TD Bank 2007 Annual Report Download - page 25

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Management’s Discussion and Analysis 21
TABLE 9NON-INTEREST EXPENSES AND EFFICIENCY RATIO
(millions of Canadian dollars) 2007 vs 2006
2007 2006 2005 % change
Salaries and employee benefits
Salaries $ 2,737 $ 2,700 $ 2,544 1.4%
Incentive compensation 1,286 1,207 1,139 6.5
Pension and other employee benefits 583 578 535 0.9
Total salaries and employee benefits 4,606 4,485 4,218 2.7
Occupancy
Rent 390 371 373 5.1
Depreciation 163 160 147 1.9
Property tax 21 21 17 -
Other 162 149 139 8.7
Total occupancy 736 701 676 5.0
Equipment
Rent 192 200 192 (4.0)
Depreciation 199 183 175 8.7
Other 223 216 242 3.2
Total equipment 614 599 609 2.5
Amortization of intangible assets 499 505 546 (1.2)
Restructuring costs 67 50 43 34.0
Marketing and business development 445 470 469 (5.3)
Brokerage-related fees 233 222 263 5.0
Professional and advisory services 488 540 519 (9.6)
Communications 193 201 205 (4.0)
Other
Capital and business taxes 196 205 167 (4.4)
Postage 122 121 108 0.8
Travel and relocation 84 87 78 (3.4)
Other 692 629 943 10.0
Total other 1,094 1,042 1,296 5.0
Total expenses $ 8,975 $ 8,815 $ 8,844 1.8%
Efficiency ratio – reported 62.8%59.8%74.0%300bps
Efficiency ratio – adjusted 59.6 62.4 65.2 (280)
FINANCIAL RESULTS OVERVIEW
Taxes
Reported total income and other taxes decreased by $26 million,
or 1.7%, from 2006. Income tax expense, on a reported basis,
was down $21 million, or 2.4%, from 2006. Other taxes were
down $5 million, or 1.7%, from 2006. Adjusted total income
and other taxes were down $112 million, or 6.3%, from 2006.
Current income tax expense, on an adjusted basis, was down
$107 million, or 9.7%, from 2006.
The Bank’s effective income tax rate, on a reported basis, was
18.3% for 2007, compared with 15.8% in 2006. The increase
was largely due to the net dilution gain on Ameritrade transac-
tion in 2006, which had limited associated tax expense. Partially
offsetting this item was a higher impact on the tax rate from
non-taxable income received and international operations as
compared with 2006. On an adjusted basis, the effective
income tax rate was 20.1% for 2007, compared with 24.4%
in 2006.
Prior to the sale of TD Waterhouse U.S.A. to Ameritrade to
create TD Ameritrade, the financial statements reported the
pre-tax and after-tax results of TD Waterhouse U.S.A. separately.
TD reports its investments in TD Ameritrade using the equity
method of accounting; tax expense of $173 million for the year
is not part of the tax rate reconciliation.
TABLE 10 TAXES
(millions of Canadian dollars) 2007 2006 2005
Income taxes at Canadian statutory income tax rate $ 1,627 34.9%$ 1,934 35.0%$ 1,072 35.0%
Increase (decrease) resulting from:
Dividends received (423)(9.1)% (234)(4.2)% (232)(7.6)%
Rate differentials on international operations (336)(7.2)% (248)(4.5)% (215)(7.0)%
Items related to dilution gains and losses – –% (582)(10.5)% 163 5.3%
Other (15)(0.3)% 4 –% (89)(2.9)%
Provision for income taxes and effective income tax rate – reported $ 853 18.3%$ 874 15.8% $ 699 22.8%