TD Bank 2005 Annual Report Download - page 60

TD BANK FINANCIAL GROUP ANNUAL REPORT 2005 Management’s Discussion and Analysis
56
All forward-looking statements, by their very nature, including those
in this Annual Report, are subject to inherent risks and uncertainties,
general and specific, which may cause the Bank’s actual results to dif-
fer materially from the expectations expressed in the forward-looking
statements. Some of these factors are discussed below.
INDUSTRY FACTORS
General Business and Economic Conditions in the
Regions in Which We Conduct Business
The Bank operates in Canada, the United States, and other countries.
As a result, the Bank’s earnings are significantly affected by the general
business and economic conditions in the geographic regions in which it
operates. These conditions include short-term and long-term interest
rates, inflation, fluctuations in the debt and capital markets, exchange
rates, the strength of the economy, threats of terrorism and the level of
business conducted in a specific region.
Currency Rates
Currency rate movements in Canada, the United States and other
jurisdictions in which the Bank does business may have an adverse
impact on the Bank’s financial position as a result of foreign currency
translation adjustments and on the Bank’s future earnings. For example,
the rising value of the Canadian dollar may negatively affect our
investments in the United States, including the Bank’s investment in
TD Banknorth Inc. The rising Canadian dollar may also adversely affect
the earnings of the Bank’s small business, commercial and corporate
clients in Canada.
Monetary Policy
The Bank’s earnings are affected by the monetary policies of the Bank of
Canada and the Federal Reserve System in the United States and other
financial market developments. Changes in the supply of money and
the general level of interest rates can impact the Bank’s profitability. A
change in the level of interest rates affects the interest spread between
the Bank’s deposits and loans and as a result impacts the Bank’s net
interest income. Changes in monetary policy and in the financial mar-
kets are beyond the Bank’s control and difficult to predict or anticipate.
Level of Competition
The Bank’s performance is impacted by the level of competition in the
markets in which it operates. The Bank currently operates in a highly com-
petitive industry. Customer retention can be influenced by many factors
such as the pricing of products or services, changes in customer service
levels and changes in products or services offered.
Changes in Laws and Regulations; Legal Proceedings
Changes to laws and regulations, including changes in their interpreta-
tion or implementation, could affect the Bank by limiting the products
or services it can provide and increasing the ability of competitors to
compete with its products and services. Also, the Bank’s failure to com-
ply with applicable laws and regulations could result in sanctions and
financial penalties that could adversely impact its earnings and damage
the Bank’s reputation. Judicial or regulatory judgments and legal
proceedings against the Bank may also adversely affect its results.
Accuracy and Completeness of Information on
Customers and Counterparties
The Bank depends on the accuracy and completeness of information
about customers and counterparties. In deciding whether to extend
credit or enter into other transactions with customers and counterpar-
ties, the Bank may rely on information furnished by them, including
financial statements and other financial information. The Bank may also
rely on the representations of customers and counterparties as to the
accuracy and completeness of that information and with respect to
financial statements, on the reports of auditors. The Bank’s financial
condition and earnings could be negatively impacted to the extent it
relies on financial statements that do not comply with Generally
Accepted Accounting Principles, that arematerially misleading, or that
do not fairly present, in all material respects, the financial condition
and results of operations of the customers and counterparties.
Accounting Policies and Methods Used by the Bank
The accounting policies and methods the Bank utilizes determine
how the Bank reports its financial condition and results of operations,
and they may require management to make estimates or rely on
assumptions about matters that are inherently uncertain. Such
estimates and assumptions may require revisions, and changes to
them may materially adversely affect the Bank’s results of operations
and financial condition.
BANK SPECIFIC FACTORS
New Products and Services to Maintain or
Increase Market Share
The Bank’s ability to maintain or increase its market share depends, in
part, on its ability to adapt products and services to evolving industry
standards. There is increasing pressure on financial services companies
to provide products and services at lower prices. This can reduce the
Bank’s net interest income and revenues from fee-based products and
services. In addition, the widespread adoption of new technologies,
including Internet-based services, could require the Bank to make sub-
stantial expenditures to modify or adapt existing products and services.
The Bank might not be successful in introducing new products and
services, achieving market acceptance of its products and services,
and/or developing and maintaining loyal customers.
Acquisitions
The Bank regularly explores opportunities to acquire other financial
services companies or parts of their businesses directly or indirectly via
the acquisition strategies of its subsidiaries. The Bank’sor a subsidiary’s
ability to successfully complete an acquisition is often subject to regula-
tory and shareholder approvals, as is the case in the pending TD
Ameritrade merger and Hudson United Bancorp acquisition, and the
Bank cannot be certain when or if, or on what terms and conditions,
any required approvals will be granted. Acquisitions can affect future
results depending on management’s success in integrating the acquired
business. If the Bank encounters difficulty in integrating the acquired
business, this can prevent the Bank from realizing expected revenue
increases, cost savings, increases in market share and other projected
benefits from the acquisition.
Ability to Attract and Retain Key Executives
The Bank’s future performance depends to a large extent on its ability to
attract and retain key executives. There is intense competition for the
best people in the financial services sector and executives employed by
acompany the Bank acquires may choose not to remain following the
acquisition. There is no assurance that the Bank will be able to continue
to attract and retain key executives, although this is the goal of the
Bank’s management resources policies and practices.
Business Infrastructure
Third parties provide key components of the Bank’s business infrastruc-
turesuch as Internet connections and network access. Disruptions
in Internet, network access or other voice or data communication
services provided by these third parties could adversely affect the Bank’s
ability to deliver products and services to customers and otherwise
conduct business.
OTHER FACTORS
Other factors beyond the Bank’s control that may affect the Bank’s
futureresults are noted in the Caution regarding forward-looking
statements on page 13 of this Annual Report.
The Bank cautions that the preceding discussion of factors that may
affect future results is not exhaustive. When relying on forward-looking
statements to make decisions with respect to the Bank, investors and
others should carefully consider these factors as well as other uncertain-
ties, potential events and industry and Bank specific factors that may
adversely impact the Bank’s future results. The Bank does not undertake
to update any forward-looking statements, written or oral, that may be
made from time to time by or on its behalf.
RISK FACTORS AND MANAGEMENT
Risk Factors That May Affect Future Results