TD Bank 2005 Annual Report Download - page 50

TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis
46
CONCENTRATION OF CREDIT RISK
Geographically, the credit portfolio remains highly concentrated
in Canada. In 2005, the percentage of loans held in Canada
was 80%, compared with 92% in 2004 and 91% in 2003.
The remaining balance is predominantly in the United States.
Exposure in the United Kingdom, Asia, Australia and New
Zealand is limited. The acquisition of TD Banknorth which
operates in the United States increased the overall lending
portfolio by $23 billion at year end and was responsible for
the increase in our U.S. geographic lending.
As indicated in Table 22, the largest Canadian exposure is
in Ontario, at 48% of total loans in 2005, down from 56% in
fiscal 2004. Internationally, the largest concentration is in the
United States, which comprises 18% of total loans, up from
5% in 2004.
(millions of Canadian dollars, Percentage of total
except percentage amounts) 2005 2004 2003 2002 2005 2004 2003 2002
Canada
Atlantic $ 3,637 $ 3,463 $ 3,445 $ 3,342 2.3% 2.7% 2.8% 2.6%
Québec 8,312 7,570 6,822 6,663 5.3 5.9 5.5 5.1
Ontario 75,673 72,334 71,914 70,219 47.8 55.9 57.6 53.9
Prairies 19,150 18,424 16,667 16,286 12.1 14.2 13.4 12.5
British Columbia 19,074 17,780 15,054 15,310 12.1 13.7 12.1 11.7
Total Canada 125,846 119,571 113,902 111,820 79.5 92.4 91.4 85.8
United States 28,609 6,131 7,731 11,714 18.1 4.7 6.2 9.0
Other International
United Kingdom 1,039 904 434 1,118 .7 .7 .3 .8
Europe – other 1,095 962 854 1,838 .7 .8 .7 1.4
Australia and New Zealand 638 665 746 1,328 .4 .5 .6 1.0
Japan –– 42 138 –––.1
Asia – other 573 894 488 1,254 .4 .7 .4 1.0
Latin America and Caribbean 431 303 503 1,123 .3 .2 .4 .9
Middle East and Africa 11 3 13 –– – –
Total Other International 3,777 3,729 3,070 6,812 2.4 2.9 2.4 5.2
Total $158,232 $129,431 $124,703 $130,346 100.0% 100.0% 100.0% 100.0%
Percentage change over previous year
Canada 5.2% 5.0% 1.9% 5.4%
United States 366.6 (20.7) (34.0) (25.7)
Other International 1.3 21.5 (54.9) (2.4)
Total 22.3% 3.8% (4.3)% 1.2%
LOANS AND ACCEPTANCES, NET OF ALLOWANCE FOR CREDIT LOSSES BY LOCATION OF ULTIMATE RISK
TABLE 22
As shown in Table 21 on page 45, the largest business and
government sector concentrations in Canada are real estate
development, financial and agriculture at 2%, 2% and 1%
respectively. Real estate development was also the leading
sector of concentration in the United States at 5%.
IMPAIRED LOANS
Aloan is considered impaired when, in management’s opinion,
it can no longer be reasonably assured that we will be able to
collect the full amount of principal and interest when due. Note
3on page 79 provides an enhanced explanation of impaired
loans. Table 23 shows the decreasing impact on net interest
income due to impaired loans.
(millions of Canadian dollars) 2005 2004 2003
Reduction in net interest income
due to impaired loans $35 $49 $111
Recoveries (26) (8) (11)
Net reduction $ 9 $41 $100
IMPACT ON NET INTEREST INCOME
DUE TO IMPAIRED LOANS
TABLE 23
As indicated in Table 24 and Table 25 on page 47 and 48,
net impaired loans before general allowances were $196 million
for the year ended October 31, 2005, compared with a total
of $271 million a year earlier and $884 million for 2003. The
decline from 2004 was due to a $90 million decrease in corpo-
rate net impaired loans. Successful collection activities and fewer
new problem loans contributed to this result. The decline in
corporate net impaired loans was entirely in the non-core
lending portfolio that is being wound down. Therewere no
net impaired non-core loans at October 31, 2005 compared to
$133 million in 2004 and $640 million in 2003. The acquisition
of TD Banknorth added $49 million of new additions to net
impaired loans.