TD Bank 2010 Annual Report Download - page 59

TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS 57
the Bank’s net interest income and revenues from fee-based products
and services, increase the Bank’s expenses and, in turn, negatively
impact net income. In addition, the widespread adoption of new
technologies could require the Bank to make substantial expenditures
to modify or adapt existing products and services and could be used
in unprecedented ways by the increasingly sophisticated parties who
direct their attempts to defraud the Bank or its customers through
many channels. The Bank might not be successful in introducing new
products and services, achieving market acceptance of its products
and services, developing and expanding distribution channels, and/or
developing and maintaining loyal customers.
Acquisitions and Strategic Plans
The Bank regularly explores opportunities to acquire other financial
services companies or parts of their businesses directly or indirectly
through the acquisition strategies of its subsidiaries. The Bank under-
takes thorough due diligence before completing an acquisition, but
it is possible that unanticipated factors could arise and there is no
assurance that the Bank will achieve its financial or strategic objectives
or anticipated cost savings following acquisitions and integration
efforts. The Bank’s, or a subsidiary’s, ability to successfully complete an
acquisition is often subject to regulatory and shareholder approvals,
and the Bank cannot be certain when or if, or on what terms and
conditions, any required approvals will be granted. The Bank’s financial
performance is also influenced by its ability to execute strategic plans
developed by management. If these strategic plans do not meet with
success or there is a change in strategic plans, the Bank’s earnings
could grow more slowly or decline.
Ability to Attract and Retain Key Executives
The Bank’s future performance depends to a large extent on the avail-
ability of qualified people and the Bank’s ability to attract, develop
and retain key executives. There is intense competition for the best
people in the financial services sector. Although it is the goal of the
Bank’s management resource policies and practices to attract, develop,
and retain key executives employed by the Bank or an entity acquired
by the Bank, there is no assurance that the Bank will be able to do so.
Business Infrastructure
Third parties provide key components of the Bank’s business infra-
struc
ture such as voice and data communications and network access.
Given the high volume of transactions we process on a daily basis,
the Bank is reliant on such third party provided services to successfully
deliver our products and services. Despite our contingency plans and
those of our third party service providers, disruptions in internet,
network access or other voice or data communication services could
adversely affect the Bank’s ability to deliver products and services to
customers and to otherwise conduct business.
Changes to Our Credit Ratings
There can be no assurance that the Bank’s credit ratings and rating
outlooks from rating agencies such as Moody’s Investors Service, Stan-
dard & Poor’s, Fitch Ratings, or DBRS will not be lowered or that these
ratings agencies will not issue adverse commentaries about the Bank.
Such changes could potentially result in higher financing costs and
reduce access to capital markets. A lowering of credit ratings may also
affect the Bank’s ability to enter into normal course derivative or hedging
transactions and impact the costs associated with such transactions.
Changes in Laws and Regulations, and Legal Proceedings
Changes to current laws and regulations, including changes in their
interpretation or implementation, and the introduction of new laws
and regulations, could adversely affect the Bank, such as by limiting
the products or services it can provide and increasing the ability
of competitors to compete with its products and services. In particular,
the recent financial crisis resulted in, and could further result in,
unprecedented and considerable change to laws and regulations
applicable to financial institutions and the financial industry. The
Bank’s failure to comply with applicable laws and regulations could
result in sanctions and financial penalties that could adversely impact
its earnings and damage its reputation.
Accuracy and Completeness of Information on Customers
and Counterparties
In deciding whether to extend credit or enter into other transactions
with customers and counterparties, the Bank may rely on information
furnished by or on behalf of such other parties, including financial
statements and other financial information. The Bank may also rely on
the representations of customers and counterparties as to the accuracy
and completeness of such information. The Bank’s financial condition
and earnings could be negatively impacted to the extent it relies on
financial statements or information that do not comply with GAAP,
that are materially misleading, or that do not fairly present, in all
material respects, the financial condition and results of operations of
the customers and counterparties.
Accounting Policies and Methods Used by the Bank
The accounting policies and methods the Bank utilizes determine
how the Bank reports its financial condition and results of operations,
and they may require management to make estimates or rely on
assumptions about matters that are inherently uncertain. Such estimates
and assumptions may require revisions, and these changes may
materially adversely affect the Bank’s results of operations and financial
condition. Significant Accounting Policies are described in Note 1 to
our Consolidated Financial Statements.
BANK SPECIFIC FACTORS
Adequacy of the Bank’s Risk Management Framework
The Bank’s risk management framework is made up of various processes
and strategies for managing risk exposure and includes an Enterprise
Risk Appetite Framework. Types of risk to which the Bank is subject
include credit, market (including equity and commodity), liquidity,
interest rate, operational, reputational, insurance, strategic, foreign
exchange, regulatory, legal, environmental, and other risks. There can
be no assurance that the Bank’s framework to manage risk, including
such framework’s underlying assumptions and models, will be effective
under all conditions and circumstances. If the Bank’s risk management
framework proves ineffective, whether because it does not keep pace
with changing Bank or market circumstances or otherwise, the Bank
could suffer unexpected losses and could be materially adversely affected.
New Products and Services to Maintain or Increase Market Share
The Bank’s ability to maintain or increase its market share depends,
in part, on its ability to innovate and adapt products and services to
evolving industry standards and develop and/or expand its distribution
networks. There is increasing pressure on financial services companies
to provide products and services at lower prices as well as to increase
the convenience features, such as longer branch hours. This can reduce