TD Bank 2006 Annual Report Download - page 33

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis 29
ECONOMIC OUTLOOK
•Economic conditions should remain favourable to personal and
commercial banking, but loan and deposit growth is likely to be
softer than in recent years.
•Personal deposits are expected to be supported by healthy
growth in personal disposable income. Term deposits are likely
to outperform core deposits, reflecting the impact of the past
rate hikes by the Bank of Canada.
•A cooling in Canadian housing markets will likely temper mort-
gage growth. Nevertheless, the pace of increase should remain
solid and home equity loans (HELOCs) will likely outperform
traditional mortgages.
•Consumer spending is expected to slow, particularly on big
ticket items. This is expected to slow growth in personal loans,
but credit card loans should continue to rise at a brisk pace.
•Commercial deposits will likely be affected by slower profit
growth, but they should still rise. Term deposits are expected
to rise faster than core deposits.
•Business investment is expected to remain strong, maintaining
demand for commercial loans but at a slower pace than in
2006. Higher business inventories and more moderate profit
growth may also prove supportive to commercial borrowing,
while lower business confidence will likely result in a partial
offset.
•Personal and commercial banking conditions are likely to prove
strongest in Western Canada.
BUSINESS OUTLOOK AND FOCUS FOR 2007
The outlook for revenue growth continues to be strong
although it will moderate slightly from last year’s growth
on a more stable interest rate outlook. Volume growth is
expected to be comparable to last year although it is sus-
ceptible to a U.S.-led economic downturn. Revenue growth
will benefit from continued investments in marketing, sim-
plified front-line processes, employee expertise to continue
to build upon sales capacity, productivity improvements
and new branch investments made in the last few years.
PCL rates are expected to remain stable as actual credit
provisions increase as a result of last year’s robust credit
card growth, the full year impact of VFC, a moderation in
business loan recoveries and overall volume growth.
Expense growth will be lower relative to last year with
continued investments in new branches, people, systems
and infrastructure to maintain momentum in revenue
growth. Canadian Personal and Commercial Banking
remains committed to sustaining a healthy gap between
revenue and expense growth. Key priorities for 2007 are
as follows:
•Expand on our industry-leading customer service levels
through continued investments in employee training and
development programs.
•Leverage our strong employee base through a caring
performance-based culture.
•Drive business solutions faster through simplified
business processes and technology.
•Focus and entrench community spirit and involvement
at all levels within the organization.
•Continue to develop relationships with moreCanadians
and deepen relationships with our existing customers
and grow under-penetrated businesses.