TD Bank 2014 Annual Report Download - page 34

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS32
(millions of dollars, except as noted) Canadian dollars
U.S. dollars
2014 2013 2012 2014 2013 2012
Net interest income $ 6,000 $ 5,173 $ 4,663 $ 5,503 $ 5,070 $ 4,643
Non-interest income 2,245 2,149 1,570 2,060 2,103 1,565
Total revenue 8,245 7,322 6,233 7,563 7,173 6,208
Provision for credit losses – loans 694 762 652 636 746 651
Provision for (recovery of) credit losses –
debt securities classified as loans (16) (32) 12 (14) (31) 12
Provision for (recovery of) credit losses –
acquired credit-impaired loans2 (2) 49 115 (1) 49 115
Provision for credit losses – reported 676 779 779 621 764 778
Provision for credit losses – adjusted 676 779 725 621 764 723
Non-interest expenses – reported 5,352 4,768 4,246 4,907 4,671 4,228
Non-interest expenses – adjusted 5,352 4,642 3,815 4,907 4,545 3,799
U.S. Retail Bank net income – reported3 1,805 1,506 1,116 1,657 1,474 1,111
Adjustments for items of note4
Litigation and litigation-related charge/reserve – 100 248 – 100 247
Impact of Superstorm Sandy – – 37 – – 37
Integration charges and direct transaction costs relating
to U.S. Retail acquisitions – – 9 – – 9
U.S. Retail Bank net income – adjusted3 1,805 1,606 1,410 1,657 1,574 1,404
Equity in net income of an investment in associate,
net of income taxes 305 246 209 281 241 207
Net income – reported $ 2,110 $ 1,752 $ 1,325 $ 1,938 $ 1,715 $ 1,318
Net income – adjusted 2,110 1,852 1,619 1,938 1,815 1,611
Selected volumes and ratios
Return on common equity – reported 8.4% 8.0% 6.3% 8.4% 8.0% 6.3%
Return on common equity – adjusted 8.4 8.4 7.7 8.4 8.4 7.7
Margin on average earning assets (TEB)5 3.75 3.66 3.60 3.75 3.66 3.60
Efficiency ratio – reported 64.9 65.1 68.1 64.9 65.1 68.1
Efficiency ratio – adjusted 64.9 63.4 61.2 64.9 63.4 61.2
Number of U.S. retail stores 1,318 1,317 1,315 1,318 1,317 1,315
Average number of full-time equivalent staff6 26,074 25,247 25,340 26,074 25,247 25,340
U.S. RETAIL1
TABLE 19
1 Revenue and expenses related to Target are reported on a gross basis in the
Consolidated Statement of Income. Non-interest expenses include expenses related
to the business and amounts due to Target Corporation under the credit card
program agreement.
2 Includes all Federal Deposit Insurance Corporation (FDIC) covered loans and other
acquired credit-impaired loans.
3 Results exclude the impact related to the equity in net income of the investment
in TD Ameritrade.
4 For explanations of items of note, see the “Non-GAAP Financial Measures −
Reconciliation of Adjusted to Reported Net Income” table in the “Financial
Results Overview” section of this document.
5 Margin on average earning assets excludes the impact related to the
TD Ameritrade IDA.
6 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
U.S. Retail net income for the year on a reported basis was
$2,110 million (US$1,938 million), which included net income of
$1,805 million (US$1,657 million) from the U.S. Retail Bank and
$305 million (US$281 million) from TD’s investment in TD Ameritrade.
U.S. Retail earnings of US$1,938 million on a reported basis were
up 13% compared with last year. U.S. Retail adjusted earnings
of US$1,657 million increased 5% due to strong organic growth,
excellent asset quality, and the full-year effect of acquisitions,
partially offset by lower security gains and margin compression.
The contribution from TD Ameritrade of US$281 million was up
17% compared with last year, primarily due to increased asset-based
and transaction-based revenue, partially offset by higher operating
expenses and lower investment gains. Canadian dollar earnings growth
benefited from a strengthening of the U.S. dollar during the year.
The reported annualized return on common equity for the year was
8.4%, compared to 8.0% last year. The adjusted annualized return
on common equity for the year was 8.4%, flat compared to last year.
Revenue for the year was US$7,563 million, an increase of
US$390 million, or 5%, compared with last year, primarily due to
increased loan and deposit volumes and the full-year impact of Target
and Epoch, partially offset by lower gains on sales of securities and
debt securities classified as loans. Average loan volumes increased
US$10 billion, or 10%, compared with last year, with a 9% increase
in personal loans and an 11% increase in business loans. Average
deposit volumes increased US$13 billion, or 7%, compared with prior
year driven by a 7% growth in personal deposits, 8% growth in busi-
ness deposits, and 6% growth in TD Ameritrade deposits. Margin on
average earning assets for the year was 3.75%, a 9 bps increase
compared with last year as higher loan margins from the full-year
impact of Target were partially offset by core margin compression
and lower accretion.