TD Bank 2005 Annual Report Download - page 34

TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis
30
•The key objectives for 2006 are to grow the credit card
and indirect lending businesses, improve profitability of the
unsecured line of credit product, increase the penetration of
overdraft protection and ensure the successful implementation
of the credit card product administration platform.
Small Business Banking and Merchant Services
•Offers quick and efficient delivery of deposit, lending, cash
management and investment services to Canada's small busi-
ness owners through the full retail branch network, as well as
the award winning EasyWeb and EasyLine banking services.
Additionally, 160 rural account managers serve the banking
needs of agri-businesses through the retail branch network in
rural communities.
•Merchant services offers point-of-sale settlement solutions for
debit and credit card transactions, supporting over 100,000
business locations across Canada.
•In 2005, 100 small business advisors were added to the retail
branch network; individuals specifically trained in understand-
ing and meeting the banking needs of small businesses and
their owners.
•Focus on meeting the needs of these customers has helped
achieve a 6% growth in net new deposit accounts and 9%
growth in new small business borrowers.
•Focus in 2006 will be to continue to make it simpler, faster
and easier for small business customers to do business and
on building the expertise in retail branches to help customers
meet their goals.
Commercial Banking
•Offers a full range of lending, deposit, investment and cash
management services to medium sized businesses in Canada.
•Improved credit markets and strengthened business develop-
ment efforts led to a 4% increase in commercial loan volumes
in 2005 compared to an overall decline in the prior year.
•Commercial deposit growth continued to be strong at 11%,
surpassing the rate of growth achieved in 2004. Margin
compression, although less significant than in the prior year,
continued primarily due to an ongoing customer preference
for lower margin term products.
•The overall risk profile of the credit portfolio has increased only
moderately and continues to remain well within acceptable risk
guidelines.
•Loan losses continued to be well below historic norms in 2005.
While provisions are likely to increase in 2006, they should
continue to be below cyclical averages.
•In 2006, continued investments in business processes and
relationship management capability will be made in order
to increase commercial banking relationships, volumes and
revenues in line with the overall strategy to grow at an above
average rate.
TDLife Group
•Provides life and health insurance protection to 1.8 million
retail customers, as well as life and health reinsurance in the
international market.
•Aleader in critical illness and direct life and health insurance
in Canada. The first full year of critical illness coverage on lines
of credit exceeded all expectations and contributed to the
overall success of this product category.
•Revenue grew by 16% over last year, continuing the trend of
strong growth.
•The focus for 2006 will be on continued growth in sales and
further investments in systems development that will position
us to enhance product offerings well into the future.
TDMeloche Monnex
•Aims to be the benchmark in the personal automobile and
home insurance industry in Canada by growing through a
unique direct marketing model.
•Services niche segments representing alumni, professionals, and
members of employer groups, and also to individuals who are
primarily customers of the Bank.
•#3 in personal lines market share and the #1 direct writer in
Canada.
•Premiums were $1.7 billion, and grew 13% over 2004.
•Through good underwriting practices and a reduction in claims
frequency, we improved the loss ratio from 72.7% in 2004 to
68.6% in 2005 despite a higher than usual level of weather-
related claims.
•Best in class expense ratio in the Canadian property and
casualty industry.
•The integration of operations acquired from Liberty Mutual was
substantially completed.
•To maintain better than industry average margins, key priorities
will be to maintain growth related to the group and non-group
businesses, further develop information technology tools and
operating systems, and improve business processes.
ECONOMIC OUTLOOK
The Canadian economy should be supportive to personal and
commercial banking activities in 2006. Tight labour markets
suggest stronger personal income growth in the coming year
although there will be a moderation in housing markets and
tempered consumer spending on big-ticket items thus dampen-
ing demand for mortgages and personal credit. A rise in rates
should not be sufficient to cause an outright pullback in con-
sumer spending. Businesses are adjusting to a stronger Canadian
dollar and high energy prices. Exporters will also face another
hurdle if the U.S. economy begins to slow. Demand for borrow-
ing should be supported by the need to invest in assets in order
to boost competitiveness and slower profit growth may dampen
the ability of firms to finance with internally generated funds.
BUSINESS OUTLOOK AND FOCUS FOR 2006
The outlook for revenue growth continues to be strong for
both personal and business banking products as new mar-
keting initiatives, branch openings, leadership in customer
satisfaction, as well as greater sales capacity are targeted
to attract both new customers and more business from
existing customers. Insurance volume is expected to
remain solid, however, revenue growth will be moderated
by premium rate reductions. The low PCL rates on personal
loans are expected to be sustainable, however business
banking loan losses are likely to increase moderately going
forward. Further investments in systems development and
infrastructure, as well as increased marketing efforts will
result in further expense growth. Canadian Personal and
Commercial Banking remains committed to deliver continu-
ing double-digit earnings growth over time. Key priorities
for 2006 are as follows:
•Make customers the number one priority for all
employees and go beyond expectations in resolving
customer complaints.
•Support employee development by improving training,
coaching and leadership,enhance recruitment and
orientation and better reflect the diverse communities
we serve.
•Develop relationships with moreCanadians and deepen
relationships with our existing customers.
•Continue to reduce business process complexity and
increase productivity levels.
•Maintain industry leadership in direct insurance through
TD Meloche Monnex and TD Insurance.
•Continue growing under-penetrated businesses.