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TD BANK FINANCIAL GROUP ANNUAL REPORT 2006 Management’s Discussion and Analysis
46
CONCENTRATION OF CREDIT RISK
Geographically, the credit portfolio remains highly concentrated
in Canada. In 2006, the percentage of loans held in Canada was
80%, compared with 80% in 2005 and 92% in 2004. The
remaining balance is predominantly in the U.S. Exposure in the
United Kingdom, Asia, Australia and New Zealand is limited.
As indicated in Table 24, the largest Canadian exposure is
in Ontario, at 50% of total loans in 2006, up slightly from 48%
in 2005. Internationally, the largest concentration is in the U.S.,
which comprises 18% of total loans, remaining unchanged
from 2005.
(millions of Canadian dollars, Percentage of total
except percentage amounts) 2006 2005 2004 2006 2005 2004
Canada
Atlantic $3,560 $3,637 $ 3,463 2.1% 2.3% 2.7%
Québec 8,154 8,312 7,570 4.8 5.3 5.9
Ontario 83,969 75,673 72,334 49.6 47.8 55.9
Prairies 20,187 19,150 18,424 12.0 12.1 14.2
British Columbia 19,382 19,074 17,780 11.5 12.0 13.7
Total Canada 135,252 125,846 119,571 80.0 79.5 92.4
United States 29,977 28,609 6,131 17.7 18.1 4.7
Other International
United Kingdom 846 1,039 904 .5 .6 .7
Europe – other 202 1,095 962 .1 .7 .8
Australia and New Zealand 1,424 638 665 .8 .4.5
Japan 12 – – –– –
Asia – other 633 573 894 .4 .4.7
Latin America and Caribbean 870 431 303 .5 .3 .2
Middle East and Africa 68 11–––
Total Other International 4,055 3,777 3,729 2.3 2.4 2.9
Total $169,284 $158,232 $129,431 100.0% 100.0% 100.0%
Percentage change over previous year
Canada 7.5% 5.2% 5.0%
United States 4.8 366.6 (20.7)
Other International 7.4 1.3 21.5
Total 7.0% 22.3% (3.8)%
LOANS AND ACCEPTANCES, NET OF ALLOWANCE FOR CREDIT LOSSES BY LOCATION OF ULTIMATE RISK
TABLE 24
As shown in Table 23, the largest business and government
sector concentrations in Canada are real estate development,
financial institutions and oil and gas each at 2%. Real estate
development was also the leading sector of concentration in
the U.S. at 6%, up 2% over last year.
IMPAIRED LOANS
A loan is considered impaired when, in management’s opinion,
it can no longer be reasonably assured that we will be able to
collect the full amount of principal and interest when due. See
Note 3 to the Consolidated Financial Statements for further
details on impaired loans. Table 25 shows the impact on net
interest income due to impaired loans.
(millions of Canadian dollars) 2006 2005 2004
Reduction in net interest income
due to impaired loans $29 $35 $49
Recoveries (9) (26) (8)
Net reduction $20 $ 9 $41
IMPACT ON NET INTEREST INCOME
DUE TO IMPAIRED LOANS
TABLE 25
As indicated in Table 26 and Table 27, net impaired loans
before general allowances were $239 million as at October 31,
2006, compared with a total of $196 million a year earlier and
$271 millionin 2004.