TD Bank 2003 Annual Report Download - page 30

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Management’s Discussion and Analysis28
Total assets under management (AUM) of $113 billion,
increased $1 billion from October 31, 2002. Assets under
administration (AUA) of $267 billion increased $33 billion from
October 31, 2002 due to higher market levels, the growth in
the Investment Advice and Financial Planning channels and
significant referrals from the retail bank.
Review of financial performance 2002
Wealth Management reported moderately lower earnings
in 2002 compared with 2001. Cash basis net income of
$125 million was $11 million or 8% lower than the prior
year. Fee-based revenue declined $83 million or 5%, primarily
due to the significant market declines, which reduced trading
volumes in our discount brokerage business and impacted
asset-based fees. In addition, narrower spreads and lower
margin loan balances reduced net interest income by 9% to
$426 million. Cash basis expenses decreased $104 million
or 5% in 2002 compared with 2001 in spite of continued
investment in our Financial Planning business, rebranding
TD Waterhouse Canada to include Investment Advice and
Financial Planning and continued growth internationally of
the discount brokerage business. Total AUM decreased by
6%, as negative markets and reduced institutional mandates
resulted in ending AUM of $112 billion. Additionally, AUA
ended 2002 at $234 billion down by 2% from the prior year.
Financial results of key product segments within
Wealth Management
TD Waterhouse discount brokerage is a leader in self-direct-
ed investing, serving customers in Canada, the United States
and the United Kingdom. Significant events during the year
included:
•The restructuring of the International operations, including
the sale of TD Waterhouse Australia and write downs and
restructuring provisions totaling $339 million, have posi-
tioned TD Waterhouse International to achieve at least
breakeven results for 2004.
•Fluctuating trade volumes due to world events and investor
uncertainty resulted in continued revenue challenges into
the middle of 2003. Increased market activity and investor
confidence in the second half of the year generated
improved results.
•A significant reduction in the cost basis of operations
allowed us to lower the breakeven point and position our-
selves to quickly realize the benefits of market improvements.
Revenue decreased by $13 million or 1%, including $39 million
related to the joint venture write downs. While global trading
volumes decreased from the prior year, an increase in trading
activity in North America and higher fee based revenue in all
markets contributed to offset the decline in revenue due to
foreign exchange and the reduction in revenue from the sale
of TD Waterhouse Australia. Expenses increased $149 million
or 11%, including the $300 million of restructuring expenses
and goodwill impairment charges. The remaining expenses
declined due to cost cutting initiatives, the impact of the sale
of TD Waterhouse Australia, and the foreign exchange effect
on U.S. dollar results.
TD Mutual Funds is the seventh largest mutual fund family
in Canada with $31 billion in AUM at October 31, 2003.
Although difficult markets in the first part of the year ham-
pered sales activity and AUM growth, the improvement in the
capital markets in the second half of the year contributed to
the 7% or $13 million increase in year-over-year revenue.
Expenses decreased $9 million due to a focus on cost control.
TD Private Client Group includes trust services, private
banking and Private Investment Counsel. Despite increases in
customer assets, revenues decreased by 3% or $4 million, to
$152 million in 2003 primarily due to declines in Estate and
Trusts and Private Investment Counsel. Cost control resulted
in an $11 million reduction in expenses in Private Client
Group businesses.
Assets under management
(billions of dollars)
$113 billion
01 02 03
$150
100
50
0
Assets under administration
(billions of dollars)
$267 billion
01 02 03
$300
200
100
Cash basis net income (loss)
(millions of dollars)
($75) million
01 02 03
$150
50
100
-100
-50
0
0