TD Bank 2005 Annual Report Download - page 28

TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis
24
(millions of Canadian dollars) 2005 2004
Quarter ended Quarter ended
October 31 July 31 April 30 January 31 October 31 July 31 April 30 January 31
Net interest income $1,641 $1,563 $1,393 $1,411 $1,435 $1,452 $1,441 $1,445
Other income 1,442 1,535 1,517 1,395 1,118 1,181 1,284 1,300
Total revenues 3,083 3,098 2,910 2,806 2,553 2,633 2,725 2,745
Provision for (reversal of) credit losses (15) 40 20 10 (73) (17) (192) (104)
Non-interest expenses 2,068 2,434 1,923 1,811 1,762 1,755 2,109 1,755
Provision for income taxes 302 64 257 268 177 231 211 333
Non-controlling interest in net income
of subsidiaries 53 58 21 – –– – –
Net income before amortization
of intangibles 675 502 689 717 687 664 597 761
Amortization of intangibles, net of
income taxes 86 91 90 87 92 99 107 179
Net income available to common
shareholders – reported basis $ 589 $ 411 $ 599 $ 630 $ 595 $ 565 $ 490 $ 582
(Canadian dollars)
Basic earnings per share
–reported basis $ .83 $ .58 $ .87 $ .96 $ .91 $ .87 $ .75 $ .89
–before amortization
of intangibles .95 .71 1.00 1.09 1.05 1.02 .91 1.16
Diluted earnings per share
–reported basis .82 .58 .86 .95 .90 .86 .74 .88
–before amortization
of intangibles .94 .70 .99 1.08 1.04 1.01 .90 1.15
Return on common shareholders’ equity
–reported basis 14.8% 10.4% 17.2% 19.5% 19.1% 18.4% 16.5% 19.8%
–before amortization
of intangibles 17.0 12.7 19.8 22.1 22.1 21.7 20.1 26.0
(billions of Canadian dollars)
Average earning assets $304 $302 $279 $ 267 $257 $258 $258 $ 248
Net interest margin as a percentage
of average earning assets 2.14% 2.05% 2.05% 2.10% 2.22% 2.23% 2.27% 2.32%
PROVISION FOR (REVERSAL OF) CREDIT LOSSES
In the fourth quarter, the Bank recorded a reversal of credit
losses of $15 million, compared with a reversal of $73 million
in the same quarter last year. The reversal was a result of a
$109 million recovery in the non-core lending portfolio for
amounts previously provided for under sectoral provisions.
This recovery was largely offset by provisions for credit losses
in the normal course of business, mainly attributable to
Canadian Personal and Commercial Banking which reported
a$97 million provision (before the effect of securitizations).
U.S. Personal and Commercial Banking reported a provision
of $7 million during the quarter. No credit losses were
experienced in the Wholesale Banking credit portfolio during
the quarter.
NON-INTEREST EXPENSES
On a reported basis, expenses for the fourth quarter were
$2,203 million, an increase of $299 million from $1,904 million
in the same quarter last year.
The increase in expenses was largely due to the inclusion of
results from the TD Banknorth acquisition, which contributed
$216 million. Expenses also increased in Wholesale Banking, par-
tially as a result of higher variable compensation costs and higher
payroll taxes. Canadian Personal and Commercial Banking also
contributed to the expense increase, mainly due to increased
employee compensation, marketing, and investments in systems
development and infrastructure. Expenses increased in Wealth
Management due to an increase in compensation costs in the
advisory businesses, higher mutual fund sales commissions,
driven by higher assets under management and higher mutual
funds marketing costs, partially offset by the impact of foreign
exchange in TD Waterhouse U.S.A. These increases were partially
offset by a $54 million litigation accrual last year that did not
recur this quarter in Corporate. The impact of amortization of
other intangibles on the Bank’s reported total expenses before
amortization of intangibles was $135 million for the fourth quar-
ter, compared with $142 million in the same quarter last year.
Total expenses before the amortization of intangibles in the
fourth quarter were $2,068 million compared to $1,762 million
in the same quarter last year.
TAXES
The Bank’s effective tax rate, on a reported basis, was 28.3% for
the fourth quarter, compared with 17.6% in the same quarter
last year.
The provision for income taxes for the fourth quarter includes
a$138 million tax expense relating to TD Waterhouse. Certain
steps have been taken to reorganize the TD Waterhouse group
of companies which precedes the transaction with Ameritrade.
These steps have been essentially completed in fiscal 2005. The
provision for income taxes also includes favourable tax items of
$68 million, which include the impact of a recent court decision.
Table 11 provides the summary information related to the Bank’s
eight most recently completed quarters.
QUARTERLY RESULTS
TABLE 11