TD Bank 2011 Annual Report Download - page 17

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TD BANK GROUP ANNUAL REPORT 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS 15
(millions of Canadian dollars) 2011 vs. 2010 2010 vs. 2009
Favourable (unfavourable) Favourable (unfavourable)
due to change in due to change in
Average Average Net Average Average Net
volume rate change volume rate change
Total earning assets $ 1,595 $ (523) $ 1,072 $ 1,663 $ (3,163) $ (1,500)
Total interest-bearing liabilities (517) 733 216 (921) 2,638 1,717
Net interest income $ 1,078 $ 210 $ 1,288 $ 742 $ (525) $ 217
ANALYSIS OF CHANGE IN NET INTEREST INCOME
TABLE 8
growth in insurance revenue. Wealth Management non-interest income
increased primarily due to higher fee-based revenue from higher client
assets. U.S. Personal and Commercial Banking non-interest income
increased due to higher fee-based revenue and the impact of acquisi-
tions, partially offset by lower overdraft fees due to Regulation E and
the translation effect of a stronger Canadian dollar. Wholesale Banking
non-interest income decreased mainly due to lower trading-related
revenue, partially offset by higher security gains.
NON-INTEREST INCOME
Non-interest income for the year was $8,763 million, an increase of
$741 million, or 9%, on a reported basis, and $8,587 million on an
adjusted basis, an increase of $567 million, or 7%, compared with
last year. The increase in adjusted non-interest income was driven
by increases in all retail segments, partially offset by a decline in
Wholesale Banking. Canadian Personal and Commercial Banking non-
interest income increased due to strong fee income growth and strong
(millions of Canadian dollars) 2011 vs. 2010
2011 2010 2009 % change
Investment and securities services
TD Waterhouse fees and commissions $ 459 $ 421 $ 465 9.0%
Full-service brokerage and other securities services 631 590 451 6.9
Underwriting and advisory 378 368 387 2.7
Investment management fees 215 189 191 13.8
Mutual funds management 941 856 718 9.9
Total investment and securities services 2,624 2,424 2,212 8.3
Credit fees 687 634 622 8.4
Net securities gains (losses) 393 75 (437) 424.0
Trading income (loss) 43 484 685 (91.1)
Service charges 1,602 1,651 1,507 (3.0)
Loan securitizations 450 489 468 (8.0)
Card services 961 820 733 17.2
Insurance, net of claims 1,173 1,028 913 14.1
Trust fees 154 153 141 0.7
Other income (loss) 676 264 (310) 156.1
Total $ 8,763 $ 8,022 $ 6,534 9.2%
NON-INTEREST INCOME
TABLE 9
(millions of Canadian dollars) 2011 2010 2009
Net interest income $ 842 $ 827 $ 1,210
Trading income (loss) 43 484 685
Loans designated as trading under the fair value option1 4 21 47
Total trading-related income (loss) $ 889 $ 1,332 $ 1,942
By product
Interest rate and credit portfolios $ 403 $ 896 $ 1,292
Foreign exchange portfolios 432 418 573
Equity and other portfolios 50 (3) 30
Loans designated as trading under the fair value option1 4 21 47
Total trading-related income (loss) $ 889 $ 1,332 $ 1,942
TRADING-RELATED INCOME
TABLE 10
credit markets and fewer trading opportunities. Foreign exchange
and equity and other portfolios benefited from wider spreads, and
increased client activity from elevated levels of volatility in the markets.
The mix of trading-related income between net interest income and
trading income is largely dependent upon the level of interest rates,
which drives the funding costs of the Bank’s trading portfolios.
Generally, as interest rates rise, net interest income declines and trad-
ing income reported in non-interest income increases. Management
believes that the total trading-related income is the appropriate
measure of trading performance.
TRADING-RELATED INCOME
Trading-related income is the total of net interest income on trading
positions, trading income which includes income from trading loans,
and income from loans designated as trading under the fair value
option that are managed within a trading portfolio. Trading-related
income decreased by $443 million, or 33% from 2010. The decrease
was primarily in interest rate and credit portfolios, partially offset
by increases in foreign exchange and equity and other portfolios
compared to the prior year. The trading environment for interest rate
and credit trading was challenging in 2011 due to volatility in the
1 Excludes amounts related to securities designated as trading under the fair value
option that are not managed within a trading portfolio, but which have been
combined with derivatives to form economic hedging relationships.