TD Bank 2006 Annual Report Download - page 45

TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis 41
2005 FINANCIAL RESULTS OVERVIEW
Summary of
2005 Performance
Canadian U.S.
Personal and Personal and Wholesale Wealth Total
(millions of Canadian dollars) Commercial Banking Commercial Banking Banking Management Corporate consolidated
Net interest income (loss) $4,342 $ 705 $ 977 $ 643 $ (659) $ 6,008
Other income 2,361 299 1,011 2,103 115 5,889
Total revenue 6,703 1,004 1,988 2,746 (544) 11,897
Provision for (reversal of)
credit losses 373 4 52 – (374) 55
Non-interest expenses 3,773 549 1,325 2,083 1,052 8,782
Income before provision for
income taxes 2,557 451 611 663 (1,222) 3,060
Provision for (benefit of)
income taxes 855 161 189 231 (737) 699
Non-controlling interests in
subsidiaries, net of income taxes – 132 – – – 132
Equity in net income of associated
company, net of income taxes – – – – – –
Net income – reported 1,702 158 422 432 (485) 2,229
Items of note, net of income taxes – – 129 – 503 632
Net income – adjusted $1,702 $ 158 $ 551 $ 432 $ 18 $ 2,861
REVIEW OF 2005 FINANCIAL PERFORMANCE
TABLE 20
Net interest income on a reported basis was $6,008 million
in 2005, a year-over-year increase of $235 million or 4%. Higher
asset volumes added $1,109 million to net interest income in
2005. However, changes in rates reduced net interest income by
$874 million. The overall increase in net interest income primarily
related to the Bank's acquisition of TD Banknorth. The inclusion
of seven months of net interest income from TD Banknorth
contributed $705 million.
Other income,on a reported basis, was $5,889 million in 2005,
an increase of $1,006 million, or 21%, from 2004. The improve-
ment was primarily due to higher trading income, insurance
revenues, card services revenues, securitization income, invest-
ment and securities services income, mutual fund management
fees and securities and full service brokerage fees. The increase
was partially offset by a loss due to a reduction in the estimated
value and the exit of certain structured derivative portfolios in
connection with the repositioning of the Bank’s global structured
products businesses and a decrease in discount brokerage fees
due to a decline in commissions per trade, lower average trades
per day and the impact of foreign exchange in TD Waterhouse
U.S.A. The improvement in trading income was largely a result of
an increase in trading revenue within the Wholesale Banking
credit and equity trading businesses.
Non-interest expenses,on a reported basis,were$8,782
million compared with $8,007 million in 2004, up $775 million
or 10%. The inclusion of results from the TD Banknorth acquisi-
tion contributed $549 million to this expense increase. Increases
in salaries and employee benefits, occupancy costs, equipment
costs, professional advisory services, other expenses due to the
recognition of $365 million of expense related to contingent
litigation reserves increases related to Enron, increases in
restructuring costs and marketing and business development
contributed to the expense increase. The impact of the amortiza-
tion of intangibles on the Bank’s reported expenses was $546
million, compared with $626 million in 2004.
Income tax expense, on a reported basis, was $699 million in
fiscal 2005, down $104 million from 2004. The Bank’s effective
income tax rate was 22.8%for fiscal 2005, compared with
26.5% in 2004.
BALANCE SHEET
The Bank, with 80% of its assets in Canada in 2005, increased
assets by $54 billion, or 17.4%, to $365 billion at the end of
2005.
REVIEW OF FINANCIAL PERFORMANCE
2005 SIGNIFICANT EVENTS
In March 2005, the Bank acquired a majority interest in TD
Banknorth. 2005 was the first year TD Banknorth results were
included in the Bank’s results. TD Banknorth operates in
Northeastern U.S. and offers a full range of banking services
and products.
During 2005, the Bank added $365 million to its contingent
litigation reserves for Enron-related claims. See Note 20 for more
information.