TD Bank Group Reports Fourth Quarter and Fiscal 2010 Results
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This quarterly earnings release should be read in conjunction with our
unaudited fourth quarter 2010 consolidated financial results ended
October 31, 2010 included in this Earnings News Release and with our
audited 2010 Consolidated Financial Statements, which is available on our
website at http://www.td.com/investor/. This analysis is dated
December 2, 2010. 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).
The accounting policies used in the preparation of these consolidated
financial results are consistent with those used in the Bank's
October 31, 2010 Consolidated Financial Statements. Certain comparative
amounts have been reclassified to conform to the presentation adopted in
the current period. Additional information relating to the Bank is
available 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) website at http://www.sec.gov (EDGAR filers section).
FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter
last year:
- Reported diluted earnings per share were $1.07, compared with $1.12.
- Adjusted diluted earnings per share were $1.38, compared with $1.46.
- Reported net income was $994 million, compared with $1,010 million.
- Adjusted net income was $1,260 million, compared with $1,307 million.
FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:
- Reported diluted earnings per share were $5.10, compared with $3.47.
- Adjusted diluted earnings per share were $5.77, compared with $5.35.
- Reported net income was $4,644 million, compared with $3,120 million.
- Adjusted net income was $5,228 million, compared with $4,716 million.
Adjusted measures are non-GAAP. Refer to the "How the Bank Reports"
section of the Management's Discussion and Analysis for an explanation of
reported and adjusted results.
FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The fourth quarter reported earnings figures included the following items
of note:
- Amortization of intangibles of $115 million after tax (14 cents per
share), compared with $116 million after tax (13 cents per share) in
the fourth quarter last year.
- A loss of $8 million after tax (1 cent per share), due to the change
in fair value of derivatives hedging the reclassified
available-for-sale debt securities portfolio, compared with a loss of
$73 million after tax (9 cents per share) in the fourth quarter last
year.
- Integration and restructuring charges of $18 million after tax
(2 cents per share), relating to the U.S. Personal and Commercial
Banking acquisitions, compared with $89 million after tax (10 cents
per share) in the fourth quarter last year.
- A loss of $4 million after tax, due to the change in fair value of
credit default swaps hedging the corporate loan book, net of
provision for credit losses (PCL), compared with a loss of
$19 million after tax (2 cents per share) in the fourth quarter last
year.
- An increase in the tax provision of $121 million (14 cents per share)
reflecting the resolution of a number of outstanding tax matters
related to certain previously discontinued strategies in the
Wholesale Banking segment.
TORONTO, Dec. 2 /CNW/ - TD Bank Group (TD or the Bank) today announced its financial results for the fourth quarter ended October 31, 2010. Overall results for the quarter reflected very strong retail earnings performance.
"The fourth quarter completed a great year for TD, with our retail operations delivering a record $4.8 billion in adjusted earnings for 2010. Canadian Personal and Commercial Banking had yet another strong quarter, while our U.S. operations continued to perform very well despite new regulatory challenges and ongoing weakness in the economy," said Ed Clark, Group President and Chief Executive Officer, TD. "Our results in Wholesale Banking also exceeded our expectations, even though markets remained challenging."
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking posted earnings of $773 million in the fourth quarter, up 24% from the same period last year. Revenue grew 10% while PCL declined by 24%. Expenses increased by 9% due to the timing of business investment initiatives and higher project-related costs. TD Canada Trust (TDCT) reported strong volume growth, primarily in core banking, financing services, real estate secured lending, and insurance. During the quarter, TDCT also announced it will introduce Sunday hours across approximately 300 branches, providing seven-day banking in those branches.
"For the fourth straight quarter, earnings at Canadian Personal and Commercial Banking grew more than 20%, marking an outstanding year for the business. We continued to win market share, benefitting from our leadership position in branch hours and the ongoing investment in our network," said Tim Hockey, Group Head, Canadian Banking and Insurance, TD. "This quarter, customer satisfaction levels also hit a record by every measure we track, which speaks to our commitment to delivering the absolute best in customer service and convenience. For 2011, we expect healthy but more moderate growth in revenue, as volume growth slows and competitive pricing continues to pressure margins."
Wealth Management
Global Wealth net income, which excludes TD's reported investment in TD Ameritrade, was $118 million in the quarter, up 22% from the same period last year, driven by increased fee-based revenue from higher client assets and increased net interest margin. The fourth quarter marked the seventh consecutive quarter of improved profit for the business. TD Ameritrade contributed $33 million in earnings to the segment, down 44% from the same period last year, due to lower earnings at TD Ameritrade and the translation effect of a stronger Canadian dollar.
"We see good momentum in the business and we remain competitive in attracting new client assets with our product and service offering," said Mike Pedersen, Group Head, Wealth Management, Direct Channels and Corporate Shared Services, TD. "I'm proud to be leading a business poised for growth."
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated US$257 million in reported net income for the quarter. On an adjusted basis, the segment earned US$275 million, up 40% from the fourth quarter last year. Revenue in U.S. dollar terms grew 14% from the same period last year, driven by increased loan and deposit volume, wider product spreads, and recent acquisitions. Total PCL dropped to US$142 million, down 29% compared with the same period last year.
"TD Bank, America's Most Convenient Bank, finished the year on a high note, delivering US$1 billion in adjusted earnings for 2010, despite the sluggish pace of recovery of the U.S. economy and the low interest rate environment," said Bharat Masrani, Group Head, U.S. Personal and Commercial Banking, TD. "We're confident we have built a competitive growth platform around a business model focused on long-term profitability. While we remain somewhat cautious given the macroeconomic challenges, we will continue to take market share in 2011 and are excited by the early performance we've seen from the acquisitions in Florida and the Carolinas completed this year."
Wholesale Banking
Wholesale Banking recorded net income of $95 million on a reported basis, and $216 million on an adjusted basis, for the quarter. Last year's results reflected strong, broad-based performance driven by the unprecedented rate of recovery in the global financial system. This quarter, as markets continued to normalize, the business experienced lower client volumes and fewer trading opportunities, partially offset by better currency trading, investment banking income and investment portfolio gains.
"This quarter was a strong finish to a very good year. TD Securities generated close to $1 billion in adjusted net income in 2010 despite a challenging operating environment," said Bob Dorrance, Group Head, Wholesale Banking, TD. "Our client-driven franchise strategy served us well through the choppy markets and we are well positioned for continued good performance through 2011."
Corporate
The Corporate segment, which includes the Bank's other activities, recorded a net loss of $290 million, up $28 million, on a reported basis, and a net loss of $163 million, up $109 million, on an adjusted basis, from the same period last year. The higher adjusted net loss this quarter was primarily attributable to higher net corporate expenses and the impact of favourable tax-related items last year, partially offset by favourable hedging and treasury activities.
Capital
TD's Tier 1 capital ratio was 12.2%. Capital quality remained very high, with tangible common equity comprising about 75% of Tier 1 capital.
"We expect to hold more capital as a result of the new rules being finalized by regulators. However, our current levels are very strong and we do not believe we will need to raise additional capital as a result," Clark said. "Our dividend policy remains driven by our outlook for earnings, rather than our capital position, and we expect to provide the market with some clarity in that regard in the next several months."
Conclusion
"Looking back on 2010, this has been a year of significant growth for TD and we're poised to continue to deliver strong results despite the challenging economy and the regulatory environment, which still remains uncertain," Clark said. "The pace of recovery has been slower than we would like and interest rates remain near historic lows. However, we're confident that our ongoing investments in our franchise, and our unrelenting focus on the needs of our customers and clients will help us achieve sustainable growth in the years ahead. Our success wouldn't be possible without the dedication shown by our employees every day and I want to thank them for another great year."
The foregoing contains forward-looking statements.
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Caution Regarding Forward-Looking Statements
From time to time, the Bank makes written and/or oral forward-looking
statements, including in this earnings news release, in other filings
with Canadian regulators or the U.S. Securities and Exchange Commission,
and in other communications. In addition, representatives of the Bank may
make forward-looking statements orally to analysts, investors, the media
and others. All such statements are made pursuant to the "safe harbour"
provisions of, and are intended to be forward-looking statements under,
applicable Canadian and U.S. securities legislation, including the U.S.
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, but are not limited to, statements made in this
earnings news release, the Bank's 2010 Management's Discussion and
Analysis ("MD&A") under the headings "Economic Summary and Outlook" and,
for each business segment, "Business Outlook and Focus for 2011" and in
other statements regarding the Bank's objectives and priorities for 2011
and beyond and strategies to achieve them, and the Bank's anticipated
financial performance. 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 the Bank to make
assumptions and are subject to inherent risks and uncertainties, general
and specific. Especially in light of the current uncertainty related to
the financial, economic and regulatory environments, such risks and
uncertainties - many of which are beyond the Bank's control and the
effects of which can be difficult to predict - may cause actual results
to differ materially from the expectations expressed in the
forward-looking statements. Risk factors that could cause such
differences include: credit, market (including equity, commodity, foreign
exchange and interest rate), liquidity, operational, reputational,
insurance, strategic, regulatory, legal, environmental and other risks,
all of which are discussed in the MD&A. Additional risk factors include
the impact of recent U.S. legislative developments, as discussed under
"Significant Events in 2010" in the "How we Performed" section of this
earnings news release; changes to and new interpretations of capital and
liquidity guidelines and reporting instructions; increased funding costs
for credit due to market illiquidity and competition for funding; and the
failure of third parties to comply with their obligations to the Bank or
its affiliates relating to the care and control of information. We
caution that the preceding list is not exhaustive of all possible risk
factors and other factors could also adversely affect the Bank's results.
For more detailed information, please see the "Risk Factors and
Management" section of the 2010 MD&A. All such factors should be
considered carefully, as well as other uncertainties and potential
events, and the inherent uncertainty of forward-looking statements, when
making decisions with respect to the Bank and we caution readers not to
place undue reliance on the Bank's forward-looking statements.
Material economic assumptions underlying the forward-looking statements
contained in this document are set out in the 2010 MD&A under the
headings "Economic Summary and Outlook" and, for each business segment,
"Business Outlook and Focus for 2011", as updated in subsequently filed
quarterly Reports to Shareholders.
Any forward-looking statements contained in this document represent the
views of management only as of the date hereof and are presented for the
purpose of assisting the Bank's shareholders and analysts in
understanding the Bank's financial position, objectives and priorities
and anticipated financial performance as at and for the periods ended on
the dates presented, and may not be appropriate for other purposes. 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.
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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.
FINANCIAL HIGHLIGHTS
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(millions of Canadian For the twelve
dollars, except For the three months ended months ended
as noted) --------------------------------------------------
Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
2010 2010 2009(1) 2010 2009(1)
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Results of operations
Total revenue $ 5,017 $ 4,744 $ 4,718 $ 19,565 $ 17,860
Provision for credit
losses 404 339 521 1,625 2,480
Non-interest expenses 3,263 2,966 3,095 12,163 12,211
Net income - reported(2) 994 1,177 1,010 4,644 3,120
Net income - adjusted(2) 1,260 1,304 1,307 5,228 4,716
Economic profit(3) 105 208 262 876 561
Return on common
equity - reported 9.7% 12.2% 11.0% 12.1% 8.4%
Return on invested
capital(3) 11.0% 12.0% 12.6% 12.1% 11.4%
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Financial position
Total assets $619,545 $603,467 $557,219 $619,545 $557,219
Total risk-weighted
assets 199,910 189,190 189,585 199,910 189,585
Total shareholders'
equity 42,302 41,336 38,720 42,302 38,720
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Financial ratios
Efficiency ratio -
reported 65.0% 62.5% 65.6% 62.2% 68.4%
Efficiency ratio -
adjusted 61.4% 58.8% 58.4% 58.6% 59.2%
Tier 1 capital to
risk-weighted assets 12.2% 12.5% 11.3% 12.2% 11.3%
Provision for credit
losses as a % of net
average loans 0.60% 0.51% 0.79% 0.62% 0.97%
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Common share
information - reported
(Canadian dollars)
Per share
Basic earnings $ 1.08 $ 1.30 $ 1.12 $ 5.13 $ 3.49
Diluted earnings 1.07 1.29 1.12 5.10 3.47
Dividends 0.61 0.61 0.61 2.44 2.44
Book value 44.29 43.41 41.13 44.29 41.13
Closing share price 73.45 73.16 61.68 73.45 61.68
Shares outstanding
(millions)
Average basic 874.9 870.2 855.6 867.1 847.1
Average diluted 879.7 875.1 861.1 872.1 850.1
End of period 878.5 874.1 858.8 878.5 858.8
Market capitalization
(billions of Canadian
dollars) $ 64.5 $ 63.9 $ 53.0 $ 64.5 $ 53.0
Dividend yield 3.4% 3.4% 3.7% 3.5% 4.8%
Dividend payout ratio 56.4% 47.2% 54.3% 47.6% 70.3%
Price to earnings ratio 14.4 14.2 17.8 14.4 17.8
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Common share
information - adjusted
(Canadian dollars)
Per share
Basic earnings $ 1.39 $ 1.44 $ 1.47 $ 5.81 $ 5.37
Diluted earnings 1.38 1.43 1.46 5.77 5.35
Dividend payout ratio 44.1% 42.4% 41.5% 42.1% 45.6%
Price to earnings ratio 12.7 12.5 11.6 12.7 11.6
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(1) As explained in the "How the Bank Reports" section, effective the
second quarter ended April 30, 2009, the reporting periods of U.S.
entities are aligned with the reporting period of the Bank.
(2) Adjusted measures are non-GAAP. Refer to the "How the Bank Reports"
section for an explanation of reported and adjusted results.
(3) Economic profit and return on invested capital are non-GAAP financial
measures. Refer to the "Economic Profit and Return on Invested
Capital" section for an explanation.
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 to arrive at "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 April 30, 2009, the reporting periods of TD Bank, N.A., which operates as TD Bank, America's Most Convenient Bank, were aligned with the reporting period of the Bank to eliminate the one month lag in financial reporting. Prior to April 30, 2009, the reporting period of TD Bank, N.A. was included in the Bank's financial statements on a one month lag. In accordance with the CICA Handbook Section 1506, Accounting Changes, this alignment is considered a change in accounting policy. The Bank has assessed that the impact to prior periods is not material and therefore, an adjustment was made to opening retained earnings of the second quarter of 2009, to align the reporting period of TD Bank, N.A. to that of the Bank's reporting period.
The following table provides the operating results - reported for the Bank.
Operating Results - Reported
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(millions of Canadian For the twelve
dollars) For the three months ended months ended
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Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
2010 2010 2009 2010 2009
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Net interest income $ 2,983 $ 2,921 $ 2,825 $ 11,543 $ 11,326
Non-interest income 2,034 1,823 1,893 8,022 6,534
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Total revenue 5,017 4,744 4,718 19,565 17,860
Provision for credit
losses 404 339 521 1,625 2,480
Non-interest expenses 3,263 2,966 3,095 12,163 12,211
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Income before income
taxes, non-controlling
interests in
subsidiaries, and
equity in net income of
an associated company 1,350 1,439 1,102 5,777 3,169
Provision for income
taxes 374 310 132 1,262 241
Non-controlling interests
in subsidiaries, net
of income taxes 27 26 27 106 111
Equity in net income of
an associated company,
net of income taxes 45 74 67 235 303
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Net income - reported 994 1,177 1,010 4,644 3,120
Preferred dividends 48 49 48 194 167
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Net income available to
common shareholders -
reported $ 946 $ 1,128 $ 962 $ 4,450 $ 2,953
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Non-GAAP Financial Measures - Reconciliation of Adjusted 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 Canadian Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
dollars) 2010 2010 2009 2010 2009
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Net interest income $ 2,983 $ 2,921 $ 2,825 $ 11,543 $ 11,326
Non-interest income(1) 2,049 1,861 1,984 8,020 7,294
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Total revenue 5,032 4,782 4,809 19,563 18,620
Provision for credit
losses(2) 404 339 521 1,685 2,225
Non-interest expenses(3) 3,088 2,811 2,807 11,464 11,016
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Income before income
taxes, non-controlling
interests in
subsidiaries, and
equity in net income of
an associated company 1,540 1,632 1,481 6,414 5,379
Provision for income
taxes(4) 315 392 231 1,387 923
Non-controlling interests
in subsidiaries, net
of income taxes 27 26 27 106 111
Equity in net income of
an associated company,
net of income taxes(5) 62 90 84 307 371
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Net income - adjusted 1,260 1,304 1,307 5,228 4,716
Preferred dividends 48 49 48 194 167
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Net income available to
common shareholders -
adjusted 1,212 1,255 1,259 5,034 4,549
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Adjustments for items
of note, net of income
taxes
Amortization of
intangibles(6) (115) (117) (116) (467) (492)
Increase (decrease) in
fair value of
derivatives hedging the
reclassified available-
for-sale debt
securities portfolio(7) (8) (14) (73) 5 (450)
Integration and
restructuring charges
relating to U.S.
Personal and Commercial
Banking acquisitions(8) (18) (5) (89) (69) (276)
Increase (decrease) in
fair value of credit
default swaps hedging
the corporate loan book,
net of provision for
credit losses(9) (4) 9 (19) (4) (126)
Recovery of income taxes
due to changes in
statutory income tax
rates(10) - - - 11 -
Release of insurance
claims(11) - - - 17 -
General allowance release
(increase) in Canadian
Personal and Commercial
Banking and Wholesale
Banking(12) - - - 44 (178)
Settlement of TD
Banknorth shareholder
litigation(13) - - - - (39)
FDIC special assessment
charge(14) - - - - (35)
Agreement with Canada
Revenue Agency(15) (121) - - (121) -
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Total adjustments for
items of note (266) (127) (297) (584) (1,596)
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Net income available to
common shareholders -
reported $ 946 $ 1,128 $ 962 $ 4,450 $ 2,953
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(1) Adjusted non-interest income excludes the following items of note:
fourth quarter 2010 - $8 million loss due to change in fair value of
credit default swaps (CDS) hedging the corporate loan book, as
explained in footnote 9; $7 million loss due to change in fair value
of derivatives hedging the reclassified available-for-sale (AFS)
debt securities portfolio, as explained in footnote 7; third quarter
2010 - $15 million gain due to change in fair value of credit
default swaps (CDS) hedging the corporate loan book; $53 million
loss due to change in fair value of derivatives hedging the
reclassified available-for-sale (AFS) debt securities portfolio;
second quarter 2010 - $5 million loss due to change in fair value of
CDS hedging the corporate loan book; $34 million gain due to change
in fair value of derivatives hedging the reclassified AFS debt
securities portfolio; first quarter 2010 - $11 million loss due to
change in fair value of CDS hedging the corporate loan book;
$12 million gain due to change in fair value of derivatives hedging
the reclassified AFS debt securities portfolio; $25 million recovery
of insurance claims, as explained in footnote 11; fourth quarter
2009 - $30 million loss due to change in fair value of credit
default swaps (CDS) hedging the corporate loan book; $61 million
loss due to change in fair value of derivatives hedging the
reclassified available-for-sale (AFS) debt securities portfolio;
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.
(2) Adjusted provision for credit losses (PCL) excludes the following
items of note: second quarter 2010 - $60 million release in general
allowance for credit losses in Canadian Personal and Commercial
Banking and Wholesale Banking, as explained in footnote 12; 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.
(3) Adjusted non-interest expenses excludes the following items of note:
fourth quarter 2010 - $147 million amortization of intangibles as
explained in footnote 6; $28 million of integration charges related
to U.S. Personal and Commercial Banking acquisitions, as explained
in footnote 8; third quarter 2010 - $147 million amortization of
intangibles; $8 million of integration charges related to U.S.
Personal and Commercial Banking acquisitions; second quarter 2010 -
$149 million amortization of intangibles; first quarter 2010 -
$149 million amortization of intangibles; $71 million of integration
and restructuring charges related to U.S. Personal and Commercial
Banking acquisitions; fourth quarter 2009 - $151 million
amortization of intangibles; $137 million restructuring and
integration charges related to the Commerce acquisition; third
quarter 2009 - $158 million amortization of intangibles;
$109 million of integration and restructuring charges related to
U.S. Personal and Commercial Banking acquisitions; $55 million the
Federal Deposit Insurance Corporation (FDIC) special assessment
charge, as explained in footnote 14; second quarter 2009 -
$171 million amortization of intangibles; $77 million integration
and restructuring 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 integration and
restructuring charges related to U.S. Personal and Commercial
Banking acquisitions.
(4) For reconciliation between reported and adjusted provision for
income taxes, see the 'Non-GAAP Financial Measures - Reconciliation
of Reported to Adjusted Provision for Income Taxes' table.
(5) Adjusted equity in net income of an associated company excludes the
following items of note: fourth quarter 2010 - $17 million
amortization of intangibles, as explained in footnote 6; third
quarter 2010 - $16 million amortization of intangibles; second
quarter 2010 - $22 million amortization of intangibles; first
quarter 2010 - $17 million amortization of intangibles; fourth
quarter 2009 - $17 million amortization of intangibles; third
quarter 2009 - $20 million amortization of intangibles; second
quarter 2009 - $16 million amortization of intangibles; first
quarter 2009 - $15 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) Effective August 1, 2008, as a result of 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 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. Adjusted results of
the Bank exclude the gains and losses of the derivatives in excess
of the accrued amount.
(8) As a result of U.S. Personal and Commercial Banking acquisitions and
related integration and restructuring initiatives undertaken, the
Bank may incur integration and restructuring charges. Restructuring
charges consist of employee severance costs, the costs of amending
certain executive employment and award agreements, contract
termination fees, and the write-down of long-lived assets due to
impairment. Integration charges consist of costs related to employee
retention, external professional consulting charges, marketing
(including customer communication and rebranding), and
integration-related travel costs. Beginning in Q2 2010, U.S.
Personal and Commercial Banking has elected not to include any
further Commerce-related integration and restructuring charges in
this item of note as the efforts in these areas wind down and in
light of the fact that the integration and restructuring is
substantially complete. For the twelve months ended October 31,
2010, the integration charges were driven by the FDIC-assisted and
South Financial acquisitions and there were no restructuring charges
recorded.
(9) 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.
(10) This represents the impact of scheduled changes in the income tax
statutory rate on net future income tax balances.
(11) 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. The
plaintiffs sought leave to appeal the decision to the Supreme Court
of Canada and in Q1 2010, the Supreme Court of Canada denied the
plaintiffs' application to seek leave to appeal. As result of this
favourable outcome, the Bank released its provision related to the
minor injury cap litigation in Alberta.
(12) Effective November 1, 2009, TD Financing Services (formerly VFC
Inc.) aligned their loan loss methodology with that used for all
other Canadian Personal and Commercial Banking retail loans; any
general provisions resulting from the revised methodology are
included in "General allowance increase in Canadian Personal and
Commercial Banking and Wholesale Banking."
(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. 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.
(14) On May 22, 2009, FDIC, in the U.S., finalized a special assessment
resulting in a charge of $55 million before tax or US$49 million
before tax.
(15) The Bank resolved several outstanding tax matters related to
Wholesale Banking strategies that have been previously reassessed by
the Canada Revenue Agency (CRA) and that were awaiting resolution by
the CRA appeals division or the courts. The Bank no longer enters
into these types of strategies.
Reconciliation of Reported Earnings per Share (EPS) to Adjusted EPS(1)
-------------------------------------------------------------------------
(Canadian dollars) For the twelve
For the three months ended months ended
--------------------------------------------------
Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
2010 2010 2009 2010 2009
-------------------------------------------------------------------------
Diluted - reported $ 1.07 $ 1.29 $ 1.12 $ 5.10 $ 3.47
Items of note affecting
income (as above) 0.31 0.14 0.34 0.67 1.88
-------------------------------------------------------------------------
Diluted - adjusted $ 1.38 $ 1.43 $ 1.46 $ 5.77 $ 5.35
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic - reported $ 1.08 $ 1.30 $ 1.12 $ 5.13 $ 3.49
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) EPS is computed by dividing net income available to common
shareholders by the weighted-average number of shares outstanding
during the period.
Non-GAAP Financial Measures - Reconciliation of Reported to Adjusted
Provision for Income Taxes(1)
-------------------------------------------------------------------------
(millions of Canadian For the twelve
dollars, except For the three months ended months ended
as noted) --------------------------------------------------
Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
2010 2010 2009 2010 2009
-------------------------------------------------------------------------
Provision for income
taxes - reported $ 374 $ 310 $ 132 $ 1,262 $ 241
-------------------------------------------------------------------------
Adjustments for items
of note: Recovery of
(provision for) income
taxes(2)
Amortization of
intangibles 49 46 52 197 229
Fair value of derivatives
hedging the reclassified
available-for-sale debt
securities portfolio (1) 39 (12) 19 114
Integration and
restructuring charges
relating to U.S.
Personal and Commercial
Banking acquisitions 10 3 48 38 153
Fair value of credit
default swaps hedging
the corporate loan book,
net of provision for
credit losses 4 (6) 11 5 70
Income tax benefit due
to changes in statutory
income tax rates - - - 11 -
Insurance claims - - - (8) -
General allowance
increase (release) in
Canadian Personal and
Commercial Banking and
Wholesale Banking - - - (16) 77
Settlement of TD
Banknorth shareholder
litigation - - - - 19
FDIC special assessment
charge - - - - 20
Agreement with Canada
Revenue Agency (121) - - (121) -
-------------------------------------------------------------------------
Total adjustments for
items of note (59) 82 99 125 682
-------------------------------------------------------------------------
Provision for income
taxes - adjusted $ 315 $ 392 $ 231 $ 1,387 $ 923
-------------------------------------------------------------------------
Effective income tax
rate - adjusted(3) 20.5% 24.0% 15.6% 21.6% 17.2%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For explanations of items of note, see the "Non-GAAP Financial
Measures - Reconciliation of Adjusted to Reported Net Income" table
in the "How We Perform" section of this document.
(2) The tax effect for each item of note is calculated using the
effective statutory income tax rate of the applicable legal entity.
(3) Adjusted effective income tax rate is the 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 adjusted net income available to common shareholders. Adjusted results, items of note, and related terms are discussed in the "How the Bank Reports" section.
Reconciliation of Net Income Available to Common Shareholders - Adjusted,
Economic Profit, and Return on Invested Capital
-------------------------------------------------------------------------
(millions of Canadian For the twelve
dollars) For the three months ended months ended
--------------------------------------------------
Oct. 31, July 31, Oct. 31, Oct. 31, Oct. 31,
2010 2010 2009 2010 2009
-------------------------------------------------------------------------
Average common equity $ 38,816 $ 36,564 $ 34,846 $ 36,639 $ 35,341
Average cumulative
goodwill/intangible
assets amortized, net
of income taxes 5,093 4,994 4,698 4,943 4,541
-------------------------------------------------------------------------
Average invested
capital $ 43,909 $ 41,558 $ 39,544 $ 41,582 $ 39,882
Rate charged for
invested capital 10.0% 10.0% 10.0% 10.0% 10.0%
-------------------------------------------------------------------------
Charge for invested
capital $ 1,107 $ 1,047 $ 997 $ 4,158 $ 3,988
-------------------------------------------------------------------------
Net income available to
common shareholders -
reported $ 946 $ 1,128 $ 962 $ 4,450 $ 2,953
Items of note impacting
income, net of income
taxes 266 127 297 584 1,596
-------------------------------------------------------------------------
Net income available to
common shareholders -
adjusted $ 1,212 $ 1,255 $ 1,259 $ 5,034 $ 4,549
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Economic profit $ 105 $ 208 $ 262 $ 876 $ 561
-------------------------------------------------------------------------
Return on invested
capital 11.0% 12.0% 12.6% 12.1% 11.4%
-------------------------------------------------------------------------
Significant Events in 2010
Acquisition of The South Financial Group, Inc.
On September 30, 2010, the Bank acquired 100% of the outstanding common shares of The South Financial Group, Inc. (South Financial) for total consideration to common shareholders of approximately $65 million paid in cash and common shares in the amount of $11 million and $54 million, respectively. Each common share of South Financial was exchanged for US $0.28 cash or 0.004 of a Bank common share, resulting in the issuance of approximately 720 thousand common shares of the Bank. In addition, immediately prior to completion of the transaction, the United States Department of the Treasury sold the Bank its South Financial preferred stock and the associated warrant acquired under the Treasury's Capital Purchase Program and discharged all accrued but unpaid dividends on that stock for total cash consideration of approximately $134 million. The acquisition was accounted for by the purchase method. The results of South Financial from the acquisition date to October 31, 2010 have been consolidated with the Bank's results for the year ended October 31, 2010. The results are included with TD Bank, N.A. and are reported in the U.S. Personal and Commercial Banking segment. As at September 30, 2010, the acquisition contributed $6.6 billion of loans and $9.0 billion of deposits to the Bank's Consolidated Balance Sheet. The purchase price allocation is subject to refinement as the Bank completes the valuation of the assets acquired and liabilities assumed.
U.S. Legislative Developments
Recent market and economic conditions have led to new legislation and numerous proposals for changes in the regulation of the financial services industry, including significant additional legislation and regulation in the United States. On July 21, 2010 the President of the United States signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act") which provides for widespread reform of the U.S. financial industry. At over 2,300 pages in length, the Act will affect every financial institution in the United States and many financial institutions, including the Bank, that operate outside the United States. The Act makes significant changes in areas such as banking and bank supervision and the resolution of systemically important financial companies, consumer protection, securities, derivatives, and executive compensation, among others. The Act also calls for a large number of regulatory rulemaking projects, as well as numerous studies and on-going reports as part of its implementation. Accordingly, while the Act will have an effect on the business of the Bank, especially its business operations in the United States, the full impact on the Bank will not be known until such time as the implementing regulations are released.
Other regulatory changes include the amendments to Regulation E, or the Electronic Funds Transfer Act, which prohibits financial institutions from charging fees to consumers for paying automated teller machine and point of sale transactions that result in an overdraft, and the Credit Card Act, which will, among other things, significantly restrict the Bank's ability to charge interest rates and assess fees to reflect individual customer risk. For more detail on the impact of Regulation E, see the U.S. Personal and Commercial Banking segment disclosure in the "How Our Businesses Performed" section of this report.
The Bank continues to monitor closely these and other legislative developments and analyze the impact such regulatory and legislative changes may have on its businesses.
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 Canada Trust and TD Insurance; Wealth Management, including TD Waterhouse and an investment in TD Ameritrade; U.S. Personal and Commercial Banking including TD Bank, America's Most Convenient Bank; and Wholesale Banking, including TD Securities. The Bank's other activities are grouped into the Corporate segment.
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 2010 Management Discussion and Analysis, Appendix A of this Earnings News Release, and Note 33 to the 2010 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 of this document and in the 2010 Management Discussion and Analysis.
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 $117 million, compared with $120 million in the fourth quarter last year, and $92 million in the prior quarter. On a full year basis, the TEB adjustment was $415 million, compared with $470 million in the same period last year.
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 Interim Consolidated Financial Statements. For segment reporting, 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
-------------------------------------------------------------------------
(millions of Canadian For the three months ended
dollars, except ------------------------------
as noted) Oct. 31, July 31, Oct. 31,
2010 2010 2009
-------------------------------------------------------------------------
Net interest income $ 1,854 $ 1,819 $ 1,668
Non-interest income 814 827 766
-------------------------------------------------------------------------
Total revenue 2,668 2,646 2,434
Provision for credit losses 239 236 313
Non-interest expenses 1,331 1,222 1,226
Net income 773 841 622
-------------------------------------------------------------------------
Selected volumes and ratios
Return on invested capital 32.9% 35.5% 27.1%
Margin on average earning assets (including
securitized assets) 2.91% 2.92% 2.88%
Efficiency ratio 49.9% 46.2% 50.4%
Number of Canadian retail branches 1,127 1,116 1,116
Average number of full-time equivalent staff 34,844 34,573 33,080
-------------------------------------------------------------------------
Quarterly comparison - Q4 2010 vs. Q4 2009
------------------------------------------
Canadian Personal and Commercial Banking net income for the quarter was $773 million, an increase of $151 million, or 24%, compared with the fourth quarter last year. The annualized return on invested capital for the quarter was 32.9%, compared with 27.1% in the fourth quarter last year.
Canadian Personal and Commercial Banking revenue is derived from personal banking, business banking, and insurance. Revenue for the quarter was $2,668 million, an increase of $234 million, or 10%, compared with the fourth quarter last year, primarily due to strong volume growth in real estate secured lending, financing services, personal and business deposits, and insurance. Compared with the fourth quarter last year, real estate secured lending volume, including securitized assets, increased $17.0 billion, or 10%, while consumer loan volume increased $3.4 billion, or 11%. Business loans and acceptances volume increased $1.6 billion, or 5%. Personal deposit volume increased $6.8 billion, or 5%, while business deposit volume increased $6.1 billion, or 12%. Gross originated insurance premiums increased $75 million, or 10%. Margin on average earning assets increased by 3 bps to 2.91% compared with the fourth quarter last year as higher margins in real estate secured lending were partially offset by margin compression in deposits and lower mortgage breakage revenue.
PCL for the quarter was $239 million, a decrease of $74 million, or 24%, compared with the fourth quarter last year. Personal banking PCL was $221 million, a decrease of $58 million, or 21%, mainly due to better credit conditions resulting from an improving economic environment. Business banking PCL was $18 million, a decrease of $16 million, or 47%, due to higher commercial banking provisions taken in the fourth quarter last year. Annualized PCL as a percentage of credit volume was 0.37%, a decrease of 16 bps, compared with the fourth quarter last year. Net impaired loans were $553 million, a decrease of $2 million, compared with the fourth quarter last year. Net impaired loans in commercial banking remain at relatively low levels largely due to active management. Net impaired loans as a percentage of total loans were 0.85%, compared with 0.93% as at October 31, 2009.
Non-interest expenses for the quarter were $1,331 million, an increase of $105 million, or 9%, compared with the fourth quarter last year, primarily due to project-related costs, which included costs related to a project cancellation, the timing of business investments, and higher employee compensation costs.
The average full-time equivalent (FTE) staffing levels increased by 1,764, or 5%, compared with the fourth quarter last year reflecting continued investment in our businesses. The efficiency ratio for the quarter improved to 49.9%, compared with 50.4% in the fourth quarter last year.
Quarterly comparison - Q4 2010 vs. Q3 2010
------------------------------------------
Canadian Personal and Commercial Banking net income for the quarter decreased $68 million, or 8%, compared with the prior quarter. The annualized return on invested capital for the quarter was 32.9%, compared with 35.5% in the prior quarter.
Revenue for the quarter increased $22 million compared with the prior quarter. Compared with the prior quarter, real estate secured lending volume, including securitized assets, increased $4.4 billion, or 2%, consumer loan volume increased $0.8 billion, or 2%, while business loans and acceptances increased $0.7 billion, or 2%. Personal deposit volume increased $1.7 billion, or 1%, while business deposit volume increased $1.4 billion, or 3%. Gross originated insurance premiums decreased $58 million, or 7% due to seasonality of policy renewals. Margin on average earning assets decreased 1 bp to 2.91%.
PCL for the quarter increased $3 million compared with the prior quarter. Personal banking PCL decreased $1 million while business banking PCL increased $4 million. Net impaired loans increased $28 million, or 5%, compared to the prior quarter. Net impaired loans as a percentage of total loans were 0.85%, compared with 0.82% as at July 31, 2010.
Non-interest expenses for the quarter increased $109 million, or 9%, compared with the prior quarter largely due to higher project-related costs, including a large project cancellation, and the timing of business investment initiatives.
The average FTE staffing levels increased by 271 compared with the prior quarter. The efficiency ratio for the current quarter worsened to 49.9%, compared with 46.2% in the prior quarter.
Wealth Management
-------------------------------------------------------------------------
(millions of Canadian dollars, For the three months ended
except as noted) ------------------------------
Oct. 31, July 31, Oct. 31,
2010 2010 2009
-------------------------------------------------------------------------
Net interest income $ 97 $ 93 $ 67
Non-interest income 542 523 520
-------------------------------------------------------------------------
Total revenue 639 616 587
Non-interest expenses 468 447 444
Net income
Global Wealth 118 117 97
TD Ameritrade 33 62 59
-------------------------------------------------------------------------
Total 151 179 156
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Selected volumes and ratios - Global Wealth
Assets under administration (billions of
Canadian dollars) 224 211 191
Assets under management (billions of
Canadian dollars) 183 174 171
Return on invested capital 13.5% 16.2% 13.6%
Efficiency ratio 73.2% 72.6% 75.6%
Average number of full-time equivalent staff 7,000 7,027 6,769
-------------------------------------------------------------------------
Quarterly comparison - Q4 2010 vs. Q4 2009
------------------------------------------
Wealth Management net income for the quarter was $151 million, a decrease of $5 million, or 3%, compared with the fourth quarter last year. Global Wealth net income, which excludes TD Ameritrade, was $118 million, an increase of $21 million, or 22%, largely driven by increased fee-based revenue from higher average client assets in the advice-based and asset management businesses, and higher net interest margin. The Bank's reported investment in TD Ameritrade generated net income for the quarter of $33 million, a decrease of $26 million, or 44%, compared with the fourth quarter last year. The decrease was due to lower earnings and the translation effect of a stronger Canadian dollar. For its fourth quarter ended September 30, 2010, TD Ameritrade reported net income of US$114 million, a decrease of US$43 million, or 27%, compared with the fourth quarter last year. Wealth Management's annualized return on invested capital for the quarter was 13.5%, compared with 13.6% in the fourth quarter last year.
Wealth Management revenue is derived from online brokerage, advice-based businesses, and asset management services. Global Wealth revenue for the quarter was $639 million, an increase of $52 million, or 9%, compared to the fourth quarter last year. The increase was primarily due to higher assets under administration and assets under management which drove strong fee-based revenue growth in the advice-based and asset management businesses, the inclusion of U.K. acquisitions, increased net interest margin, and higher client margin loans and deposit balances. This increase was partially offset by reduced trading volumes in the online brokerage business combined with lower commissions per trade in Canada as active traders accounted for a higher proportion of trading volumes.
Non-interest expenses for the quarter were $468 million, an increase of $24 million, or 5%, compared with the fourth quarter last year. This increase was primarily due to higher variable compensation and trailer fees driven by increased revenue from higher asset levels in the advice-based and asset management businesses, higher investment to support business growth, and the inclusion of U.K. acquisitions. This increase was partially offset by reduced staffing levels in the U.S. wealth management businesses resulting from the winding down of the financial advisory business.
The average FTE staffing levels increased by 231, or 3%, compared with the fourth quarter last year, primarily due to additional FTE staff related to the U.K. acquisitions, growth in client-facing FTE staff, and growth in support FTE for infrastructure, partially offset by a reduction of staff in the U.S. wealth management businesses. The efficiency ratio for the current quarter improved to 73.2%, compared with 75.6% in the fourth quarter last year.
Assets under administration of $224 billion as at October 31, 2010, increased by $33 billion, or 17%, from October 31, 2009. Assets under management of $183 billion as at October 31, 2010, increased by $12 billion, or 7%, from October 31, 2009. These increases were driven by market appreciation and net new client assets.
Quarterly comparison - Q4 2010 vs. Q3 2010
------------------------------------------
Wealth Management net income for the quarter decreased by $28 million, or 16%, compared with the prior quarter. Global Wealth net income increased by $1 million. The Bank's reported investment in TD Ameritrade reflected a decrease in net income of $29 million, or 47%, compared with the prior quarter due to lower earnings at TD Ameritrade. For its fourth quarter ended September 30, 2010, TD Ameritrade reported a net income decline of US$65 million, or 36%, compared with the prior quarter. Wealth Management's annualized return on invested capital for the quarter was 13.5%, compared with 16.2% in the prior quarter.
Revenue for the quarter increased $23 million, or 4%, compared with the prior quarter, primarily due to increased revenue from higher assets under management in our asset management businesses and higher assets under administration in our advice-based businesses.
Non-interest expenses increased $21 million compared to the prior quarter due to higher variable compensation and trailer fees driven by increased revenue from higher asset levels and higher costs related to technology projects.
The average FTE staffing levels decreased by 27 compared with the prior quarter, reflecting reduced business volumes in the online brokerage channel and support areas. The efficiency ratio for the current quarter worsened slightly to 73.2%, compared with 72.6% in the prior quarter.
Assets under administration as at October 31, 2010 increased $13 billion, or 6%, from July 31, 2010. Assets under management as at October 31, 2010 increased $9 billion, or 5%, from July 31, 2010. The increase in the assets was due to the positive market impact on asset values and an increase in net new client assets.
U.S. Personal and Commercial Banking
-------------------------------------------------------------------------
(millions of For the three months ended
dollars, ------------------------------------------------------------
except Canadian dollars U.S. dollars
as noted) ------------------------------------------------------------
Oct. 31, July 31, Oct. 31, Oct. 31, July 31, Oct. 31,
2010 2010 2009 2010 2010 2009
-------------------------------------------------------------------------
Net interest
income $ 962 $ 909 $ 840 $ 933 $ 874 $ 781
Non-interest
income 257 314 273 250 302 255
-------------------------------------------------------------------------
Total revenue 1,219 1,223 1,113 1,183 1,176 1,036
Provision for
credit losses -
loans 133 132 175 129 127 162
Provision for
credit losses -
debt securities
classified as
loans 13 (1) 41 13 (1) 39
-------------------------------------------------------------------------
Provision for
credit losses -
total 146 131 216 142 126 201
Non-interest
expenses -
reported 763 724 806 741 696 751
Non-interest
expenses -
adjusted 736 716 669 714 688 623
------------------------------------------------------------
-------------------------------------------------------------------------
Net income -
reported 265 282 122 257 271 113
-------------------------------------------------------------------------
Adjustments for
items of note,
net of income
taxes(1)
Integration and
restructuring
charges relating
to U.S. Personal
and Commercial
Banking
acquisitions 18 5 89 18 5 83
-------------------------------------------------------------------------
Net income -
adjusted 283 287 211 275 276 196
-------------------------------------------------------------------------
Selected volumes
and ratios
Return on
invested
capital 6.3% 6.4% 4.5% 6.3% 6.4% 4.5%
Margin on
average earning
assets (TEB) 3.50% 3.47% 3.46% 3.50% 3.47% 3.46%
Efficiency
ratio -
reported 62.6% 59.2% 72.4% 62.6% 59.2% 72.4%
Efficiency
ratio -
adjusted 60.4% 58.5% 60.1% 60.4% 58.5% 60.1%
Number of U.S.
retail stores 1,269 1,100 1,028 1,269 1,100 1,028
Average number
of full-time
equivalent
staff 21,104 20,181 19,242 21,104 20,181 19,242
-------------------------------------------------------------------------
(1) For explanations of items of note, see the "Non-GAAP Financial
Measures - Reconciliation of Adjusted to Reported Net Income" table
in the "How We Perform" section of this document.
Quarterly comparison - Q4 2010 vs. Q4 2009
------------------------------------------
U.S. Personal and Commercial Banking net income, in Canadian dollar terms, for the quarter was $265 million, an increase of $143 million, or 117%, on a reported basis, and $283 million, an increase of $72 million, or 34%, on an adjusted basis, compared with the fourth quarter last year. The strengthening of the Canadian dollar against the U.S. dollar decreased the reported and adjusted net income by $13 million, for the current quarter. Adjusted net income for the current and prior year excluded integration and restructuring charges relating to acquisitions. The annualized return on invested capital for the quarter was 6.3%, compared with 4.5% in the fourth quarter last year. On September 30th, the Bank closed on the acquisition of South Financial. As at October 31, 2010, South Financial had total assets of US$9.7 billion and total deposits of US$8.6 billion.
In U.S. dollar terms, revenue for the quarter was US$1,183 million, an increase of US$147 million, or 14%, compared with the fourth quarter last year. The increase was primarily due to increased loan and deposit volume, wider product spreads, and recent acquisitions. Revenue growth was muted due to the implementation of Regulation E in the current quarter. Margin on average earning assets increased by 4 bps to 3.50% compared with the fourth quarter last year, primarily due to expanded loan margins. Compared with the fourth quarter last year, average loans increased US$6.9 billion, or 13%. Excluding acquisitions, average loans increased US$3.0 billion, or 6%, with average personal loans increasing US$2.1 billion, or 11%, primarily due to a US$1.7 billion increase in residential mortgages, and average business loans increasing US$0.8 billion, or 2%. Average deposits increased US$23.8 billion, or 22%. Excluding acquisitions, average deposits increased $18.5 billion, or 17%, which included a US$13.4 billion increase in TD Ameritrade insured deposit accounts (IDA). Average deposit volume, excluding the impact of the TD Ameritrade IDAs and acquisitions, increased US$5.1 billion, or 6%, due to maturing stores and solid organic growth. Business deposit volumes (excluding government) increased US$3.5 billion, or 13%, government deposits were flat, and personal deposit volumes increased US$1.7 billion, or 4%.
Total PCL for the quarter was US$142 million, a decrease of US$59 million, or 29%, compared with the fourth quarter last year. PCL for loans for the quarter was US$129 million, a decrease of US$33 million, or 20%, compared with the fourth quarter last year. Annualized PCL for loans as a percentage of credit volume was 0.85%, a decrease of 40 bps compared with the fourth quarter last year. Net impaired loans, excluding debt securities classified as loans and covered assets, were US$1,097 million, an increase of US$284 million, or 35%, compared with the fourth quarter last year. The increase was largely due to net new formations resulting from weakness in the commercial real estate market in the U.S. Net impaired loans, excluding debt securities classified as loans and covered assets, as a percentage of total loans were 1.7%, compared with 1.5% as at October 31, 2009. Net impaired debt securities classified as loans were US$1,010 million as at October 31, 2010, compared to $US181 million as at October 31, 2009. Covered impaired loans were US$32 million as at October 31, 2010.
Reported non-interest expenses for the quarter were US$741 million, a decrease of $10 million, compared with the fourth quarter last year. On an adjusted basis, non-interest expenses for the quarter were US$714 million, an increase of US$91 million, or 15%, primarily due to operating expenses associated with recent acquisitions, new store expenses, and investments in infrastructure.
The average FTE staffing levels increased by 1,862, or 10%, compared with the fourth quarter last year. This increase resulted from the recent acquisitions and 32 new store openings since the fourth quarter last year. The reported efficiency ratio for the quarter improved to 62.6%, compared with 72.4% in the fourth quarter last year. The adjusted efficiency ratio for the quarter was essentially flat to the prior year quarter at 60.4%.
Quarterly comparison - Q4 2010 vs. Q3 2010
------------------------------------------
U.S. Personal and Commercial Banking net income, in Canadian dollar terms, for the quarter decreased $17 million, or 6%, on a reported basis, and decreased $4 million, on an adjusted basis, compared with the prior quarter. Adjusted net income for the current and prior year excluded integration and restructuring charges relating to acquisitions. The annualized return on invested capital for the quarter was 6.3%, compared with 6.4% in the prior quarter.
In U.S. dollar terms, revenue for the quarter increased US$7 million compared with the prior quarter, primarily due to higher revenue from the recent acquisition, partially offset by $44 million impact of Regulation E on fee revenue. Margin on average earning assets increased by 3 bps to 3.50% compared with the prior quarter, primarily due to higher loan spreads. Compared with the prior quarter, average loans increased US$3.1 billion, or 5%. Excluding acquisitions, average loans increased US$1.0 billion, or 2%, with average business loans increasing US$0.4 billion, or 1%, and average personal loans increasing US$0.6 billion, or 3%. Average deposits increased US$5.1 billion, or 4%. Excluding acquisitions, average deposits increased US$2.6 billion including a US$1.0 billion increase in average deposits of TD Ameritrade IDAs. Average deposit volume excluding the impact of the TD Ameritrade IDAs and acquisitions increased US$1.6 billion, or 2%, with 2% growth in business deposit volume (excluding government), 6% increase in government deposits, and 0.4% growth in personal deposit volume.
Total PCL for the quarter increased US$16 million, or 13%, compared with the prior quarter. PCL for loans increased US$2 million, or 2%, while annualized PCL for loans as a percentage of credit volume was 0.85%, a decrease of 4 bps, compared with the prior quarter. Net impaired loans, excluding debt securities classified as loans that are impaired and covered assets, were US$1,097 million, an increase of US$51 million, or 5%, compared with the prior quarter. The increase was largely due to new formations in the commercial loan portfolio. Net impaired loans, excluding debt securities classified as loans and covered assets, as a percentage of total loans were 1.7%, an improvement of 9 bps from the prior quarter. Net impaired debt securities classified as loans were US$1,010 million, an increase of US$43 million, or 5%, compared with the prior quarter. PCL for debt securities classified as loans increased US$14 million compared with the prior quarter.
Non-interest expenses for the quarter increased US$45 million, or 7%, on a reported basis, and increased US$26 million, or 4%, on an adjusted basis, compared with the prior quarter, primarily due to the recent acquisition of The South Financial Group, Inc.
The average FTE staffing levels increased by 923, or 5%, compared with the prior quarter, primarily driven by the recent acquisition of South Financial. The reported efficiency ratio for the quarter worsened to 62.6%, compared with 59.2% in the prior quarter. The adjusted efficiency ratio for the quarter worsened to 60.4%, compared with 58.5% in the prior quarter, due primarily to the impact of the South Financial acquisition.
Wholesale Banking
-------------------------------------------------------------------------
(millions of Canadian dollars, For the three months ended
except as noted) -----------------------------
Oct. 31, July 31, Oct. 31,
2010 2010 2009
-------------------------------------------------------------------------
Net interest income (TEB) $ 416 $ 430 $ 579
Non-interest income 261 146 307
-------------------------------------------------------------------------
Total revenue 677 576 886
Provision for credit losses 23 (16) 7
Non-interest expenses 324 323 347
-------------------------------------------------------------------------
Net income - reported 95 179 372
-------------------------------------------------------------------------
Adjustments for items of note, net of
income taxes(1)
Agreement with Canada Revenue Agency 121 - -
-------------------------------------------------------------------------
Net income - adjusted 216 179 372
-------------------------------------------------------------------------
Selected volumes and ratios
Risk-weighted assets (billions of
Canadian dollars) 32 32 34
Return on invested capital 25.6% 22.7% 46.0%
Efficiency ratio - reported 47.9% 56.1% 39.2%
Average number of full-time equivalent
staff 3,373 3,291 3,057
-------------------------------------------------------------------------
(1) For explanations of items of note, see the "Non-GAAP Financial
Measures - Reconciliation of Adjusted to Reported Net Income" table
in the "How We Perform" section of this document.
Quarterly comparison - Q4 2010 vs. Q4 2009
------------------------------------------
Wholesale Banking reported net income for the quarter was $95 million, a decrease of $277 million, or 74%, on a reported basis, and $216 million, a decrease of $156 million, or 42%, on an adjusted basis, compared with the fourth quarter last year. There were no items of note in the prior year. The decrease was due to lower fixed income, credit and equity trading, and lower underwriting fees, partially offset by improved currency trading, investment banking income, and gains in the investment portfolio. In the fourth quarter last year, results were very strong as financial markets recovered at a rapid pace resulting in significantly improved asset values and market liquidity. The operating environment in the current quarter had decreased client volumes and offered fewer trading opportunities compared to same quarter last year. The annualized return on invested capital for the quarter was strong at 25.6%, compared with 46.0% in the very strong fourth quarter last year.
Wholesale Banking revenue is derived primarily from capital markets and corporate lending. Revenue for the quarter was $677 million, a decrease of $209 million, or 24%, compared with the fourth quarter last year. Last year, financial markets were rapidly recovering from the credit crisis, and an improved competitive position resulted in tighter credit spreads, increased client flow, and wider bid-offer margins which in turn resulted in strong, broad-based performance with particularly strong results in fixed income and credit trading. Partially offsetting these decreases were improved currency trading from strong client flow and solid trading, higher M&A and advisory fees as market volumes increased compared to low levels in the prior year, as well as security gains in the investment portfolio compared to losses in the prior year.
PCL is composed of specific provisions for credit losses and accrual costs for credit protection net of recoveries of previously recorded provisions. PCL in the quarter was $23 million, an increase of $16 million compared to the fourth quarter last year. Provisions in the current quarter were driven by a single merchant banking exposure. In the fourth quarter last year, PCL was $7 million mainly reflecting the cost of credit protection. Net impaired loans were $42 million, a decrease of $78 million, or 65%, over the fourth quarter last year.
Non-interest expenses for the quarter were $324 million, a decrease of $23 million, or 6%, compared with the fourth quarter last year. The decrease was driven by lower variable compensation partially offset by higher operating costs related to investment in risk and control infrastructure.
Quarterly comparison - Q4 2010 vs. Q3 2010
------------------------------------------
Wholesale Banking net income for the quarter decreased by $84 million, or 47%, on a reported basis, and increased by $37 million, or 21%, on an adjusted basis, compared with the prior quarter. The increase was primarily due to gains from credit valuation in the current quarter as compared to losses in the prior quarter. The annualized return on invested capital for the quarter was 25.6%, compared with 22.7% in the prior quarter.
Revenue for the quarter increased $101 million, or 18%, compared with the prior quarter, primarily due to improved results in fixed income, equity and currency trading and investment banking fees. Market conditions remained challenging as low interest rate and low volatility persisted, keeping client activity depressed; however, credit spreads tightened in the current quarter which drove credit valuation gains, as compared to losses in the prior quarter where concern over European sovereign debt dampened the markets. Equity derivatives benefitted from increased revenue related to client transactions, and cash equities businesses performed well as a result of improved equity markets and trading opportunities. Investment banking revenue increased primarily due to higher M&A and advisory fees.
PCL for the quarter was $39 million higher than the prior quarter. In the prior quarter, the accrual cost of CDS protection was more than offset by recoveries of previously recorded provisions. Net impaired loans decreased $22 million, or 34%, compared with the prior quarter.
Non-interest expenses for the quarter were $324 million, in line with the prior quarter due to lower variable compensation offset by higher severance and operating expenses.
Corporate
-------------------------------------------------------------------------
(millions of Canadian dollars) For the three months ended
-----------------------------
Oct. 31, July 31, Oct. 31,
2010 2010 2009
-------------------------------------------------------------------------
Corporate segment net loss - reported $ (290) $ (304) $ (262)
-------------------------------------------------------------------------
Adjustments for items of note, net of
income taxes(1)
Amortization of intangibles 115 117 116
Decrease (increase) in fair value of
derivatives hedging the reclassified
available-for-sale securities portfolio 8 14 73
Decrease (increase) in fair value of
credit default swaps hedging the corporate
loan book, net of provision for credit losses 4 (9) 19
-------------------------------------------------------------------------
Total adjustments for items of note 127 122 208
-------------------------------------------------------------------------
Corporate segment net loss - adjusted $ (163) $ (182) $ (54)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Decomposition of items included in net
loss - adjusted
Net securitization $ (2) $ (17) $ (2)
Net corporate expenses (161) (80) (90)
Other - (85) 38
-------------------------------------------------------------------------
Corporate segment net loss - adjusted $ (163) $ (182) $ (54)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For explanations of items of note, see the "Non-GAAP Financial
Measures - Reconciliation of Adjusted to Reported Net Income" table
in the "How We Perform" section of this document.
Quarterly comparison - Q4 2010 vs. Q4 2009
------------------------------------------
Corporate segment's reported net loss for the quarter was $290 million, compared with a reported net loss of $262 million in the fourth quarter last year. Adjusted net loss for the quarter was $163 million, compared with an adjusted net loss of $54 million. Compared with the fourth quarter last year, the higher adjusted net loss was primarily attributable to higher net corporate expenses and the impact of favourable tax-related items last year, partially offset by favourable hedging and treasury activities. The current quarter included a charge of $22 million related to a write-down of our investment in Symcor.
Quarterly comparison - Q4 2010 vs. Q3 2010
------------------------------------------
Corporate segment's reported net loss for the quarter was $290 million, compared with a reported net loss of $304 million in the prior quarter. Adjusted net loss for the quarter was $163 million, compared with an adjusted net loss of $182 million. The lower adjusted net loss was primarily attributable to favourable hedging and treasury activities and the impact of an unfavourable tax-related item in the prior quarter, partially offset by higher net corporate expenses. The current quarter included the Symcor write-down of $22 million.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
-------------------------------------------------------------------------
INTERIM CONSOLIDATED BALANCE SHEET (unaudited)
-------------------------------------------------------------------------
(millions of Canadian dollars, except as noted) As at
---------------------
Oct. 31 Oct. 31
2010 2009
-------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------
Cash and due from banks $ 2,574 $ 2,414
Interest-bearing deposits with banks 19,136 19,103
-------------------------------------------------------------------------
21,710 21,517
-------------------------------------------------------------------------
Securities
Trading 59,542 54,320
Available-for-sale 102,355 84,841
Held-to-maturity 9,715 9,662
-------------------------------------------------------------------------
171,612 148,823
-------------------------------------------------------------------------
Securities purchased under reverse
repurchase agreements 50,658 32,948
-------------------------------------------------------------------------
Loans
Residential mortgages 71,507 65,665
Consumer instalment and other personal 100,880 94,357
Credit card 8,870 8,152
Business and government 83,481 76,176
Debt securities classified as loans 7,591 11,146
-------------------------------------------------------------------------
272,329 255,496
Allowance for loan losses (2,309) (2,368)
-------------------------------------------------------------------------
Loans, net of allowance for loan losses 270,020 253,128
-------------------------------------------------------------------------
Other
Customers' liability under acceptances 7,757 9,946
Investment in TD Ameritrade 5,485 5,465
Derivatives 51,675 49,445
Goodwill 14,460 15,015
Other intangibles 2,093 2,546
Land, buildings, and equipment 4,247 4,078
Current income tax receivable - 238
Other assets 19,828 14,070
-------------------------------------------------------------------------
105,545 100,803
-------------------------------------------------------------------------
Total assets $ 619,545 $ 557,219
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------
Deposits
Personal $ 249,251 $ 223,228
Banks 12,508 5,480
Business and government 145,221 126,907
Trading 22,991 35,419
-------------------------------------------------------------------------
429,971 391,034
-------------------------------------------------------------------------
Other
Acceptances 7,757 9,946
Obligations related to securities sold short 23,695 17,641
Obligations related to securities sold under
repurchase agreements 25,426 16,472
Derivatives 53,685 48,152
Current income tax payable 352 -
Future income tax liabilities 460 235
Other liabilities 21,316 19,632
-------------------------------------------------------------------------
132,691 112,078
-------------------------------------------------------------------------
Subordinated notes and debentures 12,506 12,383
-------------------------------------------------------------------------
Liability for preferred shares 582 550
-------------------------------------------------------------------------
Liability for capital trust securities - 895
-------------------------------------------------------------------------
Non-controlling interests in subsidiaries 1,493 1,559
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Common shares (millions of shares issued and
outstanding: Oct. 31, 2010 - 879.7 and
Oct. 31, 2009 - 859.6) 16,730 15,357
Preferred shares (millions of shares issued and
outstanding: Oct. 31, 2010 - 135.8 and
Oct. 31, 2009 - 135.8) 3,395 3,395
Treasury shares - common (millions of shares held:
Oct. 31, 2010 - (1.2) and Oct. 31, 2009 - (0.8)) (91) (15)
Treasury shares - preferred (millions of shares held:
Oct. 31, 2010 - nil and Oct. 31, 2009 - nil) (1) -
Contributed surplus 305 336
Retained earnings 20,959 18,632
Accumulated other comprehensive income (loss) 1,005 1,015
-------------------------------------------------------------------------
42,302 38,720
-------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 619,545 $ 557,219
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
-------------------------------------------------------------------------
(millions of Canadian dollars, For the three For the twelve
except as noted) months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
2010 2009 2010 2009
-------------------------------------------------------------------------
Interest income
Loans $ 3,293 $ 3,264 $ 12,939 $ 13,691
Securities
Dividends 175 180 737 868
Interest 854 744 3,043 3,886
Deposits with banks 171 84 668 442
-------------------------------------------------------------------------
4,493 4,272 17,387 18,887
-------------------------------------------------------------------------
Interest expense
Deposits 1,203 1,126 4,578 5,818
Subordinated notes and
debentures 166 168 667 671
Preferred shares and capital
trust securities 7 24 37 94
Other 134 129 562 978
-------------------------------------------------------------------------
1,510 1,447 5,844 7,561
-------------------------------------------------------------------------
Net interest income 2,983 2,825 11,543 11,326
-------------------------------------------------------------------------
Non-interest income
Investment and securities
services 616 591 2,424 2,212
Credit fees 155 168 634 622
Net securities gains (losses) 1 26 75 (437)
Trading income (loss) 119 215 484 685
Service charges 392 385 1,651 1,507
Loan securitizations 124 135 489 468
Card services 210 192 820 733
Insurance, net of claims 238 202 1,028 913
Trust fees 40 33 153 141
Other income (loss) 139 (54) 264 (310)
-------------------------------------------------------------------------
2,034 1,893 8,022 6,534
-------------------------------------------------------------------------
Total revenue 5,017 4,718 19,565 17,860
-------------------------------------------------------------------------
Provision for credit losses 404 521 1,625 2,480
-------------------------------------------------------------------------
Non-interest expenses
Salaries and employee benefits 1,485 1,452 5,960 5,839
Occupancy, including depreciation 339 293 1,236 1,213
Equipment, including depreciation 268 246 880 897
Amortization of other intangibles 147 151 592 653
Restructuring costs - 9 17 36
Marketing and business development 184 158 595 566
Brokerage-related fees 73 70 297 274
Professional and advisory services 281 200 804 740
Communications 64 58 251 239
Other 422 458 1,531 1,754
-------------------------------------------------------------------------
3,263 3,095 12,163 12,211
-------------------------------------------------------------------------
Income before income taxes,
non-controlling interests in
subsidiaries, and equity in net
income of an associated company 1,350 1,102 5,777 3,169
Provision for income taxes 374 132 1,262 241
Non-controlling interests in
subsidiaries, net of income
taxes 27 27 106 111
Equity in net income of an
associated company, net of
income taxes 45 67 235 303
-------------------------------------------------------------------------
Net income 994 1,010 4,644 3,120
Preferred dividends 48 48 194 167
-------------------------------------------------------------------------
Net income available to common
shareholders $ 946 $ 962 $ 4,450 $ 2,953
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average number of common
shares outstanding (millions)
Basic 874.9 855.6 867.1 847.1
Diluted 879.7 861.1 872.1 850.1
Earnings per share (Canadian
dollars)
Basic $ 1.08 $ 1.12 $ 5.13 $ 3.49
Diluted 1.07 1.12 5.10 3.47
Dividends per share (Canadian
dollars) 0.61 0.61 2.44 2.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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)
-------------------------------------------------------------------------
(millions of Canadian dollars) For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
2010 2009 2010 2009
-------------------------------------------------------------------------
Common shares
Balance at beginning of
period $ 16,443 $ 15,118 $ 15,357 $ 13,278
Proceeds from shares issued on
exercise of stock options 89 112 521 247
Shares issued as a result of
dividend reinvestment plan 144 127 546 451
Proceeds from issuance of new
shares - - 252 1,381
Shares issued on acquisitions 54 - 54 -
-------------------------------------------------------------------------
Balance at end of period 16,730 15,357 16,730 15,357
-------------------------------------------------------------------------
Preferred shares
Balance at beginning of period 3,395 3,395 3,395 1,875
Shares issued - - - 1,520
-------------------------------------------------------------------------
Balance at end of period 3,395 3,395 3,395 3,395
-------------------------------------------------------------------------
Treasury shares - common
Balance at beginning of period (88) (63) (15) (79)
Purchase of shares (512) (619) (2,158) (1,756)
Sale of shares 509 667 2,082 1,820
-------------------------------------------------------------------------
Balance at end of period (91) (15) (91) (15)
-------------------------------------------------------------------------
Treasury shares - preferred
Balance at beginning of period - - - -
Purchase of shares (28) (6) (63) (6)
Sale of shares 27 6 62 6
-------------------------------------------------------------------------
Balance at end of period (1) - (1) -
-------------------------------------------------------------------------
Contributed surplus
Balance at beginning of period 313 357 336 392
Net premium (discount) on sale
of treasury shares 4 (3) 52 (27)
Stock options (12) (18) (83) (29)
-------------------------------------------------------------------------
Balance at end of period 305 336 305 336
-------------------------------------------------------------------------
Retained earnings
Balance at beginning of period 20,548 18,192 18,632 17,857
Net income due to
reporting-period alignment of
U.S. entities - - - 4
Transition adjustment on
adoption of financial
instruments amendments - - - (59)
Net income 994 1,010 4,644 3,120
Common dividends (534) (522) (2,118) (2,075)
Preferred dividends (48) (48) (194) (167)
Share issue expenses (1) - (5) (48)
-------------------------------------------------------------------------
Balance at end of period 20,959 18,632 20,959 18,632
-------------------------------------------------------------------------
Accumulated other
comprehensive income (loss)
Balance at beginning of period 725 1,021 1,015 (1,649)
Other comprehensive income due
to reporting-period alignment
of U.S. entities - - - 329
Transition adjustment on
adoption of financial
instruments amendments - - - 563
Other comprehensive income
(loss) for the period 280 (6) (10) 1,772
-------------------------------------------------------------------------
Balance at end of period 1,005 1,015 1,005 1,015
-------------------------------------------------------------------------
Retained earnings and
accumulated other comprehensive
income 21,964 19,647 21,964 19,647
-------------------------------------------------------------------------
Total shareholders' equity $ 42,302 $ 38,720 $ 42,302 $ 38,720
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Certain comparative amounts have been reclassified to conform with the
presentation adopted in the current year.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
-------------------------------------------------------------------------
(millions of Canadian dollars) For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
2010 2009 2010 2009
-------------------------------------------------------------------------
Net income $ 994 $ 1,010 $ 4,644 $ 3,120
-------------------------------------------------------------------------
Other comprehensive income
(loss), net of income taxes
Change in unrealized gains
(losses) on available-for-sale
securities, net of hedging
activities(1) 214 347 445 1,129
Reclassification to earnings
of net losses (gains) in
respect of available-for-sale
securities(2) (5) 45 9 257
Net change in unrealized
foreign currency translation
gains (losses) on investments
in subsidiaries, net of
hedging activities(3),(4) (334) (349) (1,362) (72)
Change in net gains (losses)
on derivatives designated as
cash flow hedges(5) 613 300 1,955 1,702
Reclassification to earnings
of net losses (gains) on cash
flow hedges(6) (208) (349) (1,057) (1,244)
-------------------------------------------------------------------------
280 (6) (10) 1,772
-------------------------------------------------------------------------
Comprehensive income (loss)
for the period $ 1,274 $ 1,004 $ 4,634 $ 4,892
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Net of income tax provision of $111 million and $229 million,
respectively, for the three and twelve months ended October 31, 2010
(three and twelve months ended October 31, 2009 - income tax
provision of $154 million and $456 million, respectively).
(2) Net of income tax recovery of nil and $5 million, respectively, for
the three and twelve months ended October 31, 2010 (three and twelve
months ended October 31, 2009 - income tax recovery of $15 million
and $148 million, respectively).
(3) Net of income tax provision of $35 million and $316 million,
respectively, for the three and twelve months ended October 31, 2010
(three and twelve months ended October 31, 2009 - income tax recovery
of $58 million and income tax provision of $604 million,
respectively).
(4) Includes $86 million and $867 million of after-tax gains for the
three and twelve months ended October 31, 2010, respectively, (three
and twelve months ended October 31, 2009 - after-tax losses of
$26 million and after-tax gains of $1,380 million, respectively),
arising from hedges of the Bank's investment in foreign operations.
(5) Net of income tax provision of $245 million and $865 million,
respectively, for the three and twelve months ended October 31, 2010
(three and twelve months ended October 31, 2009 - income tax
provision of $153 million and $828 million, respectively).
(6) Net of income tax provision of $79 million and $447 million,
respectively, for the three and twelve months ended October 31, 2010
(three and twelve months ended October 31, 2009 - income tax
provision of $154 million and $552 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)
-------------------------------------------------------------------------
(millions of Canadian dollars) For the three For the twelve
months ended months ended
-------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31
2010 2009 2010 2009
-------------------------------------------------------------------------
Cash flows from (used in)
operating activities
Net income $ 994 $ 1,010 $ 4,644 $ 3,120
Adjustments to determine net
cash flows from (used in)
operating activities
Provision for credit losses 404 521 1,625 2,480
Restructuring costs - 9 17 36
Depreciation 185 166 601 600
Amortization of other
intangibles 147 151 592 653
Net securities losses (gains) (1) (26) (75) 437
Net gain on securitizations (79) (87) (317) (321)
Equity in net income of an
associated company (45) (67) (235) (303)
Non-controlling interests 27 27 106 111
Future income taxes 320 399 98 336
Current income taxes
receivable and payable (95) (426) 590 1,703
Interest receivable and
payable 286 148 20 224
Trading securities (1,144) (4,564) (5,222) 5,043
Derivative assets (3,198) 7,929 (2,230) 33,880
Derivative liabilities 3,294 (7,384) 5,533 (26,137)
Other (2,222) 2,269 (2,498) 2,781
-------------------------------------------------------------------------
Net cash from operating
activities (1,127) 75 3,249 24,643
-------------------------------------------------------------------------
Cash flows from (used in)
financing activities
Change in deposits (218) 2,556 26,645 14,319
Change in securities sold short 636 5,202 6,054 (877)
Change in securities sold under
repurchase agreements 187 9,059 8,954 (2,460)
Repayment of subordinated notes
and debentures (35) (2) (35) (20)
Liability for preferred shares
and capital trust securities 32 (4) (863) 1
Translation adjustment on
subordinated notes and
debentures issued in a foreign
currency and other 157 (34) 158 (37)
Common shares issued 72 89 657 1,544
Sale of treasury shares 540 670 2,196 1,799
Purchase of treasury shares (540) (625) (2,221) (1,762)
Dividends paid (438) (443) (1,766) (1,791)
Net proceeds from issuance of
preferred shares - - - 1,497
-------------------------------------------------------------------------
Net cash from (used in)
financing activities 393 16,468 39,779 12,213
-------------------------------------------------------------------------
Cash flows from (used in)
investing activities
Interest-bearing deposits with
banks 1,341 (3,621) (33) (6,313)
Activity in available-for-sale
and held-to-maturity securities
Purchases (16,660) (21,804) (80,778) (92,331)
Proceeds from maturities 10,670 11,092 40,510 43,101
Proceeds from sales 7,127 6,723 23,731 33,022
Net change in loans, net of
securitizations (9,267) (14,698) (25,339) (51,036)
Proceeds from loan
securitizations 4,160 6,585 15,580 27,491
Net purchases of premises and
equipment (498) (357) (770) (820)
Securities purchased under
reverse repurchase agreements 2,350 (534) (17,710) 10,275
Net cash acquired from
acquisitions 1,125 - 2,024 -
-------------------------------------------------------------------------
Net cash used in investing
activities 348 (16,614) (42,785) (36,611)
-------------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (9) 8 (83) (159)
-------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (395) (63) 160 86
Impact due to reporting-period
alignment of U.S. entities - - - (189)
Cash and cash equivalents at
beginning of period 2,969 2,477 2,414 2,517
-------------------------------------------------------------------------
Cash and cash equivalents at
end of period, represented by
cash and due from banks $ 2,574 $ 2,414 $ 2,574 $ 2,414
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary disclosure of
cash flow information
Amount of interest paid during
the period $ 1,128 $ 1,172 $ 5,865 $ 8,337
Amount of income taxes paid
(refunded) during the period 334 (230) 917 (1,198)
-------------------------------------------------------------------------
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 October 31 are presented in the following tables:
Results by Business Segment
-------------------------------------------------------------------------
(millions of
Canadian For the three months ended
dollars) -----------------------------------------------------------
Canadian Personal U.S. Personal
and Commercial Wealth and Commercial
Banking Management Banking
-------------------------------------------------------------------------
Oct. 31
Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 2009
2010 2009 2010 2009 2010 (1),(2)
-------------------------------------------------------------------------
Net interest
income $ 1,854 $ 1,668 $ 97 $ 67 $ 962 $ 840
Non-interest
income 814 766 542 520 257 273
-------------------------------------------------------------------------
Total revenue 2,668 2,434 639 587 1,219 1,113
Provision for
(reversal of)
credit losses 239 313 - - 146 216
Non-interest
expenses 1,331 1,226 468 444 763 806
-------------------------------------------------------------------------
Income (loss)
before income
taxes 1,098 895 171 143 310 91
Provision for
(recovery
of) income
taxes 325 273 53 46 45 (31)
Non-
controlling
interests
in subsid-
iaries, net
of income
taxes - - - - - -
Equity in net
income of an
associated
company, net
of income
taxes - - 33 59 - -
-------------------------------------------------------------------------
Net income
(loss) $ 773 $ 622 $ 151 $ 156 $ 265 $ 122
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets
(billions of
Canadian
dollars)
Balance sheet $ 198.1 $ 183.3 $ 20.8 $ 20.6 $ 179.6 $ 153.8
Securitized(3) 65.6 57.6 - - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the twelve months ended
-------------------------------------------------------------------------
Net interest
income $ 7,134 $ 6,348 $ 336 $ 270 $ 3,579 $ 3,607
Non-interest
income 3,237 3,101 2,121 1,935 1,180 1,117
-------------------------------------------------------------------------
Total revenue 10,371 9,449 2,457 2,205 4,759 4,724
Provision for
(reversal of)
credit losses 1,046 1,155 - - 646 948
Non-interest
expenses 4,934 4,725 1,813 1,701 2,910 3,213
-------------------------------------------------------------------------
Income (loss)
before income
taxes 4,391 3,569 644 504 1,203 563
Provision for
(recovery of)
income taxes 1,296 1,097 197 159 230 (70)
Non-
controlling
interests in
subsidiaries,
net of income
taxes - - - - - -
Equity in net
income of an
associated
company, net
of income
taxes - - 194 252 - -
-------------------------------------------------------------------------
Net income
(loss) $ 3,095 $ 2,472 $ 641 $ 597 $ 973 $ 633
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-------------------------------------------------------------------------
(millions of
Canadian For the three months ended
dollars) -----------------------------------------------------------
Wholesale
Banking Corporate Total
-------------------------------------------------------------------------
Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
2010 2009 2010 2009 2010 2009
-------------------------------------------------------------------------
Net interest
income $ 416 $ 579 $ (346) $ (329) $ 2,983 $ 2,825
Non-interest
income 261 307 160 27 2,034 1,893
-------------------------------------------------------------------------
Total revenue 677 886 (186) (302) 5,017 4,718
Provision for
(reversal of)
credit losses 23 7 (4) (15) 404 521
Non-interest
expenses 324 347 377 272 3,263 3,095
-------------------------------------------------------------------------
Income (loss)
before income
taxes 330 532 (559) (559) 1,350 1,102
Provision for
(recovery
of) income
taxes 235 160 (284) (316) 374 132
Non-
controlling
interests
in subsid-
iaries, net
of income
taxes - - 27 27 27 27
Equity in net
income of an
associated
company, net
of income
taxes - - 12 8 45 67
-------------------------------------------------------------------------
Net income
(loss) $ 95 $ 372 $ (290) $ (262) $ 994 $ 1,010
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets
(billions of
Canadian
dollars)
Balance sheet $ 188.8 $ 164.9 $ 32.2 $ 34.6 $ 619.5 $ 557.2
Securitized(3) 4.0 4.1 (19.0) (13.7) 50.6 48.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the twelve months ended
-------------------------------------------------------------------------
Net interest
income $ 1,815 $ 2,488 $ (1,321) $ (1,387) $ 11,543 $ 11,326
Non-interest
income 1,059 733 425 (352) 8,022 6,534
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Total revenue 2,874 3,221 (896) (1,739) 19,565 17,860
Provision for
(reversal of)
credit losses 25 164 (92) 213 1,625 2,480
Non-interest
expenses 1,395 1,417 1,111 1,155 12,163 12,211
-------------------------------------------------------------------------
Income (loss)
before income
taxes 1,454 1,640 (1,915) (3,107) 5,777 3,169
Provision for
(recovery of)
income taxes 588 503 (1,049) (1,448) 1,262 241
Non-
controlling
interests in
subsidiaries,
net of income
taxes - - 106 111 106 111
Equity in net
income of an
associated
company, net
of income
taxes - - 41 51 235 303
-------------------------------------------------------------------------
Net income
(loss) $ 866 $ 1,137 $ (931) $ (1,719) $ 4,644 $ 3,120
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Commencing the third quarter ended July 31, 2008, the results of U.S.
Personal and Commercial Banking include Commerce.
(2) As explained in Note 1, effective the second quarter ended April 30,
2009, as a result of the alignment of reporting period of U.S.
entities, TD Bank, N.A., which currently operates as TD Bank,
America's Most Convenient Bank, is consolidated using the same period
as the Bank.
(3) Securitized assets continue to be reported under the segments the
original loans originated from.
SHAREHOLDER AND INVESTOR INFORMATION
-------------------------------------------------------------------------
Shareholder Services
-------------------------------------------------------------------------
-------------------------------------------------------------------------
And your
If you: inquiry relates to: Please contact:
-------------------------------------------------------------------------
Are a registered Missing dividends, Transfer Agent
shareholder (your lost share
name appears on your certificates, estate CIBC Mellon Trust Company
TD share questions, address P.O. Box 7010
certificate) changes to the share Adelaide Street Postal
register, dividend Station
bank account changes, Toronto, ON M5C 2W9
the dividend 416-643-5500 or toll-free
reinvestment plan, at 1-800-387-0825
eliminating duplicate [email protected]
mailings of or www.cibcmellon.com
shareholder materials
or stopping (and
resuming) receiving
Annual and Quarterly
Reports.
-------------------------------------------------------------------------
Hold your TD shares Missing dividends, Co-Transfer Agent and
through the Direct lost share Registrar
Registration System certificates, estate
in the United States questions, address BNY Mellon Shareowner
changes to the share Services P.O. Box 358015
register, eliminating Pittsburgh, Pennsylvania
duplicate mailings of 15252-8015
shareholder materials or
or stopping (and 480 Washington Boulevard
resuming) receiving Jersey City, New Jersey
Annual and Quarterly 07310
Reports. 1-866-233-4836
TDD for hearing impaired:
1-800-231-5469
Shareholders outside of
U.S.: 201-680-6578
TDD Shareholders outside of
U.S.: 201-680-6610
www.bnymellon.com/shareowner/equityaccess
-------------------------------------------------------------------------
Beneficially own TD Your TD shares, Your intermediary
shares that are held including questions
in the name of an regarding the dividend
intermediary, such reinvestment plan and
as a bank, a trust mailings of shareholder
company, a materials
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 2010 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 for fiscal 2010 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]
Access to Quarterly Results Materials
-------------------------------------
Interested investors, the media and others may view this fourth quarter earnings news release, results slides, supplementary financial information, and the 2010 Consolidated Financial Statements and Notes and the 2010 Management's Discussion and Analysis documents on the TD website at www.td.com/investor/qr_2010.jsp.
Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on December 2, 2010. The call will be webcast live via TD's website at 3 p.m. ET. The call and webcast will feature presentations by TD executives on the Bank's financial results for the fourth quarter and fiscal 2010, followed by a question-and-answer period with analysts. The presentation material referenced during the call will be available on the TD website at http://www.td.com/investor/qr_2010.jsp on December 2, 2010, before 12 p.m. ET. A listen-only telephone line is available at 416-644-3414 or 1-877-974-0445 (toll free).
The webcast and presentations will be archived at http://www.td.com/investor/qr_2010.jsp. Replay of the teleconference will be available from 6 p.m. ET on December 2, 2010, until January 4, 2011, by calling 416-640-1917 or 1-877-289-8525 (toll free). The passcode is 4382740, followed by the pound key.
Annual Meeting
Thursday, March 31, 2011
Victoria Conference Centre
Victoria, British Columbia
About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (TD or the Bank). TD is the sixth largest bank in North America by branches and serves approximately 19 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, including TD Bank, America's Most Convenient Bank; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with more than 6 million online customers. TD had $620 billion in assets on October 31, 2010. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.
For further information: Mushtak Najarali, Vice President, Investor Relations, 416-308-9030; Wojtek Dabrowski, Manager, Media Relations, 416-307-8149
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