 498 280 140
-------------------------------------------------------------------------
Total revenue 2,283 2,152 591 581 1,044 475
Provision for
(reversal of)
credit losses 209 176 - - 78 35
Non-interest
expenses 1,202 1,114 428 399 649 263
-------------------------------------------------------------------------
Income (loss)
before provision
for (benefit of)
income taxes 872 862 163 182 317 177
Provision for
(benefit of)
income taxes 272 290 53 63 66 53
Non-controlling
interests in
subsidiaries, net
of income taxes - - - - - -
Equity in net
income of an
associated
company, net of
income taxes - - 60 75 - -
-------------------------------------------------------------------------
Net income (loss) $600 $572 $170 $194 $251 $124
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets
(billions of
Canadian dollars)
- balance sheet $172.4 $152.1 $15.4 $14.9 $127.0 $58.8
- securitized 42.8 44.6 - - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions of Wholesale
Canadian dollars) Banking(4) Corporate(4) Total
-------------------------------------------------------------------------
For the three Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2008 2007 2008 2007 2008 2007
-------------------------------------------------------------------------
Net interest
income $464 $310 $(356) $(328) $2,449 $1,808
Other income (578) 215 192 145 1,191 1,742
-------------------------------------------------------------------------
Total revenue (114) 525 (164) (183) 3,640 3,550
Provision for
(reversal of)
credit losses 10 4 (9) (76) 288 139
Non-interest
expenses 306 274 (218) 191 2,367 2,241
-------------------------------------------------------------------------
Income (loss)
before provision
for (benefit of)
income taxes (430) 247 63 (298) 985 1,170
Provision for
(benefit of)
income taxes (202) 90 (169) (343) 20 153
Non-controlling
interests in
subsidiaries, net
of income taxes - - 18 8 18 8
Equity in net
income of an
associated
company, net of
income taxes - - 7 10 67 85
-------------------------------------------------------------------------
Net income (loss) $(228) $157 $221 $47 $1,014 $1,094
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets
(billions of
Canadian dollars)
- balance sheet $215.0 $177.2 $33.4 $19.1 $563.2 $422.1
- securitized 3.0 - (13.3) (16.3) 32.6 28.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Results by Business Segment
-------------------------------------------------------------------------
Canadian Personal U.S. Personal
(millions of and Commercial Wealth and Commercial
Canadian dollars) Banking(1) Management(1) Banking(2),(3)
-------------------------------------------------------------------------
For the twelve Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2008 2007 2008 2007 2008 2007
-------------------------------------------------------------------------
Net interest
income $5,790 $5,401 $347 $318 $2,144 $1,365
Other income 3,036 2,848 1,981 1,995 853 583
-------------------------------------------------------------------------
Total revenue 8,826 8,249 2,328 2,313 2,997 1,948
Provision for
(reversal of)
credit losses 766 608 - - 226 120
Non-interest
expenses 4,522 4,256 1,615 1,551 1,791 1,221
-------------------------------------------------------------------------
Income (loss)
before provision
for (benefit of)
income taxes 3,538 3,385 713 762 980 607
Provision for
(benefit of)
income taxes 1,114 1,132 233 261 258 196
Non-controlling
interests in
subsidiaries, net
of income taxes - - - - - 91
Equity in net
income of an
associated
company, net of
income taxes - - 289 261 - -
-------------------------------------------------------------------------
Net income (loss) $2,424 $2,253 $769 $762 $722 $320
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(millions of Wholesale
Canadian dollars) Banking(4) Corporate(4) Total
-------------------------------------------------------------------------
For the twelve Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2008 2007 2008 2007 2008 2007
-------------------------------------------------------------------------
Net interest
income $1,318 $875 $(1,067) $(1,035) $8,532 $6,924
Other income (68) 1,619 335 312 6,137 7,357
-------------------------------------------------------------------------
Total revenue 1,250 2,494 (732) (723) 14,669 14,281
Provision for
(reversal of)
credit losses 106 48 (35) (131) 1,063 645
Non-interest
expenses 1,199 1,261 375 686 9,502 8,975
-------------------------------------------------------------------------
Income (loss)
before provision
for (benefit of)
income taxes (55) 1,185 (1,072) (1,278) 4,104 4,661
Provision for
(benefit of)
income taxes (120) 361 (948) (1,097) 537 853
Non-controlling
interests in
subsidiaries, net
of income taxes - - 43 4 43 95
Equity in net
income of an
associated
company, net of
income taxes - - 20 23 309 284
-------------------------------------------------------------------------
Net income (loss) $65 $824 $(147) $(162) $3,833 $3,997
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Effective the third quarter ended July 31, 2008, the Bank transferred
the U.S. insurance and credit card businesses to the Canadian
Personal and Commercial Banking segment, and the U.S. Wealth
Management businesses to the Wealth Management segment for management
reporting purposes. Prior periods have not been reclassified as the
impact was not material to segment results.
(2) Commencing May 1, 2007, the results of TD Bank USA (previously
reported in the Corporate segment for the period from the second
quarter 2006 to the second quarter 2007 and in the Wealth Management
segment prior to the second quarter of 2006) are included in the U.S.
Personal and Commercial Banking segment prospectively. Prior periods
have not been reclassified as the impact was not material.
(3) Commencing the third quarter ended July 31, 2008, the results of U.S.
Personal and Commercial Banking segment include Commerce. For
details, see Note 31 to the 2008 Consolidated Financial Statements.
(4) The taxable equivalent basis (TEB) increase to net interest income
and provision for income taxes reflected in the Wholesale Banking
segment results is reversed in the Corporate segment.
SHAREHOLDER AND INVESTOR INFORMATION
Shareholder Services
-------------------------------------------------------------------------
If you: And your inquiry relates to: Please contact:
-------------------------------------------------------------------------
Are a registered Missing dividends, lost share Transfer Agent:
shareholder (your certificates, estate questions, CIBC Mellon Trust
name appears on address changes to the share Company
your share register, dividend bank account P.O. Box 7010
certificate) changes, the dividend Adelaide Street
re-investment plan, or to Postal Station
eliminate duplicate mailings Toronto, Ontario
of shareholder materials M5C 2W9
416-643-5500 or
toll-free at
1-800-387-0825
inquiries@cibcmellon.com
or http://www.cibcmellon.com
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Hold your TD Missing dividends, lost share Co-Transfer Agent
shares through certificates, estate questions, and Registrar:
the Direct address changes to the share BNY Mellon
Registration register, or to eliminate Shareowner
System in the duplicate mailings of Services
United States shareholder materials P.O. Box 358015
Pittsburgh,
Pennsylvania
15252-8015 or
480 Washington
Boulevard
Jersey City,
New Jersey 07310
1-866-233-4836
TDD for hearing
impaired:
1-800-231-5469
Foreign
shareholders:
201-680-6578
TDD foreign
shareholders:
201-680-6610
http://www.bnymellon.com/shareowner
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Beneficially own Your TD shares, including Your intermediary
TD shares that are questions regarding the dividend
held in the name re-investment plan and mailings
of an intermediary, of shareholder materials
such as a bank, a
trust company, a
securities broker
or other nominee
-------------------------------------------------------------------------
For all other shareholder inquiries, please contact TD Shareholder
Relations at 416-944-6367 or 1-866-756-8936 or email tdshinfo@td.com. Please
note that by leaving us an e-mail or voicemail message you are providing your
consent for us to forward your inquiry to the appropriate party for response.
Annual Report on Form 40-F (U.S.)
A copy of the Bank's Annual Report on Form 40-F for fiscal 2008 will be
filed with the Securities and Exchange Commission later today and will be
available at http://www.td.com. You may obtain a printed copy of the Bank's
Annual Report on Form 40-F free of charge upon request to TD Shareholder
Relations at 416-944-6367 or 1-866-756-8936 or e-mail: tdshinfo@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
Internet website: http://www.td.com
Internet e-mail: customer.service@td.com
Quarterly Earnings Conference Call
TD Bank Financial Group will host an earnings conference call on
Thursday, December 4, 2008. The call will be webcast live via TDBFG's website
at 3:00 p.m. ET. The call and webcast will feature presentations by TDBFG
executives on the Bank's financial results for the fourth quarter and fiscal
2008, followed by a question-and-answer-period with analysts. The presentation
material referenced during the call will be available on the TDBFG website at
http://www.td.com/investor/earnings.jsp on December 4, 2008, by approximately
12:00 p.m. ET. A listen-only telephone line is available at 416-644-3425 or
1-800-732-6179 (toll free).
The webcast and presentations will be archived at
http://www.td.com/investor/calendar_arch.jsp. Replay of the teleconference
will be available from 6:00 p.m. ET on December 4, 2008, until January 4,
2008, by calling 416-640-1917 or 1-877-289-8525 (toll free). The passcode is
21289136 followed by the number sign.
Annual Meeting
Thursday, April 2, 2009
Saint John Trade and Convention Centre
Saint John, New Brunswick
About TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Financial Group. TD Bank Financial Group is the sixth largest bank in
North America by branches and serves approximately 17 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 and TD Insurance; Wealth Management, including TD Waterhouse
and an investment in TD Ameritrade; U.S. Personal and Commercial Banking
through TD Banknorth and TD Bank, America's Most Convenient Bank; and
Wholesale Banking, including TD Securities. TD Bank Financial Group also ranks
among the world's leading online financial services firms, with more than 5.5
million online customers. TD Bank Financial Group had CDN$563 billion in
assets as of October 31, 2008. The Toronto-Dominion Bank trades under the
symbol "TD" on the Toronto Stock Exchange and New York Stock Exchange.
For further information: Colleen Johnston, Group Head Finance and Chief Financial Officer, (416) 308-9030; Tim Thompson, Senior Vice President, Investor Relations, (416) 308-9030; or Simon Townsend, Senior Manager, Corporate Communications, (416) 944-7161
Get News Alerts by Email
Receive breaking news from TD Bank Group directly to your inbox.
