TD Bank 2006 Annual Report Download - page 28

TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis
24
BUSINESS SEGMENT ANALYSIS
Business Focus
For management reporting purposes, the Bank’s
operations and activities are organized around the
following operating business segments: Canadian
Personal and Commercial Banking, U.S. Personal
and Commercial Banking, Wholesale Banking and
Wealth Management.
Canadian Personal and Commercial Banking comprises the
Bank’s personal and business banking business in Canada as well
as the Bank’s global insurance operations (excluding the U.S.).
Operating in Canada under the TD Canada Trust brand, the
retail operations provide a full range of financial products and
services to approximately 11 million personal and small business
customers. Products and services are provided - anywhere,
anytime - through telephone and internet banking, more than
2,400 automated banking machines and a network of 1,017
branches located across Canada. TD Commercial Banking serves
the needs of medium-sized Canadian businesses, customizing a
broad range of products and services to meet their financing,
investment, cash management, international trade and day-to-
day banking needs. Under the TD Insurance and TD Meloche
Monnex brands, the Bank offers in Canada a broad range of
insurance products, including home and automobile coverage,
life and health insurance, as well as credit protection coverage
on TD Canada Trust lending products.
U.S. Personal and Commercial Banking. The Bank’s approxi-
mate 57% ownership of TD Banknorth serves as the focal point
of our personal and commercial banking operations in the U.S.
TD Banknorth provides financial services to more than 1.5 million
households in the Northeastern and mid-Atlantic regions of the
U.S. Headquartered in Portland, Maine, the business comprises
commercial banking, insurance agency,wealth management,
mortgage banking and other financial services. TD Banknorth
distributes products and services through a network of 584
branches and 754 automated banking machines. The Bank’s U.S.
Personal and Commercial banking operations will expand with
the proposed acquisition of Interchange Financial Services
Corporation in 2007. This acquisition will add approximately
US $1.3 billion of tangible assets and US $1.2 billion of deposits
in the New Jersey area.
Wholesale Banking serves a diverse base of corporate, govern-
ment and institutional clients in key financial markets around
the world. Under the TD Securities brand, Wholesale Banking
provides a wide range of capital markets and investment banking
products and services that include: underwriting and distribution
of new debt and equity issues, providing advice on strategic
acquisitions and divestitures, and executing daily trading and
investment needs.
Wealth Management provides a wide array of investment
products and services through different brands to a large and
diverse retail and institutional global client base. Wealth
Management is one of the largest in Canada, based on market
share of assets, and comprises a number of advisory, distribution
and asset management businesses, including TD Waterhouse
and TD Mutual Funds. Through Wealth Management’s discount
brokerage channels, it serves customers in Canada, the U.S. and
the United Kingdom. In Canada, discount brokerage, financial
planning and private client services cater to the needs of differ-
ent retail customer segments through all stages of their investing
life cycle. TD Mutual Funds jumped to fourth from the number
six position in industry ranking and has been number two in
net sales in long-term mutual funds for four years in a row.
At the end of the year, Wealth Management had assets under
administration of $160 billion and assets under management
of $151 billion.
On January 24, 2006, the Bank closed the transaction
involving the sale of its U.S. brokerage business, TD Waterhouse
U.S.A. to Ameritrade. In connection with the transaction,
TD Waterhouse Canada acquired 100% of Ameritrade’s
Canadian brokerage operations.
The Bank’s other business activities are not considered reportable
segments and are, therefore, grouped in the Corporate segment.
The Corporate segment includes activities from the non-core
lending portfolio, effects of asset securitization programs, treasury
management, general provisions for credit losses, elimination of
taxable equivalent adjustments, corporate level tax benefits, and
residual unallocated revenues, expenses and taxes. The non-core
portfolio represents lending accounts where the Bank determined
the risk-return relationship was unsatisfactory. As a result, the Bank
has substantially wound down this portfolio.
Results of each business segment reflect revenues, expenses,
assets and liabilities generated by the businesses in that
segment. The Bank measures and evaluates the performance
of each segment based on adjusted earnings where applicable,
and for those segments, the Bank notes that the measure is
adjusted. For further details see the “How the Bank Reports”
section. For information concerning the Bank’s measures of
economic profit and return on invested capital, see page 14.
Segmented information also appears in Note 24 to the Bank’s
Consolidated Financial Statements.
Net interest income, primarily within Wholesale Banking, is
disclosed on a taxable equivalent basis (TEB), which means the
value of non-taxable or tax-exempt income, such as dividends, is
adjusted to its equivalent before-tax value. Using TEB allows the
Bank to measureincome from all securities and loans consistent-
ly and makes for a more meaningful comparison of net interest
income with similar institutions. The TEB adjustment reflected
primarily in the Wholesale Banking segment’s results is eliminat-
ed in the Corporate segment.
The “Economic Outlook” and “Business Outlook and Focus
for 2007” sections provided on the following pages are based
on the Bank’s views and the actual outcome is uncertain. For
more information, see the “Caution regarding forward-looking
statements” on page 11 and the ”Risk Factors That May Affect
Future Results” section.
80%
60
70
40
50
20
-20
10
-10
30
-30
0
Net income by business segment
(percent)
Canadian Personal
and Commercial
Banking
U.S. Personal
and Commercial
Banking
Wholesale
Banking
Wealth
Management
Corporate
04 05 0604 05 06 04 05 0604 05 0604 05 06