TD Bank Financial Group Reports Fourth Quarter and Fiscal 2009 Results
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TD Bank Financial Group's audited Consolidated Financial Statements
(including Notes to the Consolidated Financial Statements) for the year
ended October 31, 2009, and accompanying Management's Discussion and
Analysis is available at http://www.td.com/investor.
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The financial information in this document is in Canadian dollars, and is
based on our Consolidated Financial Statements and related Notes prepared
in accordance with Canadian generally accepted accounting principles
(GAAP), unless otherwise noted.
FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter a
year ago:
- Reported diluted earnings per share were $1.12, compared with $1.22.
- Adjusted diluted earnings per share were $1.46, compared with $0.79.
- Reported net income was $1,010 million, compared with $1,014 million.
- Adjusted net income was $1,307 million, compared with $665 million.
FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:
- Reported diluted earnings per share were $3.47, compared with $4.87.
- Adjusted diluted earnings per share were $5.35, compared with $4.88.
- Reported net income was $3,120 million, compared with $3,833 million.
- Adjusted net income was $4,716 million, compared with $3,813 million.
Adjusted results are non-GAAP. Refer to the "How the Bank Reports"
section for an explanation and reconciliation of reported and adjusted
results.
The amendments to CICA Handbook Section 3855, Financial Instruments -
Recognition and Measurement apply retroactively to November 1, 2008,
accordingly transition adjustments were recorded in prior periods in
2009. For details, see the "Change in Accounting Policies" section and
Note 1a) to the 2009 Consolidated Financial Statements.
FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The fourth quarter reported earnings figures included the following items
of note:
- Amortization of intangibles of $116 million after tax (13 cents per
share), compared with $126 million after tax (16 cents per share) in
the fourth quarter last year.
- A loss of $73 million after tax (9 cents per share) due to the change
in fair value of derivatives hedging the reclassified available-for-
sale debt securities portfolio, compared with a gain of $118 million
after tax (15 cents per share) in the fourth quarter last year.
- Restructuring and integration charges of $89 million after tax (10
cents per share) relating to the acquisition of Commerce, compared
with $25 million after tax (3 cents per share) in the fourth quarter
last year.
- A loss of $19 million after tax (2 cents per share) due to the change
in fair value of credit default swaps hedging the corporate loan
book, net of provision for credit losses, compared with a gain of
$59 million after tax (7 cents per share) in the fourth quarter last
year.
"A record fourth quarter completed a record year, with TD earning over
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking posted strong earnings of
TD
"TDCT continues to deliver great results and take market share in a challenging environment, driven by our consistent focus on offering unparalleled convenience and legendary customer service," said Clark. "Strong operating leverage more than offset higher credit losses, demonstrating that with the right strategy, customer focus and dedicated employees, there are ways strong businesses can perform even in a very tough economy."
Wealth Management
Wealth Management, including TDBFG's equity share in TD Ameritrade, earned net income of
"We're optimistic about the outlook for Wealth Management, as we're beginning to feel the positive effects of the equity market rebound in our asset based businesses," said Clark. "We expect our client base to grow and online brokerage transaction volumes to remain high. These two factors are also true for TD Ameritrade, which continues to perform well. Most important, we've continued to make investments for the future that will allow us to keep growing our diversified wealth offering strategically."
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated
"After more than a year and a half of incredibly hard work, the integration of Commerce and TD Banknorth was completed this quarter, achieving our goal of uniting our U.S. operations under one brand from Maine to Florida," said Clark. "In the face of rising provision for credit losses and low nominal interest rates, and in the midst of a complex integration, our newly consolidated bank still managed to deliver solid earnings in that challenging environment."
Wholesale Banking
Wholesale Banking earned record net income for the quarter of
"Our wholesale bank produced exceptional results in 2009, while reducing risk and further focusing on our franchise model," said Clark. "While we do not view this performance as sustainable, we've built a dealer that can produce strong results even in adverse markets - I think the unprecedented market conditions of the past two years have validated our franchise strategy."
Conclusion
"The market has bounced back more strongly than we would have thought, but we think underlying economic conditions will remain lacklustre for the foreseeable future. And we know that many of our customers will face hardships as a result. As we've said before, we intend to stick by our customers and clients in tough times. Our employees are empowered to find new and innovative ways to deliver the same level of service to customers who are facing economic hardships, not just opportunities," said Clark.
"Overall, we're feeling good about these results and TD's prospects for the future. While there will be challenges ahead in 2010, we've ended 2009 with earnings momentum and an exceptionally strong balance sheet and capital position. We're emerging from the financial crisis and economic recession with our business model intact and with momentum on our side, and there will be opportunities for us to continue taking advantage of TD's position of strength."
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, including 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 2010 and beyond and the 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 to understand 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 2010 for the Bank are set out in the Bank's 2009 Management's Discussion and Analysis (MD&A) under the heading "Economic Summary and Outlook" and for each of our business segments, under the heading "Business Outlook and Focus for 2010." 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. Especially in light of the current financial and economic environment, such risks and uncertainties 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 and the effects of which can be difficult to predict - 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 2009 MD&A and in other regulatory filings made in
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 operating results of TD Bank Financial Group (TDBFG or the Bank) for the quarter ended
FINANCIAL HIGHLIGHTS
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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) 2009 2009 2008 2009(1) 2008
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Results of operations
Total revenue $4,718 $4,667 $3,640 $17,860 $14,669
Provision for credit
losses 521 557 288 2,480 1,063
Non-interest expenses 3,095 3,045 2,367 12,211 9,502
Net income - reported(2) 1,010 912 1,014 3,120 3,833
Net income - adjusted(2) 1,307 1,303 665 4,716 3,813
Economic profit(3),(4) 262 246 (150) 561 932
Return on common equity
- reported(4) 11.0% 9.7% 13.3% 8.4% 14.4%
Return on invested
capital(3),(4) 12.6% 12.4% 7.5% 11.4% 12.4%
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Financial position
Total assets(4) $557,219 $544,821 $563,214 $557,219 $563,214
Total risk-weighted
assets(4) 189,585 189,609 211,750 189,585 211,750
Total shareholders'
equity(4) 38,720 38,020 31,674 38,720 31,674
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Financial ratios
- reported
Efficiency ratio
- reported 65.6% 65.2% 65.0% 68.4% 64.8%
Efficiency ratio
- adjusted 58.4% 56.6% 77.3% 59.2% 64.6%
Tier 1 capital to risk-
weighted assets(4) 11.3% 11.1% 9.8% 11.3% 9.8%
Provision for credit
losses as a % of net
average loans(4) 0.79% 0.87% 0.49% 0.97% 0.50%
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Common share information
- reported (Canadian
dollars)
Per share
Basic earnings $1.12 $1.01 $1.23 $3.49 $4.90
Diluted earnings 1.12 1.01 1.22 3.47 4.87
Dividends 0.61 0.61 0.61 2.44 2.36
Book value(4) 41.13 40.54 36.78 41.13 36.78
Closing share price 61.68 63.11 56.92 61.68 56.92
Shares outstanding
(millions)
Average basic 855.6 851.5 808.0 847.1 769.6
Average diluted 861.1 855.4 812.8 850.1 775.7
End of period 858.8 854.1 810.1 858.8 810.1
Market capitalization
(billions of Canadian
dollars) $53.0 $53.9 $46.1 $53.0 $46.1
Dividend yield 3.7% 4.4% 4.1% 4.8% 3.8%
Dividend payout ratio 54.3% 60.1% 49.7% 70.3% 49.0%
Price to earnings
multiple(4) 17.8 17.7 11.7 17.8 11.7
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Common share information
- adjusted (Canadian
dollars)
Per share
Basic earnings $1.47 $1.47 $0.79 $5.37 $4.92
Diluted earnings 1.46 1.47 0.79 5.35 4.88
Dividend payout ratio 41.5% 41.4% 76.8% 45.6% 49.3%
Price to earnings
multiple(4) 11.6 13.5 11.6 11.6 11.6
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(1) As explained in the "How the Bank Reports" section, effective the
second quarter ended April 30, 2009, as the reporting periods of U.S.
entities are aligned with the reporting period of the Bank, the
results of U.S. entities for the twelve months ended October 31, 2009
have been included with results of the Bank for the twelve months
ended October 31, 2009, while the results of January 2009 have been
included directly in retained earnings of the second quarter and not
included in the net income of the Bank.
(2) Adjusted and reported results are explained in the "How the Bank
Reports" section, which includes reconciliation between reported and
adjusted results.
(3) Economic profit and return on invested capital are non-GAAP financial
measures and are explained in the "Economic Profit and Return on
Invested Capital" section.
(4) During Q4 2009 certain comparative amounts retroactive to Q1 2009
have been adjusted to conform with the amendments to CICA Handbook
Section 3855. For further details, see the "Change in Accounting
Policies" section.
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.
Effective
The following tables provide reconciliations between the Bank's reported and adjusted results.
Operating Results - Reported
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For the twelve
For the three months ended months ended
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(millions of Oct. 31, July 31, Oct.31, Oct. 31, Oct. 31,
Canadian dollars) 2009 2009 2008 2009 2008
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Net interest income $2,825 $2,833 $2,449 $11,326 $8,532
Non-interest income 1,893 1,834 1,191 6,534 6,137
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Total revenue 4,718 4,667 3,640 17,860 14,669
Provision for credit
losses 521 557 288 2,480 1,063
Non-interest expenses 3,095 3,045 2,367 12,211 9,502
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Income before income
taxes, non-controlling
interests in subsidiaries,
and equity in net income
of an associated company 1,102 1,065 985 3,169 4,104
Provision for income taxes 132 209 20 241 537
Non-controlling interests
in subsidiaries, net of
income taxes 27 28 18 111 43
Equity in net income of an
associated company, net
of income taxes 67 84 67 303 309
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Net income - reported 1,010 912 1,014 3,120 3,833
Preferred dividends 48 49 23 167 59
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Net income available to
common shareholders
- reported $962 $863 $991 $2,953 $3,774
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Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income to Reported Net Income
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Operating results For the twelve
- adjusted For the three months ended months ended
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(millions of Oct. 31, July 31, Oct.31, Oct. 31, Oct. 31,
Canadian dollars) 2009 2009 2008 2009 2008
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Net interest income $2,825 $2,833 $2,449 $11,326 $8,532
Non-interest income(1) 1,984 1,976 954 7,294 5,840
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Total revenue 4,809 4,809 3,403 18,620 14,372
Provision for credit
losses(2) 521 492 288 2,225 1,046
Non-interest expenses(3) 2,807 2,723 2,632 11,016 9,291
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Income before income
taxes, non-controlling
interests in subsidiaries,
and equity in net income
of an associated company 1,481 1,594 483 5,379 4,035
Provision for (recovery
of) income taxes(4) 231 367 (116) 923 554
Non-controlling interests
in subsidiaries, net of
income taxes 27 28 18 111 43
Equity in net income of
an associated company,
net of income taxes(5) 84 104 84 371 375
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Net income - adjusted 1,307 1,303 665 4,716 3,813
Preferred dividends 48 49 23 167 59
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Net income available to
common shareholders
- adjusted 1,259 1,254 642 4,549 3,754
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Adjustments for items of
note, net of income
taxes:
Amortization of
intangibles(6) (116) (122) (126) (492) (404)
Reversal of Enron
litigation reserve(7) - - 323 - 323
Increase (decrease) in
fair value of
derivatives hedging the
reclassified available-
for-sale debt securities
portfolio(8) (73) (43) 118 (450) 118
Restructuring and
integration charges
relating to the Commerce
acquisition(9) (89) (70) (25) (276) (70)
Increase (decrease) in
fair value of credit
default swaps hedging the
corporate loan book, net
of provision for credit
losses(10) (19) (75) 59 (126) 107
Other tax items(11) - - - - (34)
Provision for insurance
claims(12) - - - - (20)
General allowance increase
in Canadian Personal and
Commercial Banking
(excluding VFC) and
Wholesale Banking - (46) - (178) -
Settlement of TD Banknorth
shareholder litigation(13) - - - (39) -
FDIC special assessment
charge(14) - (35) - (35) -
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Total adjustments for
items of note (297) (391) 349 (1,596) 20
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Net income available to
common shareholders
- reported $962 $863 $991 $2,953 $3,774
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Reconciliation of Reported Earnings per Share (EPS) to Adjusted EPS(15)
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(Canadian dollars) For the twelve
For the three months ended months ended
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Oct. 31, July 31, Oct.31, Oct. 31, Oct. 31,
2009 2009 2008 2009 2008
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Diluted - reported $1.12 $1.01 $1.22 $3.47 $4.87
Items of note affecting
income (as above) 0.34 0.46 (0.43) 1.88 (0.03)
Items of note affecting
EPS only(16) - - - - 0.04
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Diluted - adjusted $1.46 $1.47 $0.79 $5.35 $4.88
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Basic - reported $1.12 $1.01 $1.23 $3.49 $4.90
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(1) Adjusted non-interest income excludes the following items of note:
fourth quarter 2009 - $30 million loss due to change in fair value
of credit default swaps (CDS) hedging the corporate loan book, as
explained in footnote 10; $61 million loss due to change in fair
value of derivatives hedging the reclassified available-for-sale
(AFS) debt securities portfolio, as explained in footnote 8; third
quarter 2009 - $118 million loss due to change in fair value of CDS
hedging the corporate loan book; $24 million loss due to change in
fair value of derivatives hedging the reclassified AFS debt
securities portfolio; second quarter 2009 - $61 million loss due to
change in fair value of CDS hedging the corporate loan book;
$166 million loss due to change in fair value of derivatives hedging
the reclassified AFS debt securities portfolio; first quarter 2009 -
$13 million gain due to change in fair value of CDS hedging the
corporate loan book; $313 million loss due to change in fair value
of derivatives hedging the reclassified AFS debt securities
portfolio; fourth quarter 2008 - $96 million gain due to change in
fair value of CDS hedging the corporate loan book, $141 million gain
due to change in fair value of derivatives hedging the reclassified
AFS debt securities portfolio; 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 12.
(2) Adjusted provision for credit losses (PCL) excludes the following
items of note: third quarter 2009 - $65 million increase in general
allowance for credit losses in Canadian Personal and Commercial
Banking (excluding VFC) and Wholesale Banking; second quarter 2009 -
$110 million increase in general allowance for credit losses in
Canadian Personal and Commercial Banking (excluding VFC) and
Wholesale Banking; first quarter 2009 - $80 million increase in
general allowance for credit losses in Canadian Personal and
Commercial Banking (excluding VFC) and Wholesale Banking; first
quarter 2008 - $17 million related to the portion that was hedged
via the CDS, as explained in footnote 8.
(3) Adjusted non-interest expenses excludes the following items of note:
fourth quarter 2009 - $151 million amortization of intangibles, as
explained in footnote 6; $137 million restructuring and integration
charges related to the Commerce acquisition, as explained in
footnote 9; third quarter 2009 - $158 million amortization of
intangibles; $109 million restructuring and integration charges
related to the Commerce acquisition; $55 million FDIC special
assessment charge, as explained in footnote 14; second quarter 2009
- $171 million amortization of intangibles; $77 million
restructuring and integration charges related to the Commerce
acquisition; settlement of TD Banknorth shareholder litigation of
$58 million, as explained in footnote 13; first quarter 2009 -
$173 million amortization of intangibles; $106 million restructuring
and integration charges related to the Commerce acquisition; fourth
quarter 2008 - $172 million amortization of intangibles; $40 million
restructuring and integration charges related to the Commerce
acquisition, $477 million positive adjustment related to the
reversal of Enron litigation reserve, as explained in footnote 7;
third quarter 2008 - $166 million amortization of intangibles;
$23 million restructuring and integration charges; second quarter
2008 - $117 million amortization of intangibles; $48 million
restructuring and integration charges related to the Commerce
acquisition; first quarter 2008 - $122 million amortization of
intangibles.
(4) For reconciliation between reported and adjusted provision for
income taxes, see the 'Reconciliation of non-GAAP provision for
(recovery of) income taxes' table in the "Taxes" section.
(5) Adjusted equity in net income of an associated company excludes the
following items of note: fourth quarter 2009 - $17 million
amortization of intangibles, as explained in footnote 6; third
quarter 2009 - $20 million amortization of intangibles; second
quarter 2009 - $16 million amortization of intangibles; first
quarter 2009 - $15 million amortization of intangibles; 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.
(6) Amortization of intangibles primarily relates to the Canada Trust
acquisition in 2000, the TD Banknorth acquisition in 2005 and its
privatization in 2007, the Commerce acquisition in 2008, the
acquisitions by TD Banknorth of Hudson United Bancorp (Hudson) in
2006 and Interchange Financial Services (Interchange) in 2007, and
the amortization of intangibles included in equity in net income of
TD Ameritrade.
(7) 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 a
positive adjustment of $323 million after tax, reflecting the
substantial reversal of the reserve. For details, see Note 28 to the
2008 Consolidated Financial Statements.
(8) 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 the available-for-sale category in
accordance with the Amendments to 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. This
includes foreign exchange translation exposure related to the debt
securities portfolio and the derivatives hedging it. 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 the Wholesale Banking segment. 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.
Adjusted results of the Bank exclude the gains and losses of the
derivatives in excess of the accrued amount.
(9) 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).
(10) 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
earnings exclude the gains and losses on the CDS in excess of the
accrued cost. When a credit event occurs in the corporate loan book
that has an associated CDS hedge, the PCL related to the portion
that was hedged via the CDS is netted against this item of note.
(11) This represents the negative impact of scheduled reductions in the
income tax rate on net future income tax assets.
(12) The Bank accrued an additional actuarial liability in its insurance
subsidiary operations for potential losses in the first quarter of
2008 related 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 Q3 2009,
the government of Alberta won its appeal of the decision; however,
the ultimate outcome remains uncertain as the plaintiffs have filed
an application seeking leave to appeal to the Supreme Court of
Canada.
(13) Upon the announcement of the privatization of TD Banknorth in
November 2006, certain minority shareholders of TD Banknorth
initiated class action litigation alleging various claims against
the Bank, TD Banknorth and TD Banknorth officers and directors (TD
Banknorth Shareholders' Litigation). The parties agreed to settle
the litigation in February 2009 for $61.3 million (US$50 million) of
which $3.7 million (US$3 million) had been previously accrued on
privatization. The Court of Chancery in Delaware approved the
settlement of the TD Banknorth Shareholders' Litigation effective
June 24, 2009, and the settlement became final. The net after-tax
impact of the settlement was $39 million.
(14) On May 22, 2009, the Federal Deposit Insurance Corporation (FDIC),
in the U.S., finalized a special assessment resulting in a charge of
$35 million after tax (US$31 million).
(15) 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.
(16) The diluted earnings per share figures do not include Commerce
earnings for the month of April 2008 because there was a one month
lag between fiscal quarter ends until the first quarter of this
year, while share issuance on close resulted in a one-time negative
earnings impact of four cents per share.
Reconciliation of Non-GAAP Provision for (Recovery of) Income Taxes
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For the twelve
For the three months ended months ended
(millions of Canadian -------------------------------------------------
dollars, except as Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
noted) 2009 2009 2008 2009 2008
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Provision for income
taxes - reported $132 $209 $20 $241 $537
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Adjustments for items
of note
Amortization of
intangibles 52 56 63 229 239
Reversal of Enron
litigation reserve - - (154) - (154)
Increase (decrease)
in fair value of
derivatives hedging
the reclassified
available-for-sale debt
securities portfolio (12) (19) (23) 114 (23)
Restructuring and
integration charges
relating to the
Commerce acquisition 48 39 15 153 41
Increase (decrease) in
fair value of credit
default swaps hedging
the corporate loan book,
net of provision for
credit losses 11 43 (37) 70 (62)
Other tax items - - - - (34)
Provision for
insurance claims - - - - 10
General allowance
increase in Canadian
Personal and Commercial
Banking (excluding VFC)
and Wholesale Banking - 19 - 77 -
Settlement of TD Banknorth
shareholder litigation - - - 19 -
FDIC special assessment
charge - 20 - 20 -
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Total adjustments for
items of note 99 158 (136) 682 17
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Provision for income
taxes - adjusted $231 $367 $(116) $923 $554
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Effective income tax
rate - adjusted(1) 15.6% 23.0% (24.0)% 17.2% 13.7%
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(1) Adjusted effective income tax rate is adjusted provision for income
taxes before other taxes as a percentage of adjusted net income
before taxes.
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 equity cost of capital are percentage rates, while economic profit is a dollar measure. When ROIC exceeds the equity cost of capital, economic profit is positive. The Bank's goal is to maximize economic profit by achieving ROIC that exceeds the equity cost of capital.
Economic profit and ROIC are non-GAAP financial measures as these are not defined terms under GAAP. 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, ROIC, and net income available to common shareholders - adjusted. 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 Net
Income Available to Common Shareholders - Adjusted
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
-------------------------------------------------
(millions of Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
Canadian dollars) 2009 2009 2008 2009 2008
-------------------------------------------------------------------------
Average common equity(1) $34,846 $35,388 $29,615 $35,341 $26,213
Average cumulative
goodwill/intangible
assets amortized, net
of income taxes 4,698 4,598 4,269 4,541 4,136
-------------------------------------------------------------------------
Average invested
capital(1) $39,544 $39,986 $33,884 $39,882 $30,349
Rate charged for
invested capital 10.0% 10.0% 9.3% 10.0% 9.3%
-------------------------------------------------------------------------
Charge for invested
capital(1) $997 $1,008 $792 $3,988 $2,822
-------------------------------------------------------------------------
Net income available to
common shareholders -
reported $962 $863 $991 $2,953 $3,774
Items of note impacting
income, net of income
taxes 297 391 (349) 1,596 (20)
-------------------------------------------------------------------------
Net income available to
common shareholders -
adjusted $1,259 $1,254 $642 $4,549 $3,754
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Economic profit(1) $262 $246 $(150) $561 $932
-------------------------------------------------------------------------
Return on invested
capital(1) 12.6% 12.4% 7.5% 11.4% 12.4%
-------------------------------------------------------------------------
(1) As a result of the 2009 Amendments to CICA Handbook Section 3855,
certain available-for-sale and held-to-maturity securities were
reclassified to loans, as described in the "Change in Accounting
Policies" section.
HOW OUR BUSINESSES PERFORMED
For management reporting purposes, the Bank's operations and activities are organized around four key business segments operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD
Results of each business segment reflect revenue, expenses, assets, and liabilities generated by the businesses 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 expenses 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 2009 Annual Report and Note 7 to the 2009 Consolidated Financial Statements. For information concerning the Bank's measures of economic profit and return on invested capital, which are non-GAAP financial measures, see the "How We Performed" section. Segmented information also appears in Appendix A.
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 increase to net interest income and provision for income taxes reflected in Wholesale Banking results is reversed in the Corporate segment. The TEB adjustment for the quarter was
The Bank securitizes retail loans and receivables, and records a gain or loss on sale, including the recognition of an asset related to retained interests. Credit losses incurred on retained interests after securitization are recorded as a charge to non-interest income in the Bank's Consolidated Financial Statements. For segment reporting, provision for credit losses (PCL) related to securitized volumes is included in Canadian Personal and Commercial Banking but is reversed in the Corporate segment and reclassified as a charge to non-interest income to comply with GAAP.
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking net income for the quarter was
Revenue for the quarter was
PCL for the quarter was
Non-interest expenses for the quarter were
The average full-time equivalent (FTE) staffing levels increased 527, or 2%, compared with the fourth quarter last year and increased 334, or 1%, compared with the prior quarter. The efficiency ratio for the current quarter was 50.4%, compared with 52.7% in the fourth quarter last year and 47.8% in the prior quarter.
Although revenue is vulnerable to economic and market conditions, and a competitive pricing environment, the outlook for revenue growth is expected to be moderate. While volume growth is expected to be lower than last year across most products, margins on average are expected to be relatively stable and revenue is expected to continue to benefit from the increased leadership position in branch hours and continued investment in our network. PCL is expected to increase into 2010, reflective of continued challenging conditions in the Canadian economy. Expenses are anticipated to be higher relative to last year due to higher employee compensation and benefit costs, and investment in strategic initiatives to support future growth.
Wealth Management
Wealth Management net income for the quarter was
Revenue for the quarter was
Non-interest expenses for the quarter were
The average FTE staffing levels increased by 96, or 1%, compared with the fourth quarter last year primarily due to new client-facing advisors and increased processing staff to handle increased volumes, partially offset by reduced FTE in the U.S. wealth management businesses. Compared with the prior quarter, average FTE staffing levels decreased by 124, or 2%, primarily due to reduced FTE in the U.S. wealth management businesses. The efficiency ratio for the current quarter worsened to 75.6%, compared with 72.4% in the fourth quarter last year and 75.4% in the prior quarter.
Assets under administration of
In the fourth quarter, the advice-based and asset management businesses continued the trend of stronger asset growth due to a rebound in equity markets. Client engagement remains strong as evidenced by growth in new accounts and net new client assets. Non-interest expenses will continue to be managed prudently while continuing to focus on investment in client-facing advisors, products, and technology to ensure future business growth. While global economies are improving and equity markets have shown strong growth since their
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) 2009 2009 2008 2009 2008
-------------------------------------------------------------------------
Global Wealth(1) $97 $95 $110 $345 $480
TD Ameritrade 59 68 60 252 289
-------------------------------------------------------------------------
Net income $156 $163 $170 $597 $769
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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 reported net income for the quarter was
Revenue for the quarter was
Certain debt securities, including all non-agency collateralized mortgage obligations (CMOs), which were previously accounted for as available-for-sale securities were reclassified as loans in Q4 2009 as a result of amendments to Canadian GAAP, which provide that debt securities that are not quoted in an active market may be classified as loans. These securities were reclassified at their amortized cost retroactive to
Excluding provisions recorded on debt securities that are classified as loans, PCL for the quarter was
Reported non-interest expenses for the quarter were
The average FTE staffing levels decreased by 512, or 3%, compared with the fourth quarter last year. Included in this decrease is a reduction of approximately 850 FTE staff due to integration efforts and branch consolidations, partially offset by the increase of approximately 350 FTE staff resulting from 33 new store openings since the fourth quarter last year. Additional reductions will occur in the first quarter of 2010 as integration efforts wind down. The reported efficiency ratio for the quarter worsened to 72.4%, compared with 62.2% in the fourth quarter last year and 68.9% in the prior quarter. The adjusted efficiency ratio for the quarter was 60.1%, compared with 58.4% in the fourth quarter last year and 59.3% in the prior quarter.
Loan volume growth is expected to moderate in 2010 due primarily to lower demand. Organic deposit growth momentum is expected to continue due to maturing stores. PCL is expected to increase in 2010 peaking by end of the year. Key drivers of strong performance in 2010 are anticipated to be core deposit and loan growth, with a constant monitoring of credit quality and competitive pricing, and solid expense control.
Wholesale Banking
Wholesale Banking reported record net income for the quarter of
Wholesale Banking revenue was derived primarily from capital markets, corporate lending, and investing activities. Revenue for the quarter was
The increase in revenue from the fourth quarter last year was attributable to:
- Credit trading gains this quarter compared to significant losses in
the same quarter last year. Credit trading results improved
significantly due to tightening spreads compared to a dramatic
decline in global market liquidity which resulted in the significant
widening in the basis between assets and credit default swaps (CDS).
- The decline in market liquidity in 2008 led to lower mark-to-market
values on loan commitments in the same quarter last year.
- Strong interest rate trading revenue this quarter driven by wider
margins and increases in client activity.
- Increase in equity trading revenue this quarter primarily due to a
recovery of global equity prices compared to significant declines in
the same quarter last year.
- Equity and debt underwriting revenue this quarter was higher
reflecting stronger levels of market activity driven by lower
corporate financing costs and an increase in investor demand for new
issues.
Capital markets revenue decreased
Corporate lending revenue increased compared with the prior quarter primarily due to higher margins and loan fees. The investment portfolio reported a small loss this quarter compared to large net security losses in the same quarter last year and the prior quarter. Losses in the same quarter last year were driven by write-downs in the public equity investment portfolio due to significant declines in equity markets. The prior quarter included the completion of the exit of the public equity investment portfolio which led to significant realized net security losses.
PCL is composed of specific provisions for credit losses and accrual costs for credit protection. PCL for the quarter was
Non-interest expenses for the quarter were
Wholesale Banking had a very strong quarter, delivering record net income. The operating environment was favourable, leading to a strong broad based performance across all business lines. We expect the operating environment for Wholesale Banking to normalize as competition increases in the market and a less volatile, low interest rate environment persists leading to potentially lower trading revenue, and lower client volumes.
Corporate
Corporate segment's reported net loss for the quarter was
The difference between reported and adjusted net loss for the Corporate segment was due to items of note as outlined below. These items are described further in the "How We Performed" section.
-------------------------------------------------------------------------
For the twelve
For the three months ended months ended
-------------------------------------------------
(millions of Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
Canadian dollars) 2009 2009 2008 2009 2008
-------------------------------------------------------------------------
Corporate segment
net income (loss) -
reported $(262) $(427) $221 $(1,719) $(147)
-------------------------------------------------------------------------
Adjustments for items
of note, net of
income taxes
Amortization of
intangibles 116 122 126 492 404
Reversal of Enron
litigation reserve - - (323) - (323)
Decrease (increase)
in fair value of
derivatives hedging
the reclassified
available-for-sale
securities portfolio 73 43 (118) 450 (118)
Decrease (increase) in
fair value of credit
default swaps hedging
the corporate loan book,
net of provision for
credit losses 19 75 (59) 126 (107)
Other tax items - - - - 20
Provision for insurance
claims - - - - 20
General allowance
increase in Canadian
Personal and Commercial
Banking (excluding VFC)
and Wholesale Banking - 46 - 178 -
Settlement of TD
Banknorth shareholder
litigation - - - 39 -
FDIC special assessment
charge - 35 - 35 -
-------------------------------------------------------------------------
Total adjustments for
items of note 208 321 (374) 1,320 (104)
-------------------------------------------------------------------------
Corporate segment net
loss - adjusted $(54) $(106) $(153) $(399) $(251)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Decomposition of items
included in net loss -
adjusted
Net securitization $(2) $(15) $(49) $(10) $(69)
Unallocated corporate
expenses (90) (96) (83) (315) (268)
Other 38 5 (21) (74) 86
-------------------------------------------------------------------------
Corporate segment net
loss - adjusted $(54) $(106) $(153) $(399) $(251)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ACCOUNTING POLICIES
Basis of Presentation
The Bank's unaudited consolidated financial results, as presented on pages 14 to 18 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 2009 Consolidated Financial Statements. The accounting policies used in the preparation of these consolidated financial results are consistent with those used in the Bank's
Change in Accounting Policies
Financial Instruments - Amendments
Debt Securities Classified as Loans and Loans Classified as Trading
In
As a result of the 2009 Amendments, the Bank reclassified certain debt securities from available-for-sale to loans effective
In addition, the Bank also reclassified held-to-maturity securities that did not have a quoted price in an active market to loans as required by the 2009 Amendments. The securities were accounted for at amortized cost both before and after the reclassification.
For the impact of the change in accounting for financial instruments on prior quarters, see Note 1 to the 2009 Consolidated Financial Statements.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------
INTERIM CONSOLIDATED BALANCE SHEET (unaudited)
-------------------------------------------------------------------------
As at
-------------------
Oct. 31, Oct. 31,
(millions of Canadian dollars) 2009 2008
-------------------------------------------------------------------------
ASSETS
Cash and due from banks $2,414 $2,517
Interest-bearing deposits with banks 19,103 15,429
-------------------------------------------------------------------------
21,517 17,946
-------------------------------------------------------------------------
Securities
Trading 54,320 59,497
Available-for-sale 84,841 75,121
Held-to-maturity 9,662 9,507
-------------------------------------------------------------------------
148,823 144,125
-------------------------------------------------------------------------
Securities purchased under reverse repurchase
agreements 32,948 42,425
-------------------------------------------------------------------------
Loans
Residential mortgages 65,665 57,596
Consumer instalment and other personal 94,357 79,610
Credit card 8,152 7,387
Business and government 76,176 76,567
Debt securities classified as loans 11,146 -
-------------------------------------------------------------------------
255,496 221,160
Allowance for loan losses (2,368) (1,536)
-------------------------------------------------------------------------
Loans, net of allowance for loan losses 253,128 219,624
-------------------------------------------------------------------------
Other
Customers' liability under acceptances 9,946 11,040
Investment in TD Ameritrade 5,465 5,159
Derivatives 49,445 83,548
Goodwill 15,015 14,842
Other intangibles 2,546 3,141
Land, buildings and equipment 4,078 3,833
Other assets 14,308 17,531
-------------------------------------------------------------------------
100,803 139,094
-------------------------------------------------------------------------
Total assets $557,219 $563,214
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Deposits
Personal $223,228 $192,234
Banks 5,480 9,680
Business and government 126,907 129,086
Trading 35,419 44,694
-------------------------------------------------------------------------
391,034 375,694
-------------------------------------------------------------------------
Other
Acceptances 9,946 11,040
Obligations related to securities sold short 17,641 18,518
Obligations related to securities sold under
repurchase agreements 16,472 18,654
Derivatives 48,152 74,473
Other liabilities 19,867 17,721
-------------------------------------------------------------------------
112,078 140,406
-------------------------------------------------------------------------
Subordinated notes and debentures 12,383 12,436
-------------------------------------------------------------------------
Liability for preferred shares 550 550
-------------------------------------------------------------------------
Liability for capital trust securities 895 894
-------------------------------------------------------------------------
Non-controlling interests in subsidiaries 1,559 1,560
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares (millions of shares issued and
outstanding: Oct. 31, 2009 - 858.8 and Oct. 31,
2008 - 810.1) 15,357 13,241
Preferred shares (millions of shares issued and
outstanding: Oct. 31, 2009 - 135.8 and Oct. 31,
2008 - 75.0) 3,395 1,875
Contributed surplus 321 350
Retained earnings 18,632 17,857
Accumulated other comprehensive income (loss) 1,015 (1,649)
-------------------------------------------------------------------------
38,720 31,674
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $557,219 $563,214
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
-------------------------------------------------------------------------
For the three For the twelve
months ended months ended
---------------------------------------
(millions of Canadian dollars, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
except as noted) 2009 2008 2009 2008
-------------------------------------------------------------------------
Interest income
Loans $3,264 $3,455 $13,691 $13,501
Securities
Dividends 180 226 868 987
Interest 744 1,296 3,886 4,467
Deposits with banks 84 162 442 629
-------------------------------------------------------------------------
4,272 5,139 18,887 19,584
-------------------------------------------------------------------------
Interest expense
Deposits 1,126 2,103 5,818 8,481
Subordinated notes and debentures 168 172 671 654
Preferred shares and capital
trust securities 24 24 94 94
Other 129 391 978 1,823
-------------------------------------------------------------------------
1,447 2,690 7,561 11,052
-------------------------------------------------------------------------
Net interest income 2,825 2,449 11,326 8,532
-------------------------------------------------------------------------
Non-interest income
Investment and securities services 591 531 2,212 2,245
Credit fees 168 129 622 459
Net securities gains (losses) 26 55 (437) 331
Trading income (loss) 215 (654) 685 (794)
Service charges 385 363 1,507 1,237
Loan securitizations 135 (13) 468 231
Card services 192 179 733 589
Insurance, net of claims 202 248 913 927
Trust fees 33 34 141 140
Other income (loss) (54) 319 (310) 772
-------------------------------------------------------------------------
1,893 1,191 6,534 6,137
-------------------------------------------------------------------------
Total revenue 4,718 3,640 17,860 14,669
-------------------------------------------------------------------------
Provision for credit losses 521 288 2,480 1,063
-------------------------------------------------------------------------
Non-interest expenses
Salaries and employee benefits 1,452 1,334 5,839 4,984
Occupancy, including depreciation 293 287 1,213 935
Equipment, including depreciation 246 203 897 683
Amortization of other intangibles 151 172 653 577
Restructuring costs 9 - 36 48
Marketing and business development 158 148 566 491
Brokerage-related fees 70 66 274 252
Professional and advisory services 200 205 740 569
Communications 58 61 239 210
Other 458 (109) 1,754 753
-------------------------------------------------------------------------
3,095 2,367 12,211 9,502
-------------------------------------------------------------------------
Income before income taxes,
non-controlling interests in
subsidiaries, and equity in net
income of an associated company 1,102 985 3,169 4,104
Provision for income taxes 132 20 241 537
Non-controlling interests in
subsidiaries, net of income taxes 27 18 111 43
Equity in net income of an
associated company, net of
income taxes 67 67 303 309
-------------------------------------------------------------------------
Net income 1,010 1,014 3,120 3,833
Preferred dividends 48 23 167 59
-------------------------------------------------------------------------
Net income available to common
shareholders $962 $991 $2,953 $3,774
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of common shares
outstanding (millions)
Basic 855.6 808.0 847.1 769.6
Diluted 861.1 812.8 850.1 775.7
Earnings per share (Canadian
dollars)
Basic $1.12 $1.23 $3.49 $4.90
Diluted 1.12 1.22 3.47 4.87
Dividends per share (Canadian
dollars) 0.61 0.61 2.44 2.36
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
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) 2009 2008 2009 2008
-------------------------------------------------------------------------
Common shares
Balance at beginning of period $15,073 $13,090 $13,241 $6,577
Proceeds from shares issued on
exercise of stock options 112 55 247 255
Shares issued as a result of
dividend reinvestment plan 127 89 451 274
Proceeds from issuance of new
shares - - 1,381 -
Shares issued on acquisition
of Commerce - - - 6,147
Impact of shares sold (acquired)
for trading purposes(1) 45 7 37 (12)
-------------------------------------------------------------------------
Balance at end of period 15,357 13,241 15,357 13,241
-------------------------------------------------------------------------
Preferred shares
Balance at beginning of period 3,395 1,625 1,875 425
Shares issued - 250 1,520 1,450
-------------------------------------------------------------------------
Balance at end of period 3,395 1,875 3,395 1,875
-------------------------------------------------------------------------
Contributed surplus
Balance at beginning of period 339 355 350 119
Stock options (18) (5) (29) (32)
Conversion of Commerce stock
options on acquisition - - - 263
-------------------------------------------------------------------------
Balance at end of period 321 350 321 350
-------------------------------------------------------------------------
Retained earnings
Balance at beginning of period,
as previously reported 18,192 17,362 17,857 15,954
Transition adjustment on
adoption of financial
instruments amendments - - (59) -
Net income due to reporting-
period alignment of U.S.
entities - - 4 -
Net income 1,010 1,014 3,120 3,833
Common dividends (522) (493) (2,075) (1,851)
Preferred dividends (48) (23) (167) (59)
Share issue expenses - (3) (48) (20)
-------------------------------------------------------------------------
Balance at end of period 18,632 17,857 18,632 17,857
-------------------------------------------------------------------------
Accumulated other comprehensive
income (loss)
Balance at beginning of period,
as previously reported 1,021 (1,139) (1,649) (1,671)
Transition adjustment on
adoption of financial
instruments amendments - - 563 -
Other comprehensive income due
to reporting-period alignment
of U.S. entities - - 329 -
Other comprehensive income
(loss) for the period (6) (510) 1,772 22
-------------------------------------------------------------------------
Balance at end of period 1,015 (1,649) 1,015 (1,649)
-------------------------------------------------------------------------
Retained earnings and accumulated
other comprehensive income 19,647 16,208 19,647 16,208
-------------------------------------------------------------------------
Total shareholders' equity $38,720 $31,674 $38,720 $31,674
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Sold or 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) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net income $1,010 $1,014 $3,120 $3,833
-------------------------------------------------------------------------
Other comprehensive income (loss),
net of income taxes
Change in unrealized gains (losses)
on available-for-sale securities,
net of hedging activities(a) 347 (1,645) 1,129 (1,725)
Reclassification to earnings of
net losses (gains) in respect of
available-for-sale securities(b) 45 5 257 (53)
Net change in unrealized foreign
currency translation gains (losses)
on investments in subsidiaries,
net of hedging activities(c),(d) (349) 432 (72) 440
Change in net gains on derivative
instruments designated as cash
flow hedges(e) 300 758 1,702 1,522
Reclassification to earnings of
net gains on cash flow hedges(f) (349) (60) (1,244) (162)
-------------------------------------------------------------------------
Other comprehensive income (loss)
for the period (6) (510) 1,772 22
-------------------------------------------------------------------------
Comprehensive income for
the period $1,004 $504 $4,892 $3,855
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(a) Net of income tax provision of $154 million and $456 million,
respectively, for the three and twelve months ended October 31, 2009
(three and twelve months ended October 31, 2008 - income tax recovery
of $821 million and $904 million, respectively).
(b) Net of income tax recovery of $15 million and $148 million,
respectively, for the three and twelve months ended October 31, 2009
(three and twelve months ended October 31, 2008 - income tax expense
of $2 million and $22 million, respectively).
(c) Net of income tax recovery of $58 million and net of income tax
provision of $604 million, respectively, for the three and twelve
months ended October 31, 2009 (three and twelve months ended
October 31, 2008 - income tax recovery of $971 million and
$1,363 million, respectively).
(d) Includes $26 million of after-tax losses and $1,380 million of
after-tax gains arising from hedges of the Bank's investment in
foreign operations for the three and twelve months ended
October 31, 2009 (three and twelve months ended October 31, 2008 -
after-tax losses of $1,992 million and $2,881 million, respectively).
(e) Net of income tax provision of $153 million and $828 million
respectively, for the three and twelve months ended October 31, 2009
(three and twelve months ended October 31, 2008 - income tax
provision of $341 million and $669 million, respectively).
(f) Net of income tax provision of $154 million and $552 million,
respectively, for the three and twelve months ended October 31, 2009
(three and twelve months ended October 31, 2008 - income tax
provision of $25 million and $70 million, respectively).
Certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
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) 2009 2008 2009 2008
-------------------------------------------------------------------------
Cash flows from (used in)
operating activities
Net income $1,010 $1,014 $3,120 $3,833
Adjustments to determine net
cash flows from (used in)
operating activities
Provision for credit losses 521 288 2,480 1,063
Restructuring costs 9 - 36 48
Depreciation 166 136 600 438
Amortization of other intangibles 151 172 653 577
Net securities losses (gains) (26) (55) 437 (331)
Net gain (loss) on securitizations (87) 44 (321) (41)
Equity in net income of an
associated company (67) (67) (303) (309)
Non-controlling interests 27 18 111 43
Future income taxes 399 425 336 108
Changes in operating assets and
liabilities
Current income taxes payable (426) (895) 1,703 (2,857)
Interest receivable and payable 148 159 224 27
Trading securities (4,564) 16,210 5,043 26,302
Derivative assets 7,929 (42,375) 33,880 (44,630)
Derivative liabilities (7,384) 34,601 (26,137) 32,852
Other 2,269 2,576 2,781 2,859
-------------------------------------------------------------------------
Net cash from operating activities 75 12,251 24,643 19,982
-------------------------------------------------------------------------
Cash flows from (used in)
financing activities
Change in deposits 2,556 21,476 14,319 52,030
Change in securities sold under
repurchase agreements 9,059 3,596 (2,460) 2,080
Change in securities sold short 5,202 (5,975) (877) (5,677)
Issue of subordinated notes and
debentures - - - 4,025
Repayment of subordinated notes
and debentures (2) (1,079) (20) (1,079)
Liability for preferred shares
and capital trust securities (4) (4) 1 (5)
Translation adjustment on
subordinated notes and debentures
issued in a foreign currency
and other (34) 37 (37) 41
Common shares issued 89 44 1,544 201
Common shares sold (acquired) for
trading purposes 45 7 37 (12)
Dividends paid (443) (427) (1,791) (1,636)
Net proceeds from issuance of
preferred shares - 247 1,497 1,430
-------------------------------------------------------------------------
Net cash from financing activities 16,468 17,922 12,213 51,398
-------------------------------------------------------------------------
Cash flows from (used in)
investing activities
Interest-bearing deposits with
banks (3,621) (2,984) (6,313) (683)
Activity in available-for-sale
and held-to-maturity securities
Purchases (21,804) (43,137) (92,331) (120,077)
Proceeds from maturities 11,092 8,870 43,101 29,209
Proceeds from sales 6,723 15,455 33,022 63,995
Net change in loans, net of
securitizations (14,698) (5,750) (51,036) (36,659)
Proceeds from loan securitizations 6,585 5,561 27,491 10,370
Net purchases of premise and
equipment (357) (282) (820) (532)
Securities purchased under
reverse repurchase agreements (534) (8,287) 10,275 (14,777)
Acquisitions and dispositions less
cash and cash equivalents acquired - - - (1,759)
-------------------------------------------------------------------------
Net cash used in investing
activities (16,614) (30,554) (36,611) (70,913)
-------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents 8 179 (159) 260
-------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (63) (202) 86 727
Impact due to reporting-period
alignment of U.S. entities - - (189) -
Cash and cash equivalents at
beginning of period 2,477 2,719 2,517 1,790
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Cash and cash equivalents at
end of period, represented by
cash and due from banks $2,414 $2,517 $2,414 $2,517
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Supplementary disclosure of cash
flow information
Amount of interest paid during
the period $1,172 $2,192 $8,337 $10,678
Amount of income taxes paid
(refunded) during the period (230) (40) (1,198) 1,905
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Certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
Appendix A - Segmented Information
The Bank's operations and activities are organized around four key business segments: Canadian Personal and Commercial Banking, Wealth Management, U.S. Personal and Commercial Banking, and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment. Results for these segments for the three and twelve months ended
Results by Business Segment
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Canadian Personal U.S. Personal
(millions of and Commercial Wealth and Commercial
Canadian dollars) Banking Management Banking(1),(2)
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For the three Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2009 2008 2009 2008 2009 2008
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Net interest income $1,668 $1,489 $67 $88 $840 $764
Non-interest income 766 794 520 503 273 280
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Total revenue 2,434 2,283 587 591 1,113 1,044
Provision for
(reversal of)
credit losses 313 209 - - 216 78
Non-interest
expenses 1,226 1,202 444 428 806 649
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Income (loss)
before income
taxes 895 872 143 163 91 317
Provision for
(recovery of)
income taxes 273 272 46 53 (31) 66
Non-controlling
interests in
subsidiaries, net
of income taxes - - - - - -
Equity in net
income of an
associated
company, net of
income taxes - - 59 60 - -
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Net income (loss) $622 $600 $156 $170 $122 $251
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Total assets
(billions of
Canadian dollars)
Balance sheet $183.3 $172.4 $20.6 $15.4 $153.8 $127.0
Securitized 57.6 42.8 - - - -
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(millions of Wholesale
Canadian dollars) Banking Corporate Total
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For the three Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2009 2008 2009 2008 2009 2008
-------------------------------------------------------------------------
Net interest income $579 $464 $(329) $(356) $2,825 $2,449
Non-interest income 307 (578) 27 192 1,893 1,191
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Total revenue 886 (114) (302) (164) 4,718 3,640
Provision for
(reversal of)
credit losses 7 10 (15) (9) 521 288
Non-interest
expenses 347 306 272 (218) 3,095 2,367
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Income (loss)
before income
taxes 532 (430) (559) 63 1,102 985
Provision for
(recovery of)
income taxes 160 (202) (316) (169) 132 20
Non-controlling
interests in
subsidiaries, net
of income taxes - - 27 18 27 18
Equity in net
income of an
associated
company, net of
income taxes - - 8 7 67 67
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Net income (loss) $372 $(228) $(262) $221 $1,010 $1,014
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Total assets
(billions of
Canadian dollars)
Balance sheet $164.9 $215.0 $34.6 $33.4 $557.2 $563.2
Securitized 4.1 3.0 (13.7) (13.3) 48.0 32.6
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Results by Business Segment
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Canadian Personal U.S. Personal
(millions of and Commercial Wealth and Commercial
Canadian dollars) Banking Management Banking(1),(2)
-------------------------------------------------------------------------
For the twelve Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2009 2008 2009 2008 2009 2008
-------------------------------------------------------------------------
Net interest income $6,348 $5,790 $270 $347 $3,607 $2,144
Non-interest income 3,101 3,036 1,935 1,981 1,117 853
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Total revenue 9,449 8,826 2,205 2,328 4,724 2,997
Provision for
(reversal of)
credit losses 1,155 766 - - 948 226
Non-interest
expenses 4,725 4,522 1,701 1,615 3,213 1,791
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Income (loss)
before income
taxes 3,569 3,538 504 713 563 980
Provision for
(recovery of)
income taxes 1,097 1,114 159 233 (70) 258
Non-controlling
interests in
subsidiaries, net
of income taxes - - - - - -
Equity in net
income of an
associated
company, net of
income taxes - - 252 289 - -
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Net income (loss) $2,472 $2,424 $597 $769 $633 $722
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-------------------------------------------------------------------------
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(millions of Wholesale
Canadian dollars) Banking Corporate Total
-------------------------------------------------------------------------
For the twelve Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
months ended 2009 2008 2009 2008 2009 2008
-------------------------------------------------------------------------
Net interest income $2,488 $1,318 $(1,387) $(1,067) $11,326 $8,532
Non-interest income 733 (68) (352) 335 6,534 6,137
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Total revenue 3,221 1,250 (1,739) (732) 17,860 14,669
Provision for
(reversal of)
credit losses 164 106 213 (35) 2,480 1,063
Non-interest
expenses 1,417 1,199 1,155 375 12,211 9,502
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Income (loss)
before income
taxes 1,640 (55) (3,107) (1,072) 3,169 4,104
Provision for
(recovery of)
income taxes 503 (120) (1,448) (948) 241 537
Non-controlling
interests in
subsidiaries, net
of income taxes - - 111 43 111 43
Equity in net
income of an
associated
company, net of
income taxes - - 51 20 303 309
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Net income (loss) $1,137 $65 $(1,719) $(147) $3,120 $3,833
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(1) Commencing the third quarter ended July 31, 2008, the results of U.S.
Personal and Commercial Banking include Commerce. For details, see
Note 7 to the 2009 Annual Report.
(2) As explained in Note 1 to the 2009 Consolidated Financial Statements,
effective the second quarter ended April 30, 2009, as a result of the
reporting-period alignment of U.S. entities, TD Bank, N.A., which
includes TD Banknorth and Commerce, is consolidated using the same
period as the Bank.
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 TD share register, dividend bank account P.O. Box 7010
certificate) changes, the dividend Adelaide Street
reinvestment plan, to eliminate Postal Station
duplicate mailings of Toronto, Ontario
shareholder materials, or to M5C 2W9
stop (or resume) receiving 416-643-5500
Annual and Quarterly Reports. or toll-free at
1-800-387-0825
inquiries@
cibcmellon.com or
www.cibcmellon.com
-------------------------------------------------------------------------
Hold your TD Missing dividends, lost share Co-Transfer Agent and
shares through certificates, estate questions, Registrar:
the Direct address changes to the share BNY Mellon Shareowner
Registration register, to eliminate Services
System in the duplicate mailings of P.O. Box 358015
United States shareholder materials, or to Pittsburgh,
stop (or resume) receiving Pennsylvania
Annual and Quarterly Reports. 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
www.bnymellon.com/shareowner/isd
-------------------------------------------------------------------------
Beneficially own Your TD shares, including Your intermediary
TD shares that questions regarding the
are held in the dividend reinvestment plan
name of an and mailings of shareholder
intermediary, 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 [email protected].
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 2009 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: [email protected].
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: [email protected]
Quarterly Earnings Conference Call
TD Bank Financial Group will host an earnings conference call on
The webcast and presentations will be archived at www.td.com/investor/calendar_arch.jsp. Replay of the teleconference will be available from
Annual Meeting
Thursday, March 25, 2010
Fairmont Le Château Frontenac
Quebec City, Quebec
About TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group. TD Bank Financial Group is the sixth largest bank in
For further information: Tim Thompson, Senior Vice President, Investor Relations, (416) 308-9030; Nick Petter, Manager, Media Relations, (416) 308-1861
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