TD Bank 2010 Annual Report Download - page 27

TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS 25
Business Banking
•
Commercial Banking – Continued investment in new branch locations,
customer-facing resources, and tools resulted in strong volume
growth and market share gains across all products, particularly
deposits, which saw double digit growth. Credit losses were lower
than the previous year as economic conditions stabilized.
• Small Business Banking – The customer base continued to grow
during the year with strong deposit volume growth. Strategic invest-
ments continued to be made in additional small business advisors
in our retail branches, as well as in sales tools to better enable the
retail sales force.
• Merchant Services Banking – We offer point-of-sale solutions for
debit and credit card transactions, supporting over 100,000 business
locations across the country. Business volumes and revenue continued
to increase in 2010 as a result of stronger spending, the integration
of the MasterCard customer portfolio acquired from First Data, and
the build of a direct sales force for the businesses.
Insurance
• TD General Insurance – Strong unit growth in our affinity business
and significant repricing of the direct business led to very strong
premium growth, consolidating TD Insurance’s position as the leader
in the direct personal automobile and home insurance industry and
affinity business in Canada.
• TD Life and Health – Volume growth was solid across product lines
due to factors such as higher sales rates, continued double digit
growth in Critical Illness and better retention across a customer base
of over 3 million Canadians.
• TD Insurance full-service broker is the 10th largest bank-owned
insurance broker in the U.S.
BUSINESS OUTLOOK AND FOCUS FOR 2011
While we continue to benefit from our leadership position in
branch hours and the ongoing investment in our network, we
expect earnings growth to moderate as increases in volume are
expected to be lower across most products and the protracted
low rate and competitive pricing environment continues to put
pressure on margins. Strong underlying business growth
combined with improving margins helped by the Ontario Insur-
ance Reform which became effective September 1, 2010, should
provide positive momentum in the insurance business. We
expect credit losses to remain stable into 2011. While we will
continue to focus on appropriate ongoing investments in our
business, we expect expense growth to be moderate next year
and positive operating leverage to be maintained.
Our key priorities for 2011 include:
• Extend our lead on customer service and convenience.
• Create an integrated customer service experience across
all channels.
• Prepare TDCT for a period of slower growth, exercising
expense discipline while eliminating waste and simplifying
technology, process and controls.
• Continue to support under-represented businesses while iden-
tifying new sources of revenue.
REVIEW OF FINANCIAL PERFORMANCE
Canadian Personal and Commercial Banking net income for the year
was a record $3,095 million, an increase of $623 million, or 25%,
from last year. Return on invested capital for the year was 33.4%,
compared with 28.1% last year.
Revenue for the year was $10,371 million, an increase of $922 million,
or 10%, compared with last year, mainly due to strong volume growth
across most banking products. Margin on average earning assets
increased 2 bps to 2.92% compared with last year, due to higher
margins in real estate secured lending, partially offset by margin
compression in deposits due to the prolonged low rate environment
and lower mortgage breakage revenue. Volume growth was primarily
in real estate secured lending, personal and business deposits and
insurance. Real estate secured lending volume, including securitized
assets, increased $19.8 billion, or 12%, while consumer loan volume
increased $3.8 billion, or 13%. Business loans and acceptances volume
increased $1.4 billion, or 5%. Personal deposit volume increased
$5.4 billion, or 4%, while business deposit volume increased
$6.6 billion, or 14%. Gross originated insurance premiums increased
$313 million, or 11%.
PCL for the year was $1,046 million, a decrease of $109 million, or
9%, compared with last year. Personal banking PCL was $950 million,
a decrease of $101 million, or 10%, and business banking PCL was
$96 million, a decrease of $7 million, or 7%. PCL as a percentage of
average assets was 0.4%, decreasing 10 bps from last year. Net impaired
loans were $553 million, a decrease of $2 million, compared with last
year. Net impaired loans in Commercial Banking were $62 million, a
decrease of $51 million, or 45%, compared with last year, due to active
file management. Net impaired loans as a percentage of total loans
were 0.85%, compared with 0.93% as at October 31, 2009.
Non-interest expenses for the year were $4,934 million, an increase
of $209 million, or 4%, compared with last year primarily due to higher
employee compensation, project-related costs, non-credit losses, and
the investment in new branches, partially offset by lower litigation costs
and capital taxes.
The average FTE staffing levels increased by 1,383, or 4%, compared
with last year. The efficiency ratio improved to 47.6%, compared with
50.0% last year.
KEY PRODUCT GROUPS
Personal Banking
• Personal Deposits – In 2010, the Bank continued to leverage its
market share position to deliver strong volume growth across the
deposit business lines. While competitive pressure for accounts has
been increasing, the Bank maintained its leadership in market share
and continued to grow net active accounts.
• Consumer Lending – Solid growth in personal lending and credit
card balances due to increased consumer spending and growing
market share in 2010.
• Real Estate Secured Lending – While the first half of the year saw
strong volume growth ahead of the introduction of the HST in
Ontario and B.C. and as a result of attractive interest rate levels,
the market moderated during the latter half of the year.