TD Bank 2011 Annual Report Download - page 43

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TD BANK GROUP ANNUAL REPORT 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS 41
GROUP FINANCIAL CONDITION
Credit Portfolio Quality
AT A GLANCE OVERVIEW
• Loans and acceptances portfolio net of allowance for credit
losses was $311 billion, an increase of $34 billion from the
prior year.
• Impaired loans net of specific allowance were $1,767 million,
an increase of $51 million.
• Provision for credit losses was $1,465 million, compared with
$1,625 million in the prior year.
• Total allowance for credit losses increased by $9 million to
$2,596 million in 2011.
LOAN PORTFOLIO
Overall in 2011, the Bank’s credit quality remained stable despite
uncertain economic conditions, due to established business and risk
management strategies and a continuing low interest rate environ-
ment. During 2011, the loans and acceptances portfolio continued to
be diversified between personal and business and government. The
Bank increased its credit portfolio by $34 billion, or 12%, from the
prior year, largely due to volume growth in the Canadian and U.S.
Personal and Commercial Banking segments and the U.S. acquisitions.
The majority of the credit risk exposure is related to the loan and
acceptances portfolio. However, the Bank also engaged in activities
that have off-balance sheet credit risk. These include credit instru-
ments and derivative financial instruments, as explained in Note 31
to the Consolidated Financial Statements.
CONCENTRATION OF CREDIT RISK
During 2011, the Bank increased its credit portfolio by $34 billion,
or 12%, from the prior year, largely due to volume growth in the
Canadian and U.S. Personal and Commercial Banking segments and
the U.S. acquisitions.
The Bank’s loan portfolio continued to be dominated by the
Canadian and U.S. residential and personal portfolios which are
comprised of credit card, consumer instalment and other personal,
representing 65% of net loans including acceptances, compared
with 64% in 2010 and 63% in 2009. During the year, these port-
folios increased by $25 billion, or 14%, and totalled $204 billion at
year end. Residential mortgages represented 28% of the portfolio
in 2011, 25% in 2010, and 25% in 2009. Credit card, consumer
instalment and other personal loans were 38% of total loans net
of specific allowance in 2011, compared with 39% in 2010 and
39% in 2009.
The Bank’s business and government credit exposure was 31%
of total loans net of specific allowance, in line with 31% in 2010.
The largest business and government sector concentrations in
Canada were the real estate and financial sectors, which comprised
5% and 3% of total loans and acceptances net of specific allow-
ance, respectively. Real estate was the leading U.S. sector of
concentration and represented 4% of net loans, compared with
5% in 2010.
Geographically, the credit portfolio remained concentrated in
Canada. In 2011, the percentage of loans held in Canada was
71%, compared with 72% in 2010. The largest Canadian exposure
was in Ontario, which represented 56% of total loans net of
specific allowance for 2011, up from 55% in 2010.
The balance of the credit portfolio was predominantly in the
U.S., which represented 24% of the portfolio, up from 22% in
2010 primarily due to the U.S. acquisitions. Exposure to other
geographic regions was limited. The largest U.S. exposures by state
were in New Jersey and New York, each of which represented 4%
of total loans net of specific allowance, in line with 2010.