TD Bank 2007 Annual Report Download - page 51

TD BANK FINANCIAL GROUP ANNUAL REPORT 2007 Management’s Discussion and Analysis 47
GROUP FINANCIAL CONDITION
Credit Portfolio Quality
AT A GLANCE OVERVIEW
• Loans and acceptances portfolio net of allowances
for credit losses was $185 billion, up $16 billion or 9%
from the prior year.
• Impaired loans after specific allowance were
$366 million, up $96 million or 36%.
• Provision for credit losses was $645 million, compared
with $409 million in 2006.
• Total allowances for credit losses decreased by
$22 million, or 2%, to $1,295 million in 2007.
LOAN PORTFOLIO
Overall in 2007, the Bank’s credit quality remained stable due to
strong Canadian market conditions, established business and
risk management strategies and a continuing low interest rate
environment. The Bank experienced a relatively low level of new
impaired loan formations during the year, consisting primarily of
formations in the U.S. real estate development sector.
During 2007, the loans and acceptances portfolio continued
to be diversified between retail and business and government.
The Bank increased its credit portfolio by $16 billion, or 9%,
from the prior year, largely due to a 12% increase globally in
business and government loans and acceptances, down slightly
from the 20% increase in 2006. Loans authorized and amounts
outstanding to small and mid-sized business customers are
provided in Table 22 below.
TABLE 22 LOANS TO SMALL AND MID-SIZED BUSINESS CUSTOMERS
(millions of Canadian dollars)
Loans authorized Amount outstanding
Loan amount 2007 2006 2005 2007 2006 2005
(thousands of Canadian dollars)
0 – 24 $ 1,221 $ 1,200 $ 1,137 $ 601 $ 621 $ 589
25 – 49 1,138 1,075 1,000 681 665 648
50 – 99 1,800 1,722 1,582 996 976 931
100 – 249 3,697 3,714 3,251 2,229 2,260 1,988
250 – 499 3,648 3,449 3,100 2,128 2,022 1,798
500 – 999 3,889 3,757 3,235 1,981 1,924 1,653
1,000 – 4,999 11,863 11,285 9,735 5,405 5,226 4,457
Total1$ 27,256 $ 26,202 $ 23,040 $ 14,021 $ 13,694 $ 12,064
1 Personal loans used for business purposes are not included in these totals.
The retail business portfolio continued to be the dominant
category for lending activity. During the year, the portfolio,
which primarily comprised residential mortgages and consumer
installments and other personal loans, increased by $10 billion,
or 8%, and totalled $131 billion at year end. The growth was
primarily due to the expansion of the Canadian market that
grew 11% as a result of continuing good demand for domestic
consumer lending products, adding $12 billion to the portfolio.
This offset a $2 billion decline in the U.S. retail business.
The total retail portfolio represents 71% of net loans, includ-
ing acceptances, compared with 71% in 2006 and 75% in
2005. Residential mortgages represented 32% of the portfolio
in 2007, in line with the level experienced in 2006 and down
slightly from 33% in 2005. Consumer installment and other
personal loans were 39% of total loans, compared with 40%
in 2006 and 41% in 2005. The portion of the business and
government credit exposure remained in line with the 2006
level of 29%, with growth in the domestic market and financial
services sector offset by a reduction in U.S. real estate exposure.
The majority of the credit risk exposure relates to the loan
and acceptances portfolio. However, the Bank also engages in
activities that also have off-balance sheet credit risk. These
include credit instruments and derivative financial instruments,
as explained in Note 26.