TD Bank 2010 Annual Report Download - page 38

TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS36
(millions of Canadian dollars) Canadian U.S.
Personal and Personal and
Commercial Wealth Commercial Wholesale
Banking Management Banking Banking Corporate Total
Net interest income $ 6,348 $ 270 $ 3,607 $ 2,488 $ (1,387) $ 11,326
Non-interest income 3,101 1,935 1,117 733 (352) 6,534
Total revenue 9,449 2,205 4,724 3,221 (1,739) 17,860
Provision for (reversal of) credit losses 1,155 – 948 164 213 2,480
Non-interest expenses 4,725 1,701 3,213 1,417 1,155 12,211
Income (loss) before provision for income taxes 3,569 504 563 1,640 (3,107) 3,169
Provision for (recovery of) income taxes 1,097 159 (70) 503 (1,448) 241
Non-controlling interests in subsidiaries, net of income taxes – – – – 111 111
Equity in net income of an associated company,
net of income taxes – 252 – – 51 303
Net income (loss) – reported 2,472 597 633 1,137 (1,719) 3,120
Items of note, net of income taxes – – 276 – 1,320 1,596
Net income (loss) – adjusted $ 2,472 $ 597 $ 909 $ 1,137 $ (399) $ 4,716
REVIEW OF 2009 FINANCIAL PERFORMANCE
TABLE 21
2009 FINANCIAL RESULTS OVERVIEW
Summary of 2009 Performance
NET INTEREST INCOME
Reported net interest income was $11,326 million in 2009, an increase
of $2,794 million or 33%. The increase was driven by increases in most
segments. Canadian Personal and Commercial Banking net interest
income increased $558 million, largely due to higher product volumes
in personal loans, real-estate secured lending and deposits. U.S. Personal
and Commercial Banking reported net interest income increased
$1,463 million, largely due to the Commerce acquisition. Wholesale
Banking net interest income increased $1,170 million due to higher
trading-related net interest income.
NON-INTEREST INCOME
Reported non-interest income was $6,534 million in 2009, an increase
of $397 million, or 6%, from 2008. Adjusted non-interest income was
$7,294 million, an increase of $1,454 million, or 25%, from 2008. The
increase in adjusted non-interest income was largely due to an increase
in the Wholesale Banking and U.S. Personal and Commercial Banking
segments. Wholesale Banking non-interest income increased mainly
due to higher trading-related non-interest income, partially offset by
higher net security losses relating to the exit of the equity investment
portfolio. U.S. Personal and Commercial Banking reported non-interest
income increased largely due to the full-year inclusion of Commerce.
NON-INTEREST EXPENSES
Non-interest expenses for 2009 were $12,211 million, compared with
$9,502 million in 2008, an increase of $2,709 million or 29%. The
increase in expenses was driven by growth in all segments. Corporate
segment non-interest expense increased by $780 million primarily due
to the impact of a positive adjustment resulting from the reversal of
the Enron litigation reserve in 2008 of $477 million, increases in amor-
tization of intangibles by $76 million and net corporate expenses of
$61 million, the settlement of TD Banknorth shareholder litigation of
$58 million and a FDIC special assessment charge of $55 million. U.S.
Personal and Commercial Banking non-interest expense increased by
US$1,001 million, or 57%, primarily due to the full year inclusion of
Commerce, higher integration charges, increased FDIC premiums, and
the impact of new stores, partly offset by Commerce deal expense
synergies during the year. Wholesale Banking non-interest expenses
increased by $218 million due primarily to higher variable compensation
on stronger results, higher severance costs, and ongoing investments
in control processes. Canadian Personal and Commercial banking non-
interest expenses increased by $203 million due to higher employee
compensation, full year inclusion of the U.S. insurance and credit card
businesses, and investment in new branches. Wealth Management
non-interest expenses increased by $86 million mainly due to full year
inclusion of the U.S. wealth management businesses, higher ownership
in Internaxx, U.K., higher volume related expenses, and continued
investment in growing the sales force in advice-based businesses,
partially offset by lower variable compensation impacted by business
results and prudent expense management.
INCOME TAX EXPENSE
Reported total income and other taxes decreased by $195 million, or
15%, from 2008. Income tax expense, on a reported basis, was down
$296 million, or 55%, from 2008. Other taxes were up $101 million,
or 14%, from 2008. Adjusted total income and other taxes were up
$470 million, or 36%, from 2008. Total income tax expense, on an
adjusted basis, was up $369 million, or 67%, from 2008.
The Bank’s effective income tax rate, on a reported basis, was 7.6%
for 2009, compared with 13.1% in 2008. The year-over-year decrease
was primarily caused by a decrease in reported net income before
taxes, a proportionate increase in tax exempt income, and a lower
effective tax rate on international operations.
BALANCE SHEET
Factors Affecting Assets and Liabilities
Year-over-year comparison – October 31, 2009 vs. October 31, 2008
Total assets of the Bank were $557 billion as at October 31, 2009,
a
decrease of $6 billion, or 1%, compared with October 31, 2008. The
decrease reflected a lower market value of derivatives and decreased
securities purchased under reverse purchase agreements, partially
offset by an increase in loans (net of allowance for loan losses).
Securities increased by $5 billion largely due to growth in available-
for-sale securities in U.S. Personal and Commercial Banking driven
by the reinvestment of balances previously invested in securities
purchased under reverse repurchase agreements and the reinvestment
of TD Bank USA deposits, partially offset by the reclassification of
certain debt securities as loans. The translation effect of the weaker
Canadian dollar caused the value of securities in U.S. Personal and
Commercial Banking to increase by $1 billion.
Securities purchased under resale agreements decreased by
$9 billion largely due to the reinvestment of balances into available-
for-sale securities in U.S. Personal and Commercial Banking.
Loans (net of allowance for loan losses) were $253 billion, an
increase of $34 billion, or 15%, primarily driven by volume growth
in the Canadian Personal and Commercial Banking and U.S. Personal
and Commercial Banking segments. Increases in consumer instalment
and other personal loans, business and government loans in Canadian
Personal and Commercial Banking, and residential mortgages in
U.S. Personal and Commercial Banking drove the loan volume growth
in 2009. In addition, a further $11 billion increase relates to the
reclassification of debt securities as loans. The translation effect of the