TD Bank 2011 Annual Report Download - page 111

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TD BANK GROUP ANNUAL REPORT 2011 FINANCIAL RESULTS 109
Securitization Activity
(millions of Canadian dollars) 2011 2010 2009
Residential Commercial Residential Commercial
mortgage Personal mortgage mortgage Personal mortgage
loans loans loans Total loans loans loans Total Total
Gross proceeds $ 14,609 $ 3,148 $ 270 $ 18,027 $ 15,875 $ 4,211 $ 113 $ 20,199 $ 32,057
Retained interests recognized 481 83 7 571 586 94 2 682 1,120
Cash flows received
on retained interests 904 68 2 974 790 68 – 858 593
The following table summarizes the impact of securitizations on the
Bank’s Consolidated Statement of Income.
Securitization Gain (Loss) and Income on Retained Interests
(millions of Canadian dollars) 2011 2010 2009
Residential Commercial Residential Commercial
mortgage Personal mortgage mortgage Personal mortgage
loans loans loans Total loans loans loans Total Total
Gain (loss) on sale $ 192 $ 83 $ – $ 275 $ 224 $ 94 $ (1) $ 317 $ 321
Income on retained interests1 161 13 1 175 157 13 2 172 147
Total $ 353 $ 96 $ 1 $ 450 $ 381 $ 107 $ 1 $ 489 $ 468
1 Income 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 key assumptions used to value the retained interests at the date
of the securitization activities are as follows:
Key Assumptions
2011 2010 2009
Residential Commercial Residential Commercial Residential Commercial
mortgage Personal mortgage mortgage Personal mortgage mortgage Personal mortgage
loans loans loans loans loans loans loans loans loans
Prepayment rate1 19.1% 5.3% –% 18.9% 5.1% –% 18.8% 5.0% 5.2%
Discount rate 3.4 3.7 4.5 3.6 3.7 4.5 3.2 3.4 5.8
Expected credit losses2 – – – – – – – – 0.1
1 Represents monthly payment rate for secured personal loans.
2 There are no expected credit losses for residential or commercial mortgage loans
as the loans are government guaranteed. Expected credit losses on personal loans
round to 0.0%.
During 2011, there were maturities of previously securitized loans
and receivables of $4,690 million (2010 – $4,619 million; 2009 –
$4,566 million) and the net proceeds from loan securitizations were
$13,337 million (2010 – $15,580 million; 2009 – $27,491 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, 2011. 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) 2011 2010
Residential Commercial Residential Commercial
mortgage Personal mortgage mortgage Personal mortgage
loans loans loans loans loans loans
Fair value of retained interests $ 1,160 $ 120 $ 9 $ 1,313 $ 121 $ 3
Discount rate 3.2% 3.2% 3.8% 3.5% 3.4% 4.2%
+10% $ (5) $ – $ – $ (6) $ – $ –
+20% (9) (1) – (13) (1) –
Prepayment rate 19.1% 5.1% –% 18.9% 5.4% –
+10% $ (30) $ (9) $ – $ (37) $ (8) $ –
+20% (59) (17) – (74) (15) –
Expected credit losses –% –% –% –% –% –%
+10% $ – $ – $ – $ – $ – $ –
+20% – – – – – –