TD Bank 2011 Annual Report Download - page 40

TD BANK GROUP ANNUAL REPORT 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS38
2010 FINANCIAL RESULTS OVERVIEW
2010 Financial Performance
by Business Line
Canadian Personal and Commercial Banking net income for the
year was a record $3,095 million, an increase of $623 million, or 25%,
from last year. Return on invested capital for the year was 33.4%,
compared with 28.1% last year.
Revenue for the year was $10,371 million, an increase of $922 million,
or 10%, compared with last year, mainly due to strong volume growth
across most banking products. Margin on average earning assets
increased 2 bps to 2.92% compared with last year, due to higher
margins in real estate secured lending, partially offset by margin
compression in deposits due to the prolonged low rate environment
and lower mortgage breakage revenue. Volume growth was primarily
in real estate secured lending, personal and business deposits and
insurance. Real estate secured lending volume, including securitized
assets, increased $19.8 billion, or 12%, while consumer loan volume
increased $3.8 billion, or 13%. Business loans and acceptances
volume increased $1.4 billion, or 5%. Personal deposit volume
increased $5.4 billion, or 4%, while business deposit volume increased
$6.6 billion, or 14%. Gross originated insurance premiums increased
$313 million, or 11%.
PCL for the year was $1,046 million, a decrease of $109 million, or
9%, compared with last year. Personal banking PCL was $950 million,
a decrease of $101 million, or 10%, and business banking PCL was
$96 million, a decrease of $7 million, or 7%. PCL as a percentage
of average assets was 0.4%, decreasing 10 bps from last year. Net
impaired loans were $553 million, a decrease of $2 million, compared
with last year. Net impaired loans in Commercial Banking were
$62 million, a decrease of $51 million, or 45%, compared with last year,
due to active file management. Net impaired loans as a percentage of
total loans were 0.85%, compared with 0.93% as at October 31, 2009.
Non-interest expenses for the year were $4,934 million, an increase
of $209 million, or 4%, compared with last year primarily due to
higher employee compensation, project-related costs, non-credit
losses, and the investment in new branches, partially offset by lower
litigation costs and capital taxes.
The average FTE staffing levels increased by 1,383, or 4%, compared
with last year. The efficiency ratio improved to 47.6%, compared with
50.0% last year.
Wealth Management net income for the year was $641million,
an increase of $44 million, or 7%, compared with last year. Global
Wealth net income, which excludes TD Ameritrade, was $447 million,
an increase of $102 million, or 30%, mainly due to higher fee-based
revenue from higher average client assets in the advice-based and asset
management businesses, and higher net interest margin expansion
due to effective treasury management strategies. The Bank’s reported
investment in TD Ameritrade generated $194 million of net income,
a decrease of $58 million, or 23%, compared with last year. The
decrease was driven by the translation effect of a stronger Canadian
dollar and lower earnings in TD Ameritrade. For its fiscal year ended
September 30, 2010, TD Ameritrade reported net income in Canadian
dollars was $592 million, a decrease of $52 million, or 8%, compared
with last year. Wealth Management’s return on invested capital was
14.5%, compared with 12.8% last year.
Revenue for the year was $2,457 million, an increase of $252 million,
or 11%, compared with last year. The increase was primarily due to
higher average assets under management and higher average fees due
to change in mix as a result of client preferences. Online brokerage
revenue increased slightly due to higher net interest income partially
offset by lower transaction revenue. Advice-based revenue increased
primarily due to higher average client assets.
Non-interest expenses for the year were $1,813 million, an increase
of $112 million, or 7%, compared with last year. The increase in
expenses was mainly due to higher variable compensation associated
with the increased fee-based revenue, increased trailer fees related to
higher revenue from increased assets under management, the inclu-
sion of U.K. acquisitions, higher volume-related expenses, and our
continued investment in growing the sales force in advice-based busi-
nesses. These expenses were partially offset by reduced expenses in
the U.S. wealth management businesses.
The average FTE staffing levels for the year increased by 179, or
3%, compared with last year. The increase was mainly due to the U.K.
acquisitions, the addition of new client-facing advisors, support staff,
and increased processing staff to support higher business volumes. The
efficiency ratio for the year improved to 73.8% compared to 77.1% in
the prior year.
Assets under administration of $225 billion as at October 31, 2010
increased by $34 billion, or 18%, compared with October 31, 2009,
primarily due to net new client assets and market increases in the
second half of the year. Assets under management of $183 billion
as at October 31, 2010 increased by $12 billion compared with
October 31, 2009.
U.S. Personal and Commercial Banking net income, in Canadian
dollar terms for the year was $973 million, an increase of $340 million,
or 54%, on a reported basis, and $1,042 million, an increase of
$133 million, or 15%, on an adjusted basis, compared with last year.
While reported and adjusted net income increased compared with last
year, the strengthening of the Canadian dollar against the U.S. dollar
decreased the reported and adjusted net income for the year by
$120 million and $129 million, respectively. In U.S. dollar terms,
reported net income was $941 million, an increase of $400 million,
or 74%. On an adjusted basis, net income was US$1,008 million,
an increase of US$227 million, or 29%. The increase in adjusted net
income was due to higher fee-based revenue, increased loan and
deposit volume, and lower PCL on debt securities, partially offset by
the impact of Regulation E on overdraft revenue and higher expenses.
Adjusted net income for the current and prior year excluded integra-
tion and restructuring charges relating to acquisitions. The return on
invested capital was 5.8%, compared with 4.5% in 2009. On April 16,
2010, the Bank acquired certain assets and assumed liabilities of three
Florida banks in FDIC-assisted transactions. On September 30th, the
Bank closed on the acquisition of South Financial. As at October 31,
2010, South Financial had total assets of US$9.7 billion and total
deposits of US$8.6 billion.
In U.S. dollar terms, revenue for the year was US$4,591 million,
an increase of US$538 million, or 13%, compared with last year,
driven by higher fee-based revenue, increased loan and deposit
volume, and the impact of acquisitions. Higher fees due to the
Commerce integration were partially offset by reductions later in
the year due to Regulation E. The margin on average earning assets
for the year decreased by 3 bps to 3.49% compared with last year
due to the low rate environment.