TD Bank 2005 Annual Report Download - page 33

(millions of Canadian dollars) 2005 2004 2003
Net interest income $4,342 $4,154 $4,051
Provision for credit losses 373 373 460
Other income 2,361 2,066 1,803
Non-interest expenses before amortization of intangibles 3,773 3,650 3,463
Income before provision for income taxes 2,557 2,197 1931
Provision for income taxes 855 747 689
Net income – before amortization of intangibles $1,702 $1,450 $1,242
Selected volumes and ratios
Average loans and acceptances (billions of Canadian dollars) $117 $110 $ 104
Average deposits (billions of Canadian dollars) 124 116 110
Economic profit (millions of Canadian dollars) $1,038 $ 810 $ 639
Return on invested capital – before amortization of intangibles 23.1% 20.4% 18.5%
Efficiency ratio – beforeamortization of intangibles 56.3% 58.7%59.2%
Margin on average earning assets12.96% 3.05%3.25%
1Including securitized assets.
CANADIAN PERSONAL AND COMMERCIAL BANKING
TABLE 13
TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis 29
As compared with the prior year, real estate secured lending
average volume (including securitizations) grew by $10 billion or
10% and personal deposit volume grew $4 billion or 4%, while
other personal loans were relatively flat. Business deposits grew
by $3 billion or 12%, while business loans and acceptances grew
by $725 million or 4%. Originated gross insurance premiums
grew by $242 million or 13%.
Margin on average earning assets decreased from 3.05% in
2004 to 2.96% in 2005 primarily due to a change in product mix
as volume growth was weighted towards lower margin products
such as real estate secured lending and guaranteed investment
savings accounts.
Provision for credit losses (PCL) of $373 million comprised
$354 million from personal loans and $19 million from business
loans. PCL was unchanged compared with the prior year in total,
and for each of personal and business loans. PCL as a percent of
credit volume improved to .25% from .27% in the prior year.
Expenses before amortization of intangibles increased by
$123 million or 3% compared with last year. The Liberty insur-
ance acquisition accounted for $37 million of expense growth.
Employee compensation, marketing, systems projects and
organic insurance business volume growth were the main factors
contributing to the remaining expense increase, partly offset by
synergies and lower integration expenses related to the branches
acquired from Laurentian Bank the prior year. Average full-time
equivalent staffing levels increased by 704 or 2% compared to
the prior year due to growth in insurance business (including the
acquisition) and the addition of sales and service personnel in
branches and call centres. The efficiency ratio, beforeamortiza-
tion of intangibles, for the year was 56.3%, an improvement of
2.4 percentage points over the prior year.
KEY PRODUCT GROUPS
Real Estate Secured Lending
•Offers mortgages and home equity lines of credit through
branches, direct sales force, multi unit residential, and broker
channels.
•During 2005, the industry continued to experience above nor-
mal growth driven by continued increases in home prices,
strong unit sales and refinance activity.
•The strong housing market drove growth in new business while
customer retention improved to its highest level since the inte-
gration with Canada Trust branches in 2001. Volume growth
was below estimated industry growth in a highly competitive
environment.
•Margins were relatively stable throughout the year.
•Improvements to customer payment options and renewal
processes were launched during the year.
•Business objectives in 2006 are to increase new originations
while also improving customer cross sell and maintaining
margins.
Personal Deposits
•Offers a complete range of Canadian and U.S. dollar chequing,
savings and term investment vehicles designed to promote pri-
mary banking relationships, retirement savings and retirement
income options.
•Personal Deposits experienced growth in all key areas during
2005. Net growth in active chequing accounts of 5% was
fueled by an increase in openings, fewer closures and the
“EasySwitch” account transfer process. Despite a highly com-
petitive market, volume growth outpaced the industry allowing
the Bank to increase market share, and maintain its number
one share ranking.
•Margin compression continued during the year due to the
impact of low interest rates, rate competition and growth
being weighted toward the lower margin guaranteed
investment account.
•For 2006, the continued focus is on growing the number of
chequing accounts and core banking relationships. Margin
is expected to improve with the anticipated rising interest
rate environment, moderated by continued growth in the
guaranteed investment account.
Consumer Lending
•Offers lines of credit, loans, overdraft protection products and
awide selection of Visa credit cards including classic, premium,
and commercial cards as well as compelling reward programs
such as the TD Gold Travel Visa cardand the GM Card.
•Revenue growth was driven by improved margins and growth
in cardand other fee income.
•Lending volumes, excluding credit cards, were relatively flat
reflecting growth in our line of credit and loan portfolios, offset
by the wind-down of a financing program for customers of the
Insurance Company of British Columbia.
•Credit losses continued to be maintained at low rates reflecting
the benefits of new credit management systems.
•Credit card purchase volume and outstanding balances
increased 13% and 7%, respectively. The Bank signed a
definitive agreement to outsource product administration
to an industry leader in credit card technology solutions.