TD Bank 2003 Annual Report Download - page 29

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Management’s Discussion and Analysis 27
Overall business strategy
To develop a more integrated, strong, asset gathering, client-
focused organization, thereby increasing its contribution to
shareholder value. Wealth Management will continue to
leverage technology to improve the customer experience and
increase operational efficiency. In addition, TD Waterhouse
International will focus on building critical mass in order to
improve returns.
Challenges in 2003
•Market fluctuations and investor uncertainty during the
first half of 2003 put pressure on discount brokerage
trading activity, advice based businesses and mutual fund
assets under management. Market conditions and prof-
itability have improved during the second half of 2003 and
we are hopeful that investor confidence will continue to
improve in 2004.
•Due to limited growth opportunities, TD Waterhouse
Australia was sold to Commonwealth Bank Australia Group.
Joint venture agreements have also been renegotiated to
reduce TD Waterhouse International’s ownership. The com-
bined effect of these actions will improve earnings in 2004.
•The restructuring of TD Waterhouse International in the
second quarter resulted in goodwill write downs and
restructuring charges of $339 million. The restructuring
has also helped position TD Waterhouse International to
achieve breakeven results in 2004.
2003 Highlights.
•Assets under administration increased $33 billion from
2002 as a result of business and market growth.
•For the second straight year, TD Waterhouse U.S.A.
was ranked #1 basic discount broker by SmartMoney,
The Wall Street Journal’s Magazine of Personal Business,
in its annual survey of brokerage firms.
•TD Waterhouse U.K. was named Best Online Broker by
Shares magazine. Strengths identified by readers of the
magazine were the speed and accuracy of trade execution.
Business outlook and focus for 2004
The restructuring of the TD Waterhouse International
operations and the aggressive cost control process across all
of the Wealth Management operations have set the stage
for growth in 2004. Key areas of focus for 2004 are:
•Continued concentration on asset growth in order to
drive revenue.
•Maintain cost reduction/containment strategy in order to
improve efficiency of operations.
•Build a robust infrastructure to support an integrated
domestic Wealth offering and achieve competitive advan-
tage in all domestic Wealth businesses.
Review of financial performance 2003
Wealth Management lost $75 million in 2003. Included in
these results was $339 million relating to write downs and
restructuring costs within TD Waterhouse International. The
remaining Wealth Management income was higher as a result
of the higher business volumes in the second half of the year
and the focus on cost containment. The cash basis return
on average invested capital for the year was (3.6)% compared
with 3.7% in 2002. The economic loss for the year was
$476 million compared with $298 million in 2002.
Total revenue increased $14 million. The increase in rev-
enue resulted from higher business volumes across the
Wealth Management businesses. Growth in revenue was
hampered by the impact of the higher Canadian dollar on
U.S. results and a $39 million write down related to the
TD Waterhouse International joint ventures.
Cash basis expenses increased $185 million from 2002.
Included in these expenses were $300 million of restructuring
and goodwill impairment charges for TD Waterhouse
International. The remaining expenses decreased due to the
focus on cost containment. The strong Canadian dollar also
contributed to the decline in U.S. expenses. The benefits of
the International restructuring were already evident as TD
Waterhouse International broke even in the fourth quarter.
Wealth Management
One of Canada’s largest asset managers,
advisors and distributors of investment
products. Through our Discount Brokerage
channels, we service customers in Canada,
the United States and the United Kingdom.