TD Bank 2007 Annual Report Download - page 26

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Management’s Discussion and Analysis22
TABLE 11 RECONCILIATION OF NON-GAAP PROVISIONS FOR INCOME TAXES
(millions of Canadian dollars) 2007 2006 2005
Provision for income taxes – reported $ 853 $ 874 $ 699
Increase (decrease) resulting from items of note:
Amortization of intangibles 184 205 192
Gain relating to restructuring of Visa (28)– –
TD Banknorth restructuring, privatization and merger related charges 28 – –
Dilution gain on Ameritrade transaction, net of costs –34 –
Balance sheet restructuring charge in TD Banknorth –18 –
Wholesale Banking restructuring charge –15 14
Change in fair value of credit default swaps hedging
the corporate loan book (16)(4)(10)
Tax charges related to reorganizations ––(163)
Other tax items –(24)98
Loss on structured derivative portfolio ––53
Litigation charge ––130
Non-core portfolio loan loss recoveries (sectoral related) ––(102)
General allowance release (21)(21)(12)
Initial set up of specific allowance for credit card and overdraft loans –10 –
Tax effect – items of note 147 233 200
Provision for income taxes – adjusted 1,000 1,107 899
Other taxes:
Payroll 218 199 222
Capital and premium taxes 191 197 161
GST and provincial 170 184 178
Municipal and business 89 93 84
Total other taxes 668 673 645
Total taxes – adjusted $ 1,668 $ 1,780 $ 1,544
Effective income tax rate – adjusted120.1%24.4%23.1%
1 Adjusted effective income tax rate is adjusted provisions for income taxes
before other taxes as a percentage of adjusted net income before taxes.
FINANCIAL RESULTS OVERVIEW
Quarterly Financial
Information
FOURTH QUARTER 2007 PERFORMANCE SUMMARY
Reported net income for the fourth quarter of 2007 was
$1,094 million, compared with $762 million in the same quarter
last year. Reported diluted earnings per share were $1.50 for
the quarter, compared with $1.04 in the same quarter last year.
Adjusted net income for the quarter was $1,021 million,
compared with $875 million in the same quarter last year.
Adjusted diluted earnings per share were $1.40 for the quarter,
compared with $1.20 in the fourth quarter of 2006. All busi-
ness segments contributed to the increase in adjusted net
income. Canadian Personal and Commercial Banking net
income was $572 million, an increase of $71 million, or 14%,
from the fourth quarter of 2006. Wealth Management and
Wholesale Banking also made positive contributions with earn-
ings growth of 31% and 8%, respectively. U.S. Personal and
Commercial banking earnings increased $61 million in the
fourth quarter, primarily as a result of higher ownership due
to privatization of TD Banknorth.
Revenue increased by $232 million, or 7%, from the fourth
quarter of 2006, due to gains in both net interest income and
other income. Canadian Personal and Commercial Banking rev-
enue increased by 11% on higher volumes in most products.
Wealth Management revenue rose 15% due to increased assets
under management and administration, and higher discount
brokerage volumes. Wholesale Banking revenue increased by
7%, largely due to higher trading-related revenue. The Visa
gain of $163 million before tax also increased other income.
On a reported basis, provision for credit losses decreased
$31 million from the fourth quarter of 2006, largely due to a
general allowance release of $60 million this quarter and the
initial set up of specific allowance of $28 million for credit card
and overdraft loans made in the fourth quarter of 2006. On an
adjusted basis, provision for credit losses increased $57 million.
Canadian Personal and Commercial Banking increased provi-
sions for credit losses by $44 million, largely due to personal
lending and credit card volumes. Provision for credit losses in
the U.S. Personal and Commercial Banking segment increased
as well due to an increase in net impaired loans related to a
slowdown in the U.S. residential real estate construction market.
Expenses for the quarter increased $30 million from the
fourth quarter of 2006. The increase was driven by a $46 million
increase in non-interest expenses in Canadian Personal and
Commercial Banking, primarily due to higher employee com-
pensation costs and investments in new branches and higher
Wealth Management expenses. These increases were offset by
expense reductions in Wholesale Banking, U.S. Personal and
Commercial banking, and the Corporate segment.
The Bank’s effective tax rate was 13.1% for the quarter,
compared with 18.7% in the same quarter last year. The decline
was primarily due to higher non-taxable income in equity trading
received during the quarter.
See the Bank’s fourth quarter 2007 News Release, dated
November 29, 2007, for an analysis of results by quarter by
business segment.