TD Bank 2009 Annual Report Download - page 44

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 MANAGEMENT’S DISCUSSION AND ANALYSIS40
(millions of dollars, except as noted) Canadian dollars U.S. dollars
2009 200812007 2009 200812007
Net interest income $ 3,607 $ 2,144 $ 1,365 $ 3,093 $ 2,110 $ 1,228
Non-interest income 1,117 853 583 960 842 522
Provision for credit losses – loans 698 226 120 601 222 108
Provision for credit losses – debt securities classified as loans 250 ––209 ––
Non-interest expenses 2,786 1,681 1,142 2,391 1,655 1,024
Income before provision for income taxes 990 1,090 686 852 1075 618
Provision for income taxes 81 284 236 71 281 211
Non-controlling interests in subsidiaries ––91 ––79
Net income – adjusted 909 806 359 781 794 328
Total adjustments for items of note2276 84 39 240 82 33
Net income – reported $ 633 $ 722 $ 320 $ 541 $ 712 $ 295
Selected volumes and ratios
Average loans and acceptances (billions of dollars) $61 $ 38 $ 29 $53 $38 $26
Average deposits (billions of dollars) 92 52 31 79 51 28
Return on invested capital 4.5% 6.1% 4.6%
Efficiency ratio – reported 68.0 59.8 62.7
Efficiency ratio – adjusted 59.0 56.1 58.6
Margin on average earning assets33.52 3.84 3.93
U.S. PERSONAL AND COMMERCIAL BANKING
TABLE 18
1The wealth management and insurance agency businesses in the U.S. were
transferred to other segments effective April 1, 2008. Prior period results were
not restated.
2Total adjustments for items of note include the following: 2009 – $276 million
related to integration and restructuring charges; 2008 – $84 million related to
integration and restructuring charges; 2007 – $39 million related to restructuring,
privatization, and merger-related charges.
3
Average deposits and margin on average earning assets exclude the impact related
to the money market deposit account (MMDA) agreement with TD Ameritrade.
The MMDA is described in Note 35 to the 2009 Consolidated Financial Statements.
BUSINESS OUTLOOK AND FOCUS FOR 2010
Continue to build on the strength of industry-leading conven-
ience banking, providing superior customer service and efficient,
local decision making. Store openings in excess of 30 are
expected in 2010. PCL are expected to remain elevated in 2010.
Fee income will grow modestly due to continued economic and
regulatory factors while operating expenses will be managed
closely. Actual restructuring charges associated with the
Commerce integration are expected to be higher than the
previously announced estimate, for a total in the range of
US$525 million to US$550 million pre-tax taken through the first
quarter of 2010, as a result of anticipated technology front-
and back-end system expenditures and deeper restructuring,
and expenses related to post-conversion processing issues.
The goal of U.S. Personal and Commercial Banking is to achieve
consistent earnings growth over the long-term. The expectation
of a stronger Canadian dollar for 2010 is a potential headwind.
Our key priorities for 2010 are as follows:
•Continue momentum in organic growth of core deposits and
loans, while keeping strong credit quality and competitive
pricing to maintain customer relationships.
•Continue to deliver convenient banking solutions and services
that exceed customer expectations.
•
Continue business expansion by opening new stores in wealthy
markets such as Boston and Florida.
•Manage expenses to support positive operating leverage.
•Take advantage of profitable acquisition opportunities where
risk requirements are met.
KEY PRODUCT GROUPS
Personal Banking
•
Personal Deposits – Continued to build on the reputation as America’s
Most Convenient Bank by opening 33 new stores. Delivered strong
year-over-year growth driven by maturing stores and a competitive
product offering.
•Consumer Lending – Principal product offerings of home equity
loans/lines of credit and auto loans offered through a network of
auto dealers, continued to grow organically. Loan loss rates have
increased over the prior year, but remain at the lower end of loss
rates in the industry.
•Residential Real Estate Secured Lending – Successfully implemented
a new in-house residential mortgage origination model from Maine
to Florida. Loan volumes have increased by approximately $2 billion
over last year. In-store originations are a key focus to leverage cross-
sell opportunities.
•
Small Business Banking and Merchant Services – With a total of
$1.6 billion of loans and $6.9 billion of deposits the Small Business
Banking group continues to be among the top rated small business
lenders in most of our markets. Merchant Services offers point-of-
sale settlement solutions for debit and credit card transactions,
supporting over 14,000 business locations in our footprint.
Commercial Banking
•Commercial Banking – Loan volumes were strong in the first half
of the year due to capital constrained competitors, but slowed
considerably in the second half of the year. Commercial loan balances
increased approximately by $1.2 billion since last year and growth
is expected to slow significantly in 2010. While loan losses have
increased, primarily in the for-sale residential real estate sector,
our overall asset quality remains better than the industry.