TD Bank 2014 Annual Report Download - page 23

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS 21
fourth quarter last year. The increase in adjusted non-interest expenses
was primarily driven by increases in the Canadian Retail, U.S. Retail,
and Corporate segments, partially offset by a decrease in Wholesale
Banking. Canadian Retail non-interest expenses increased primarily due
to higher employee-related costs including higher revenue-based vari-
able expenses in the wealth business, investments to support business
growth, and the inclusion of Aeroplan, partially offset by productivity
gains. U.S. Retail non-interest expenses increased due to the impact
of foreign currency translation. In U.S. dollars, U.S. Retail non-interest
expenses decreased primarily due to productivity gains and lower
expenses related to Target, partially offset by higher employee-related
costs to support business growth. Corporate segment non-interest
expenses increased primarily due to ongoing investment in enterprise
and regulatory projects and productivity initiatives. Wholesale Banking
non-interest expenses decreased primarily due to expenses related to
the settlement of a commercial dispute in the fourth quarter last year.
The Bank’s reported effective tax rate was 18.2% for the quarter,
compared with 13.4% in the same quarter last year. The Bank’s
adjusted effective tax rate was 18.9% for the quarter, compared with
15.0% in the same quarter last year. The year-over-year increases were
largely due to lower tax-exempt dividend income from taxable
Canadian corporations and business mix.
QUARTERLY TREND ANALYSIS
The Bank has had solid underlying adjusted earnings growth over the
past eight quarters. Canadian Retail earnings have been strong with
good loan and deposit volume growth, higher fee-based revenue
driven by wealth asset growth, and the acquisition of Aeroplan. U.S.
Retail earnings have benefited from strong loan and deposit volume
growth, continued investments to support business growth, and the
acquisitions of Target and Epoch. Wholesale Banking earnings bene-
fited from improved trading and investment banking results driven by
strong client activity and favourable capital market conditions. The
earnings contribution from the Bank’s investment in TD Ameritrade has
increased over the past two years primarily due to higher base earnings
in TD Ameritrade driven by higher client assets and trading volumes.
The Bank’s earnings also benefited from the impact of foreign currency
translation over the past eight quarters.
FINANCIAL RESULTS OVERVIEW
Quarterly Financial Information
FOURTH QUARTER 2014 PERFORMANCE SUMMARY
Reported net income for the quarter was $1,746 million, an increase
of $130 million, or 8%, compared with the fourth quarter last year.
Adjusted net income for the quarter was $1,862 million, an increase
of $47 million, or 3%, compared with the fourth quarter last year.
Reported diluted earnings per share for the quarter were $0.91,
compared with $0.84 in the fourth quarter last year. Adjusted
diluted earnings per share for the quarter were $0.98, compared
with $0.95 in the fourth quarter last year.
Revenue for the quarter was $7,452 million, an increase of
$452 million, or 6%, on a reported basis, and an increase of
$435 million, or 6%, on an adjusted basis, compared with the fourth
quarter last year. The increase in adjusted revenue was primarily
driven by increases in the Canadian Retail and U.S. Retail segments.
Canadian Retail revenue increased primarily due to good loan and
deposit volume growth, the inclusion of Aeroplan, wealth asset
growth, and insurance business growth. U.S. Retail revenue increased
due to the impact of foreign currency translation. In U.S. dollars, U.S.
Retail revenue decreased primarily due to lower accretion and lower
gains on sales of securities.
Provision for credit losses (PCL) for the quarter was $371 million,
an increase of $19 million, or 5%, on a reported basis, and a decrease
of $21 million, or 5%, on an adjusted basis, compared with the fourth
quarter last year. The decrease was primarily driven by a decrease in
the U.S. Retail segment partially offset by an increase in the Canadian
Retail segment. U.S. Retail PCL decreased primarily due to favourable
credit performance in auto loans. Canadian Retail PCL increased
primarily due to higher provisions in commercial lending and the inclu-
sion of Aeroplan, partially offset by favourable credit performance and
lower bankruptcies in personal banking.
Insurance claims and related expenses for the quarter were
$720 million on a reported and adjusted basis, an increase of $9 million,
or 1%, compared with the fourth quarter last year primarily due to
an increase in severe weather-related events and business growth,
partially offset by more favourable prior year claims development.
Reported non-interest expenses for the quarter were $4,331 million,
an increase of $167 million, or 4%, compared with the fourth quarter
last year. Adjusted non-interest expenses for the quarter were
$4,188 million, an increase of $298 million, or 8%, compared with the