TD Bank 2005 Annual Report Download - page 45

TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis 41
2004 FINANCIAL RESULTS OVERVIEW
Summary of 2004 Performance
EVENTS IN 2004
The Bank expanded insurance operations though the acquisition
of the Canadian personal property and casualty operations of
Boston-based Liberty Mutual Group, in April 2004. The prior
year’s results also incorporate the 57 Laurentian Bank branches,
which were acquired on October 31, 2003.
Canadian Personal and Wholesale Wealth Total
(millions of Canadian dollars) Commercial Banking Banking Management Corporate Consolidated
Net interest income (loss) $4,154 $1,581 $ 492 $(454) $ 5,773
Other income 2,066 615 2,098 104 4,883
Total revenue 6,220 2,196 2,590 (350) 10,656
Provision for (reversal of) credit losses 373 41 – (800) (386)
Non-interest expenses before amortization of intangibles 3,650 1,289 2,047 395 7,381
Income beforeprovision for income taxes 2,197 866 543 55 3,661
Provision for (benefit of) income taxes 747 278 191 (264) 952
Net income – before amortization of intangibles $1,450 $ 588 $ 352 $ 319 $ 2,709
Amortization of intangibles, net of income taxes 477
Net income – reported basis $2,232
REVIEW OF 2004 FINANCIAL PERFORMANCE
TABLE 18
Net interest income on a reported basis was $5,773 million
in 2004, a year-over-year increase of $336 million or 6%.
Numerous factors contributed to the increase, including the mix
of interest earning securities and derivatives within the trading
businesses of Wholesale Banking, continued growth in lending
volumes in Canadian Personal and Commercial Banking, and
higher margin lending and higher spreads on loans and deposits
in Wealth Management’s discount brokerage business. At 2.3%,
the Bank achieved the largest interest rate spread among the
big six banks in 2004.
Other income on a reported basis was $4,883 million in 2004,
an increase of $459 million or 10% from 2003. The improve-
ment was primarily due to higher insurance revenues, income
from loan securitizations, and investment and securities services.
The increase was partially offset by a decrease in credit fees due
to a reduction in assets as well as outstanding commitments in
the coreand non-core lending portfolios, and trading-related
income due to weaker results in the equity trading businesses.
The improvement in the investment securities portfolio was
largely a result of stronger market conditions resulting in oppor-
tunities in the Bank’sprivate and public equity portfolios.
Non-interest expenses on a reported basis were $8,007 million
compared with $8,364 million in 2003. Expenses before amorti-
zation of intangibles were$7,381 million, a year-over-year
decrease of $211 million or 3%. The Bank posted a marked
improvement in its productivity ratio to 74% in 2004. The
decline in expenses is primarily a result of $624 million in good-
will write downs and $92 million of restructuring costs included
in prior period figures that related to the international unit of the
Bank’swealth management business and its U.S. equity options
business in Wholesale Banking. This decrease was partially offset
by litigation loss accruals of $300 million recorded in fiscal 2004.
The impact of the amortization of intangibles on the Bank’s
reported before tax expenses was $626 million, compared with
$772 million in fiscal 2003.
Income tax expense on a reported basis was $803 million in
fiscal 2004, up $481 million from 2003. The Bank’s effective
income tax rate was 26.4% for fiscal 2004, compared with
24.6% in 2003.
BALANCE SHEET
The Bank, with 92% of its assets in Canada, increased assets by
$37 billion or 13.7% to $311 billion at the end of fiscal 2004.
It was significantly higher than assets growth of 4.5% in the six
largest banks in Canada, and total assets growth of 5.6% in the
Canadian banking industry.