TD Bank 2014 Annual Report Download - page 30

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS28
(millions of Canadian dollars, except as noted) 2014 2013 2012
Net interest income $ 9,538 $ 8,922 $ 8,606
Non-interest income 9,623 8,860 8,387
Total revenue – reported 19,161 17,782 16,993
Total revenue – adjusted 19,161 17,782 17,029
Provision for credit losses 946 929 1,151
Insurance claims and related expenses 2,833 3,056 2,424
Non-interest expenses – reported 8,438 7,754 7,485
Non-interest expenses – adjusted 8,091 7,602 7,381
Net income – reported $ 5,234 $ 4,569 $ 4,463
Adjustments for items of note, net of income taxes1
Integration charges and direct transaction costs relating to the
acquisition of the credit card portfolio of MBNA Canada 125 92 104
Set-up, conversion and other one-time costs related to affinity relationship
with Aimia and acquisition of Aeroplan Visa credit card accounts 131 20 –
Net income – adjusted $ 5,490 $ 4,681 $ 4,567
Selected volumes and ratios
Return on common equity – reported 41.7% 42.3% 41.3%
Return on common equity – adjusted 43.7 43.3 42.3
Margin on average earning assets (including securitized assets) – reported 2.95 2.92 2.95
Margin on average earning assets (including securitized assets) – adjusted 2.95 2.92 2.96
Efficiency ratio – reported 44.0 43.6 44.0
Efficiency ratio – adjusted 42.2 42.7 43.3
Number of Canadian retail branches 1,165 1,179 1,168
Average number of full-time equivalent staff2 39,389 39,535 41,971
CANADIAN RETAIL
TABLE 17
1 For explanations of items of note, see the “Non-GAAP Financial Measures –
Reconciliation of Adjusted to Reported Net Income” table in the “How We
Performed” section of this document.
2 In 2014, the Bank conformed to a standardized definition of full-time equivalent
staff across all segments. The definition includes, among other things, hours for
overtime and contractors as part of its calculations. Results for periods prior to
2014 have not been restated.
REVIEW OF FINANCIAL PERFORMANCE
Canadian Retail net income for the year on a reported basis was
$5,234 million, an increase of $665 million, or 15%, compared with
last year. Adjusted net income for the year was $5,490 million, an
increase of $809 million, or 17%, compared with last year. The increase
in adjusted earnings was primarily due to loan and deposit volume
growth, the addition of Aeroplan, strong growth in assets under
management, a rebound in insurance earnings due to additional losses
last year as a result of strengthened reserves for general insurance
automobile claims and claims resulting from severe weather-related
events, partially offset by expense growth. The reported annualized
return on common equity for the year was 41.7%, while the adjusted
annualized return on common equity was 43.7%, compared with
42.3% and 43.3%, respectively, last year.
Canadian Retail revenue is derived from the Canadian personal
and commercial banking businesses, including credit cards, auto
finance, wealth and insurance businesses. Revenue for the year was
$19,161 million, an increase of $1,379 million, or 8%, compared with
last year. Net interest income increased $616 million, or 7%, driven
primarily by good loan and deposit volume growth, and the addition
of Aeroplan. Non-interest income increased $763 million, or 9%,
largely driven by wealth asset growth, higher volume-related fee
growth, the addition of Aeroplan, and higher insurance revenues.
Margin on average earning assets was 2.95%, an increase of 3 basis
points (bps), due to the addition of Aeroplan.
The personal banking business generated solid average lending
volume growth of $12.4 billion, or 5%. Average real estate secured
lending volume increased $7.9 billion, or 4%. Auto lending average
volume increased $1 billion, or 7%, while all other personal lending
average volumes increased $3.5 billion, or 11%, largely due to the
addition of Aeroplan. Business loans and acceptances average volume
increased $5.3 billion, or 12%. Average personal deposit volumes
increased $3.8 billion, or 3%, due to strong growth in core chequing
and savings accounts, partially offset by lower term deposit volume.
Average business deposit volumes increased $5 billion, or 7%.
Assets under administration increased $8 billion, or 3%, compared
with the last year, as growth from new client assets, market
appreciation, and the addition of the remaining interest in NatWest
Stockbrokers Limited,
5 was partially offset by the sale of the
TD Waterhouse Institutional Services business. Assets under manage-
ment increased $25 billion, or 12%, mainly driven by growth from
market appreciation and new client assets.
PCL for the year was $946 million, an increase of $17 million, or
2% compared with last year. Personal banking PCL was $875 million,
a decrease of $7 million, or 1%, primarily due to better credit perfor-
mance and lower bankruptcies, partially offset by the addition of
Aeroplan. Business banking PCL was $71 million, an increase of
$24 million, primarily due to higher recoveries last year. Annualized
PCL as a percentage of credit volume was 0.29%, a decrease of 1 bps,
compared with last year. Net impaired loans were $834 million,
a decrease of $48 million, or 5%, compared with last year.
Insurance claims and related expenses were $2,833 million, a
decrease of $223 million, or 7%, compared with last year, primarily
due to additional losses last year as a result of strengthened reserves
for general insurance automobile claims and claims resulting from
severe weather-related events, partially offset by higher current year
claims driven by severe winter conditions, and business growth.
Reported non-interest expenses for the year were $8,438 million,
an increase of $684 million, or 9%, compared with last year. Adjusted
non-interest expenses for the year were $8,091 million, an increase of
$489 million, or 6%, compared with last year. The increase was driven
by higher employee-related costs including higher revenue-based vari-
able compensation in the wealth business, the addition of Aeroplan,
investments to grow the business, and volume growth, partially offset
by initiatives to increase productivity.
The reported efficiency ratio worsened to 44.0%, while the adjusted
efficiency ratio improved to 42.2%, compared with 43.6% and
42.7%, respectively, last year.
5 As previously announced on July 8, 2014, the Bank completed the acquisition
of the remaining interest in NatWest Stockbrokers Limited from National
Westminster Bank plc.