TD Bank 2003 Annual Report Download - page 25

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Management’s Discussion and Analysis 23
•A concerted effort to improve service quality delivered
through the branch network has resulted in a substantial
increase in Customer Satisfaction Index (CSI) scores based
on direct customer feedback.
•Average lending volumes decreased by 10% as continuing
concern about the pace of economic recovery had a nega-
tive impact on business investment plans. The sale of the
commercial leasing portfolio earlier in the year also
reduced lending volumes.
•Loan losses continue to be managed within acceptable
limits and, based on our internal risk ratings, the overall
risk profile of the portfolio has improved from one year ago.
•Focus in 2004 will be to grow relationships and revenue
through a more structured and accountable sales effort as
well as increased referrals from retail branches.
Insurance
Offers a broad range of insurance products through the TD
Insurance and TD Meloche Monnex brands, including credit
protection coverage on TD Canada Trust lending products.
TD Life Group
•Provides life and health insurance protection to
1.6 million customers.
•Insurance cross-sell success continues to improve; more
than six out of every ten new credit products sold are life
insurance protected.
•Premiums collected grew by 13% year-over-year.
•A key priority will be continued growth in critical
illness insurance.
TD Meloche Monnex
•As the largest group insurer for home and automobile
insurance in Canada, TD Meloche Monnex reached the
billion-dollar level in written premiums in 2003, represent-
ing growth of 33% over last year. This milestone reflects
the combined operations of the two brands TD Meloche
Monnex and TD Insurance Home and Auto, representing
over 600,000 individual clients. The company’s unique
business model is focused on affinity agreements with
professional and university alumni organizations as well
as employer groups.
•Despite a difficult year for the personal property and
casualty industry in 2003, TD Meloche Monnex grew net
revenue by 16% over the prior year. The company also
reduced its direct expense ratio to 19%, best among major
insurers in Canada, resulting in further growth in under-
writing profit.
•For 2004, amid uncertainties in the provincial regulatory
environment, the goal is to maintain above-average growth
by remaining the leader in chosen markets, maintaining
a low expense ratio and continuing to offer quality service
and products.
TD Insurance
•Under the TD Insurance brand, insurance products are
provided to TD clients through a direct marketing approach
based on e-commerce, direct mail and telephone.
•With its web-based applications firmly in place, e-commerce
is now responsible for a significant part of new automobile,
home, and individual life insurance sales.
•The goal for 2004 is for continued strong growth in the
TD customer market and direct marketing sales, particularly
benefiting from e-commerce initiatives.
Economic outlook
A strengthening in the Canadian economy should be sup-
portive to personal and commercial banking activities in
2004. Economic growth is expected to accelerate to around
3% next year from below 2% in 2003. This performance for
the economy should bring gains in personal income and
corporate profits, which should generate increased day-to-
day banking activity. Rising economic activity may also
increase demand for loans. However, an improvement in
investor confidence may cause non-term deposits to decline,
as individuals and firms redeploy some of the large cash
holdings they have accumulated over the past few years into
other investments.
Although some moderation is expected in housing markets,
the level of activity should remain strong, which is good news
for real estate secured lending and home-related insurance.
Auto sales are also expected to remain firm, implying healthy
demand for auto-related insurance. Lastly, small business
banking is likely to benefit from the fact that small businesses
tend to outperform larger businesses during the early stages
of a rebound in economic growth. See page 32 for discussion
of factors that may affect future results.
Personal and Commercial Banking
(millions of dollars) 2003 2002 2001
Net interest income (TEB) $4,086 $ 4,058 $ 3,951
Other income 1,803 1,710 1,688
Total revenue 5,889 5,768 5,639
Provision for credit losses 460 505 380
Non-interest expenses excluding non-cash goodwill/intangible amortization 3,463 3,501 3,467
Income before provision for income taxes 1,966 1,762 1,792
Provision for income taxes (TEB) 689 648 702
Net income – cash basis $1,277 $ 1,114 $ 1,090
Selected volumes and ratios
Average loans and acceptances (billions of dollars) $ 104 $98 $91
Average deposits (billions of dollars) $ 110 $ 103 $ 97
Economic profit (millions of dollars) $ 639 $ 438 $ 360
Return on average invested capital – cash basis 18.5% 16.8% 16.7%
Efficiency ratio – cash basis 58.8% 60.7% 61.5%
Margin on average earning assets including securitized assets 3.28% 3.42% 3.38%