TD Bank 2014 Annual Report Download - page 25

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS 23
BUSINESS SEGMENT ANALYSIS
Business Focus
For management reporting purposes, the Bank’s operations and activities are organized around the
following operating business segments: Canadian Retail, U.S. Retail, and Wholesale Banking.
The Bank’s other business activities are not considered reportable
segments and are, therefore, grouped in the Corporate segment.
The Corporate segment includes the impact of treasury and balance
sheet management activities, general provision for credit losses,
tax items at an enterprise level, the elimination of taxable equivalent
and other intercompany adjustments, and residual unallocated
revenue and expenses.
The results of the credit card portfolio of MBNA Canada, acquired
on December 1, 2011, as well as the integration charges and direct
transaction costs related to the acquisition, are reported in the
Canadian Retail segment. The results of TD Auto Finance Canada
are reported in the Canadian Retail segment. The results of TD Auto
Finance U.S. are reported in the U.S. Retail segment. Integration
charges, direct transaction costs, and changes in fair value of contin-
gent consideration related to the Chrysler Financial acquisition are
reported in the Corporate segment. The results of the credit card
portfolio of Target Corporation and the related program agreement
(collectively “Target”), acquired on March 13, 2013, and the results of
Epoch Investment Partners, Inc. (Epoch), acquired on March 27, 2013,
are both reported in the U.S. Retail segment.
Results of each business segment reflect revenue, expenses, assets,
and liabilities generated by the businesses in that segment. The Bank
measures and evaluates the performance of each segment based on
adjusted results, where applicable, and for those segments the Bank
notes that the measure is adjusted. Net income for the operating
business segments is presented before any items of note not attributed
to the operating segments. For further details, see the “How the
Bank Reports” section of this document. For information concerning
the Bank’s measure of adjusted return on common equity, which is
a non-GAAP financial measure, see the “Return on Common Equity”
section. Segmented information also appears in Note 31 to the 2014
Consolidated Financial Statements.
Net interest income within Wholesale Banking is calculated on a
taxable equivalent basis (TEB), which means that the value of non-
taxable or tax-exempt income including dividends is adjusted to its
equivalent before-tax value. Using TEB allows the Bank to measure
income from all securities and loans consistently and makes for a more
meaningful comparison of net interest income with similar institutions.
The TEB increase to net interest income and provision for income taxes
reflected in Wholesale Banking results is reversed in the Corporate
segment. The TEB adjustment for the year was $428 million, compared
with $332 million last year.
As noted in Note 9 to the 2014 Consolidated Financial Statements,
the Bank continues to securitize retail loans and receivables, however
under IFRS, the majority of these loans and receivables remain on
balance sheet.
The “Business Outlook and Focus for 2015” section for each
segment, provided on the following pages, is based on the Bank’s
views and the assumptions set out in the “Economic Summary and
Outlook” section and the actual outcome may be materially different.
For more information, see the “Caution Regarding Forward-Looking
Statements” section and the “Risk Factors That May Affect Future
Results” section.
Canadian Retail provides a full range of financial products and
services to customers in the Canadian personal and commercial
banking businesses, including credit cards, auto finance, wealth,
and insurance businesses. Under the TD Canada Trust brand, personal
and small business banking provides a full range of financial products
and services to nearly 15 million customers through its network of
1,165 branches, 2,867 automated banking machines, telephone,
internet and mobile banking. Commercial Banking serves the needs of
medium and large Canadian businesses by offering a broad range of
customized products and services to help business owners meet their
financing, investment, cash management, international trade, and
day-to-day banking needs. Auto Finance provides flexible financing
options to customers at point-of-sale for automotive and recreational
vehicle purchases through our auto dealer network. The credit card
business provides an attractive line-up of credit cards including
co-branded and affinity credit card programs. The wealth business
offers a wide range of wealth products and services to a large and
diverse set of retail and institutional clients in Canada and Europe
through the direct investing, advice-based, and asset management
businesses. The insurance business offers property and casualty
insurance, as well as life and health insurance products in Canada.
U.S. Retail comprises the Bank’s retail and commercial banking
operations operating under the brand TD Bank, America’s Most
Convenient Bank, and wealth management services in the U.S. The
retail banking operations provide a full range of financial products
and services through multiple delivery channels, including a network
of 1,318 stores located along the east coast from Maine to Florida,
telephone, mobile and internet banking and automated teller
machines (ATM). The commercial banking operations serves the needs
of businesses, customizing a broad range of products and services to
meet their financing, investment, cash management, international
trade, and day-to-day banking needs. Wealth management services
include advice-based and asset management businesses. The advice-
based business provides investment, trust and banking solutions and
advice, across different client asset levels and product complexity, to
meet our clients’ goals in protecting, growing and transitioning their
wealth. U.S. Retail works with TD Ameritrade to refer mass affluent
clients to TD Ameritrade for their direct investing needs. The asset
management business manages assets for institutional and high net
worth clients and provides sub-advisory services and includes Epoch
Investment Partners, Inc. The results of our equity investment in
TD Ameritrade are included in U.S. Retail and reported as equity
in net income of an investment in associate, net of income taxes.
Wholesale Banking provides a wide range of capital markets,
investment banking, and corporate banking products and services,
including underwriting and distribution of new debt and equity issues,
providing advice on strategic acquisitions and divestitures, and meet-
ing the daily trading, funding, and investment needs of our clients.
Operating under the TD Securities brand, our clients include highly-
rated companies, governments, and institutions in key financial
markets around the world. Wholesale Banking is an integrated part
of TD’s strategy, providing market access to TD’s wealth and retail
operations, and providing wholesale banking solutions to our partners
and their customers.