TD Bank 2003 Annual Report Download - page 28

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Management’s Discussion and Analysis26
Revenues
(millions of dollars) 2003 2002 2001
Corporate banking $326 $ 752 $ 886
Investment banking and capital markets 1,559 1,757 1,957
Equity investments 156 159 320
Non-core 136 ––
Total $2,177 $2,668 $ 3,163
The Bank was a provider of financial services to the Enron
group of companies, a former relationship now in the non-
core portfolio. With the bankruptcy of Enron, the Bank, like
many other financial institutions, has become involved in a
number of regulatory investigations and lawsuits. The Bank
is in the early stages of these investigations and lawsuits
and the outcome is uncertain at this time. While the Bank
considers that its actions were legal and consistent with
market practices at the time, it has recognized that the envi-
ronment for the provision of financial services has changed in
light of Enron and other cases of corporate malfeasance and
consequently is adapting its corporate finance processes to
meet changing expectations.
Wholesale Banking
(millions of dollars) 2003 2002 2001
Net interest income (TEB) $ 1,508 $ 1,505 $ 898
Other income 669 1,163 2,265
Total revenue 2,177 2,668 3,163
Provision for credit losses (80) 2,490 327
Non-interest expenses excluding non-cash goodwill amortization 1,761 1,235 1,373
Income (loss) before provision for (benefit of) income taxes 496 (1,057) 1,463
Provision for (benefit of) income taxes (TEB) 133 (400) 537
Net income (loss) – cash basis $ 363 $ (657) $ 926
Selected volumes and ratios
Average loans and customers’ liabilities under acceptances (billions of dollars) $17 $25 $29
Risk-weighted assets (billions of dollars) $45 $62 $66
Economic profit (loss) (millions of dollars) $(193) $ (1,192) $ 360
Return on average invested capital – cash basis 8.2% (16.1)% 21.7%
Efficiency ratio – cash basis 80.9% 46.3% 43.4%
Economic outlook
An improvement in business confidence, combined with
solid, but not spectacular gains in corporate profits, should
lead to increased client demand for wholesale banking
services in 2004. Improved financial conditions may lead to
higher trading volumes. The rebound in equity markets from
their October 2002 lows and a rising trend in bond yields are
also supportive to new equity issuance. The advance in cor-
porate profits should improve credit conditions and may
cause additional merger and acquisition activity. One factor
that will constrain the growth in corporate profits and signifi-
cantly affect the relative performance of various Canadian
industries next year will be the fall out from the rapid appre-
ciation in the Canadian dollar in 2003. The unprecedented
increase in the exchange rate will be a boon to importers, but
a major hurdle for exporters. However, the U.S. economy is
poised to deliver a strong performance in 2004. As a result,
the impact of the stronger Canadian dollar on exporters may
be offset to some extent by increased U.S. demand for
Canadian goods and services. A further weakening in the
U.S. dollar may occur in 2004, which could dampen demand
for U.S. financial assets and provide an additional lift to
trading volumes in Canadian dollar assets. See page 32 for
discussion of factors that may affect future results.