TD Bank 2009 Annual Report Download - page 25

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TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 MANAGEMENT’S DISCUSSION AND ANALYSIS 21
FINANCIAL RESULTS OVERVIEW
Net Income
AT A GLANCE OVERVIEW
•Reported net income was $3,120 million, a decrease of
$713 million, or 19%, from the prior year.
•Adjusted net income was $4,716 million, an increase of
$903 million, or 24%, from the prior year.
Reported net income was $3,120 million, compared with $3,833 million
in 2008. The decrease in reported net income was primarily due to an
increased loss in the Corporate segment, partially offset by stronger
earnings in Wholesale Banking. The Corporate segment increased net
loss was primarily attributable to losses on derivatives hedging the
reclassified available-for-sale portfolio and decreases in fair value of
credit default swaps hedging the corporate loan book, the benefit of
the Enron litigation reserve reversal reported last year, and an increase
in general allowances. Restructuring charges associated with the
Commerce integration were also higher in 2009. Adjusted net income
was $4,716 million, compared with $3,813 million in 2008. The increase
in adjusted net income was primarily due to stronger earnings in
the Wholesale Banking and U.S. Personal and Commercial Banking
segments, partially offset by decreased earnings from Wealth
Manage-
ment
and an increased loss in the Corporate segment. Canadian
Personal and Commercial Banking earnings increased by $48 million
driven by broad based revenue and volume growth partially offset by
higher credit losses and margin compression on deposits. U.S. Personal
and Commercial Banking earnings increased $103 million driven by
the full year inclusion of Commerce, strong volume growth, and the
translation effect of a weaker Canadian dollar, partially offset by
increased provision for credit losses (PCL) and margin compression.
Wholesale Banking earnings increased $1,072 million driven by higher
trading-related income, largely from interest rate and credit products.
Wealth Management earnings decreased by $135 million due to the
low interest rate environment and lower average asset levels caused by
market-related declines. The Bank’s share of earnings in TD Ameritrade
decreased by $37 million driven by margin compression partially offset
by the translation effect of the weaker Canadian dollar. The loss in the
Corporate segment increased by $148 million, primarily due to lower
tax benefits and higher unallocated corporate expenses.
Reported diluted earnings per share were $3.47 this year, a 29%
decrease, compared with $4.87 in 2008. Adjusted diluted earnings
per share were $5.35, a 10% increase, compared with $4.88 in 2008.
Impact of Foreign Exchange Rate on U.S. Personal and
Commercial Banking and TD Ameritrade Translated Earnings
U.S. Personal and Commercial Banking earnings and the Bank’s share
of earnings from TD Ameritrade are impacted by fluctuations in the
U.S. dollar to Canadian dollar exchange rate.
Depreciation of the Canadian dollar had a favourable impact on
consolidated earnings for the year ended October 31, 2009, compared
with 2008, as shown in the table below.
Impact of Foreign Exchange Rate on U.S. Translated Earnings
(millions of Canadian dollars) For the year ended Oct. 31, 2009
vs. Oct. 31, 2008
U.S. Personal and Commercial Banking
Increased total revenue $ 379
Increased non-interest expenses 209
Increased net income 101
TD Ameritrade
Increased share of earnings $67
Earnings per share impact $ 0.20
U.S. GAAP
See the Reconciliation of Canadian and U.S. Generally Accepted
Accounting Principles contained in the Bank’s 2009 Annual
Report on Form 40-F filed with the U.S. Securities and Exchange
Commission (SEC) and available on the Bank’s website at
http://www.td.com/investor/index.jsp and at the SEC’s website
(http://www.sec.gov).
Net income available to common shareholders under U.S. GAAP
was $3,599 million, compared with $2,953 million under Canadian
GAAP. The higher U.S. GAAP net income available to common share-
holders primarily resulted from an increase in income due to the
de-designation of certain fair value and cash flow hedging relationships
that were designated under Canadian GAAP and the reversal of the
provision for credit losses related to the available-for-sale securities
portfolio that was reclassified as loans for Canadian GAAP purposes as
a result of the 2009 Amendments to Section 3855, Financial Instru-
ments – Recognition and Measurement, as described in the “Changes
in Accounting Policies during the Current Year” section.