TD Bank 2007 Annual Report Download - page 23

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Management’s Discussion and Analysis 19
TABLE 6ANALYSIS OF CHANGE IN NET INTEREST INCOME
(millions of Canadian dollars) 2007 vs 2006 2006 vs 2005
Favourable (unfavourable)
due to change in
Favourable (unfavourable)
due to change in
Average
volume
Average
rate
Net
change
Average
volume
Average
rate
Net
change
Total earning assets $ 1,028 $ 1,255 $ 2,283 $ 1,332 $ 1,461 $ 2,793
Total interest-bearing liabilities (645)(1,085)(1,730)(742)(1,688)(2,430)
Net interest income $ 383 $ 170 $ 553 $ 590 $ (227)$ 363
OTHER INCOME
Other income was $7,357 million in 2007, an increase of
$536 million, or 8%, from 2006.
The Canadian Personal and Commercial Banking segment
posted an increase of $275 million in other income related to
increases in service charges, card services, insurance revenue and
non-trading foreign exchange revenue. Wealth Management
other income increased due to higher assets under administra-
tion, an increase in trades per day and higher mutual fund assets
under management, partially offset by lower commission reve-
nue due to the full year impact of the sale of TD Waterhouse
U.S.A. to Ameritrade. U.S. Personal and Commercial Banking
other income increased by 19%, largely due to the full year
impact of the Hudson and Interchange acquisitions and fee
initiatives. Wholesale Banking other income declined from 2006
as higher syndication revenue, merger and acquisition fees, and
equity and debt underwriting were more than offset by a decline
in trading income. Other income also increased due to a gain
of $163 million related to the restructuring of Visa and a
net security loss of $52 million in 2006 related to the balance
sheet restructuring of the U.S. Personal and Commercial
Banking segment.
TABLE 7OTHER INCOME
(millions of Canadian dollars) 2007 vs 2006
2007 2006 2005 % change
Investment and securities services:
Discount brokerage $ 445 $ 567 $ 881 (21.5)%
Securities and full service brokerage 1,087 988 927 10.0
Mutual funds 868 704 671 23.3
Credit fees 420 371 343 13.2
Net securities gains 326 305 242 6.9
Trading income (loss) 591 797 147 (25.8)
Income from financial instruments designated as
trading under the fair value option (55)– – –
Service charges 1,019 937 787 8.8
Loan securitizations 397 346 414 14.7
Card services 457 383 279 19.3
Insurance, net of claims 1,005 896 826 12.2
Trust fees 133 130 111 2.3
Other 664 397 323 67.3
Total $ 7,357 $ 6,821 $ 5,951 7.9%
TRADING-RELATED INCOME
Trading-related income, which is the total of net interest
income on trading positions and trading income, decreased by
$234 million, or 32%, from 2006. The decrease was primarily
due to weaker credit trading associated with volatility in the
credit markets and a breakdown in traditional pricing relation-
ships between corporate bonds and credit default swaps in the
latter part of the year. Additionally, weaker results were experi-
enced in equity trading.
The mix of trading-related income between net interest
income and trading income is largely dependent upon levels
of interest rates, which drives the funding costs of our trading
portfolios. Generally, as interest rates rise, net interest income
declines and trading income reported in other income increases.
Management believes that the total trading-related income is
the appropriate measure of trading performance.