TD Bank 2006 Annual Report Download - page 42

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis
38
(millions of Canadian dollars) 2006 2005 2004
Net interest income $377 $643 $ 492
Other income 1,883 2,103 2,098
Non-interest expenses 1,575 2,083 2,047
Income before provision for income taxes 685 663 543
Provision for income taxes 242 231 191
Equity in net income of associated company, net of income taxes 147 – –
Net income – reported 590 432 352
Items of note, net of income taxes –– –
Net income (loss) – adjusted $590 $432 $ 352
Selected volumes and ratios
Assets under administration (billions of Canadian dollars) $ 160 $ 315 $ 279
Assets under management (billions of Canadian dollars) $ 151 $ 130 $ 117
Economic profit (loss) (millions of Canadian dollars) $ 257 $ 116 $ 25
Return on invested capital 19.5% 16.4% 13.0%
Efficiency ratio 69.7% 75.9% 79.0%
WEALTH MANAGEMENT
TABLE 17
(millions of Canadian dollars) 2006 2005 2004
Canadian Wealth $410 $ 324 $252
TD Ameritrade / TD Waterhouse U.S.A. 180 108 100
Net income $590 $432 $352
WEALTH MANAGEMENT CANADA AND THE U.S.
TABLE 18
KEY PRODUCT GROUPS
TD Waterhouse Discount Brokerage
•A leader in self-directed investing, serving customers in
Canada, and the United Kingdom.
•Canadian revenue increased by $88 million, compared with
2005, as higher commission and fee revenue from a 36%
increase in trading volumes, combined with higher net interest
income from higher margin and client deposit balances, more
than offset the impact of lower commissions per trade. The
decline in commissions per trade resulted from lower pricing
strategies for the active trader segment.
•Canadian expenses increased by $20 million, primarily due to
higher clearing and compensation costs as a result of increased
trading activity and continued investment in technology to
support the active trader strategy.
TD Asset Management
•TD Mutual Funds is the second largest bank-owned mutual
fund family in Canada, based on market share of assets, with
$49 billion in assets under management at October 31, 2006,
an increase of 17% over 2005. TD Mutual Funds jumped to
fourth from the number six position in industry ranking.
Revenue growth of 20% resulted from this growth in assets.
Expenses increased by $50 million, primarily due to the increase
in trailer payments to sellers of the Bank’s funds. For the fourth
year in a row, TD Mutual Funds was second in net sales in
long-term mutual funds.
•TD Investment Management is recognized as one of the largest
money managers in the country. Services provided include
investment management to pension funds, corporations,
institutions, endowments and foundations, high net worth
individuals and third-party distributors. Assets under manage-
ment increased by 16% over 2005. Revenue increased by
22%, primarily due to the growth in assets.
Advice-based Businesses
•TD Waterhouse Private Client Group includes trust services,
private banking and private investment counsel. Increases in
customer assets were responsible for a $20 million, or 11%,
increase in revenue year over year. Expenses increased $12 mil-
lion, or 9%, primarily due to growth in compensation levels for
client-facing advisors due to higher revenues, and investment
in technology to upgrade client-facing systems.
•TD Waterhouse private investment advice provides full-service
brokerage services to its retail customers throughout Canada.
In 2006, growth in assets under administration resulted in a
$15 million, or 5%, increase in revenues compared with 2005.
Expenses grew 4%, over the prior year, reflecting increases in
sales force compensation as a result of increases in commission-
able revenues. Continued hiring of new and experienced
investment advisors also contributed to the expense growth.
•TD Waterhouse financial planning continues to grow its client-
facing advisors with a17% increase in the number of planners
and a 42% increase in assets under administration in 2006. As
a result, revenues increased $34 million, or 56%, in 2006 while
expenses grew $20 million as the investment in growing the
number of financial planners continues.
TD Ameritrade
•Wealth Management includes the results of TD Ameritrade
for approximately eight months of 2006. TD Ameritrade
generated record net income, excluding investment gains,
for its fiscal period ended September 30, 2006, driven by
strong equity markets and higher margins.
•Information on TD Ameritrade’s products and services is
available in TD Ameritrade’s SEC filings on EDGAR at
www.sec.gov/edgar.