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TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 FINANCIAL RESULTS 103
Key Assumptions
2009 2008 2007
Residential Credit Commercial Residential Credit Commercial Residential Credit Commercial
mortgage Personal card mortgage mortgage Personal card mortgage mortgage Personal card mortgage
loans loans loans loans loans loans loans loans loans loans loans loans
Prepayment rate118.8% 5.0% n/a 5.2% 18.4% 5.9% 43.5% 5.2% 20.0% 6.5% 43.0% 8.7%
Excess spread21.4 0.5 n/a 1.0 0.8 1.1 7.1 1.0 0.7 1.1 7.1 1.0
Discount rate 3.2 3.4 n/a 5.8 4.7 5.6 6.1 8.1 6.5 6.2 6.3 10.3
Expected credit losses3– – n/a 0.1 – – 2.4 0.1 – – 2.1 0.1
The key assumptions used to value the retained interests at the date
of the securitization activities are as follows:
1Represents monthly payment rate for secured personal and credit card loans and
an annual prepayment rate for U.S. loans.
2The excess spread for credit card loans reflects the net portfolio yield, which is
interest earned less funding costs and losses.
3There are no expected credit losses for residential mortgage loans as the loans are
government guaranteed.
During 2009, there were maturities of previously securitized loans
and receivables of $4,566 million (2008 – $8,901 million; 2007 –
$9,974 million) and the net proceeds from loan securitizations were
$27,491 million (2008 – $10,370 million; 2007 – $9,937 million).
The following table presents key economic assumptions and the
sensitivity of the current fair value of retained interests to two adverse
changes in each key assumption as at October 31, 2009. As the sensi-
tivity is hypothetical, it should be used with caution.
Sensitivity of Key Assumptions to Adverse Changes
(millions of Canadian dollars, except as noted) 2009 2008
Residential Credit Commercial Residential Credit Commercial
mortgage Personal card mortgage mortgage Personal card mortgage
loans loans loans loans loans loans loans loans
Fair value of retained interests $ 1,216 $ 121 $ – $ 2 $ 442 $ 80 $ – $ 4
Discount rate 3.4% 3.0% –% 5.8% 4.1% 4.2% –% 8.1%
+10% $ (3) $ – $ – $ – $ (2) $ – $ – $ –
+20% (7) (1) – – (4) (1) – –
Prepayment rate 18.8% 4.3% –% 5.2% 18.4% 5.7% –% 5.2%
+10% $ (40) $ (8) $ – $ – $ (14) $ (6) $ – $ –
+20% (78) (14) – – (27) (11) – –
Expected credit losses –% –% –% 0.1% –% –% –% 0.1%
+10% $– $– $– $– $– $– $– $–
+20% ––––––––
Securitization Gain (Loss) and Income on Retained Interests
(millions of Canadian dollars) 2009 2008 2007
Residential Credit Commercial Residential Credit Commercial
mortgage Personal card mortgage mortgage Personal card mortgage
loans loans loans loans Total loans loans loans loans Total Total
Gain (loss) on sale $ 301 $ 20 $ – $ – $ 321 $ (21) $ 50 $ 12 $ – $ 41 $ 141
Income on retained interests1126 21 – – 147 96 17 77 – 190 256
Total $ 427 $ 41 $ – $ – $ 468 $ 75 $ 67 $ 89 $ – $ 231 $ 397
1Income on retained interests excludes income arising from changes in fair values.
Unrealized gains and losses on retained interests arising from changes in fair value
are recorded in trading income.
The following table summarizes the impact of securitizations on the
Bank’s Consolidated Statement of Income.