TD Bank 2001 Annual Report Download - page 69

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67
FINANCIAL RESULTS
Concentration of credit risk exists where a number of borrowers
or counterparties are engaged in similar activities, are located
in the same geographic area or have comparable economic
characteristics. Their ability to meet contractual obligations may
be similarly affected by changing economic, political or other
conditions. Management considers the following concentrations
to be within acceptable limits.
On-balance sheet assets
Of the total loans outstanding at September 30, 2001, 81%
were to borrowers in Canada, with the largest concentration in
Ontario
(50%), and 14% to borrowers in the United States. At
September 30, 2000, loan concentration
was 74% in Canada
(including 44% in Ontario) and 18% in the United States. No
single industry segment accounted for more than 5% of the total
loans and customers’ liability under acceptances.
Off-balance sheet financial instruments
(a) Credit instruments
At October 31, 2001, the Bank had commitments and contingent
liability contracts in the amount of $87,249 million (2000 –
$91,447 million). Included are commitments to extend credit
totalling $77,357 million (2000 – $83,168 million), of which
approximately 45% of the credit risk was in Canada (2000 –
45%), 42% in the United States (2000 – 42%), and 7% in the
United Kingdom (2000 – 7%). Of the commitments to extend
credit, approximately 34% of the industry concentration related
to financial institutions (2000 – 34%), 13% related to utilities
(2000 – 13%), 8% related to government (2000 – 6%), 7%
related to telecommunications (2000 – 10%), and 6% related to
oil and gas (2000 – 5%). No other industry segment exceeded
5% of the total.
(b) Derivative financial instruments
At October 31, 2001, the current replacement cost of derivative
financial instruments amounted to $24,822 million (2000 –
$15,662 million). Based on the location of the ultimate counter-
party,
31
% of this credit risk amount related to the United States
(2000 – 27%), 27%
to Europe
excluding the United Kingdom
(2000 –
30%
),
21% to Canada (2000 – 24%), and 12% to
the United Kingdom (2000 – 11%). The largest concentration
by counterparty type was with financial institutions, which
accounted for 84% of the total (2000 – 84%). No other industry
segment exceeded 5% of the total.
NOTE 16 Concentration of credit risk
The Bank’s operations and activities are organized around
the following businesses: TD Canada Trust, TD Waterhouse,
TD Wealth Management and TD Securities.
TD Canada Trust provides financial services to consumers and
small and medium-sized businesses. TD Waterhouse provides
global self-directed brokerage services. TD Wealth Management
provides investment management services to institutional and
retail investors. TD Securities provides a full range of services,
including investment banking, merchant banking, mergers and
acquisitions, fixed income, foreign exchange, derivative products,
high yield, money market, equities, and corporate banking.
The Other category includes real estate investments, the effect
of securitizations, treasury management, general provisions for
credit losses, certain taxable equivalent adjustments, restructuring
costs and any residual unallocated revenues and expenses.
Results of each segment reflect revenues, expenses, assets and
liabilities generated by the businesses in that segment. Transfer
pricing of funds sold or purchased, and of commissions for serv-
ices provided are generally at market rates. The Bank measures
the performance of each segment based on net income, return
on equity and economic profit.
NOTE 17 Segmented information