TD Bank 2014 Annual Report Download - page 35

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS 33
PCL for the year was US$621 million, a decrease of US$143 million,
or 19%, compared with last year primarily due to broad-based
improvements in credit quality offset by volume-driven PCL growth.
Personal banking PCL was US$630 million, a decrease of US$8 million,
or 1%, compared with last year primarily due to lower provisions
on auto loans, partially offset by the full-year inclusion of Target
and other retail products. Business banking PCL was US$3 million,
a decrease of US$152 million, or 98%, compared with last year
reflecting improvements in credit quality and lower net charge
offs. Annualized adjusted PCL as a percentage of credit volume
for loans excluding debt securities classified as loans was 0.55%,
a decrease of 20 bps, compared with last year. Net impaired loans,
excluding acquired credit-impaired loans and debt securities classified
as loans, were US$1.2 billion, a decrease of US$64 million, or 5%,
compared with last year. Net impaired loans as a percentage of total
loans were 1.1% as at October 31, 2014, compared with 1.3% at
October 31, 2013. Net impaired debt securities classified as loans were
US$919 million at October 31, 2014, compared with US$985 million
at October 31, 2013.
Reported non-interest expenses for the year were US$4,907 million,
an increase of US$236 million, or 5%, compared with last year.
On an adjusted basis, non-interest expenses were US$4,907 million,
an increase of US$362 million, or 8%, compared with last year,
primarily due to increased expenses related to the full-year impact
of acquisitions, and investments to support business growth, partially
offset by productivity improvements. The reported efficiency ratio for
the year improved to 64.9%, compared with 65.1% last year, while
the adjusted efficiency ratio for the year was 64.9%, compared with
63.4% last year.
KEY PRODUCT GROUPS
Personal Banking
• Personal Deposits – offers a full suite of chequing and savings
products to retail customers along the U.S. Eastern Seaboard. In
2014, U.S. Retail continued to build on its reputation as America’s
Most Convenient Bank by opening 34 new stores and enhancing its
digital and phone channel capabilities. Strong year-over-year growth
in personal deposits was driven by maturing stores and a competi-
tive product offering. Enhancements to digital banking capabilities
resulted in record on-line account openings and double-digit growth
in the number of active users of digital banking services.
• Consumer Lending – offers a diverse range of financing products to
suit the needs of retail customers along the U.S. Eastern Seaboard.
In 2014, U.S. Retail continued to focus on growing profitable
market share by deepening customer relationships and acquiring
new customers through its stores and mortgage lending specialists,
while maintaining good risk management.
• Credit Cards Services – offers TD branded and private label credit
cards for retail and small business customers. Through its agreement
with Target Corporation, U.S. Retail provides co-branded Visa and
private label credit cards to Target’s U.S. customers. In 2014, U.S.
Retail saw robust new account growth fueled by its TD branded
product offerings as well as its private label card programs.
• Auto Finance – offers automotive financing and dealer commercial
services through a network of auto dealers throughout the U.S. In
2014, U. S. Retail focused on improving effectiveness in the delivery
of its services through a new priority dealer program and roll-out of
new product initiatives.
Business Banking
• Commercial Banking – serves the needs of U.S. businesses and
governments across a wide range of industries. In 2014, the busi-
ness saw improved asset quality and strong increases in loan volume
growth and significantly outperformed the industry.
• Small Business Banking – offers a wide range of financial products
and services to small businesses along the U.S. Eastern Seaboard.
In 2014, the business continued to be among the top ranked small
business lenders in its markets.
Wealth
• Advice-based business – provides private banking services,
investment advisory services, and trust services to retail and
institutional clients across different portfolio sizes and levels of
product complexity, to help clients protect, grow, and transition
their wealth. The advice-based business is integrated with the
U.S. personal and commercial banking businesses. In 2014, the
business made significant progress with its growth strategy.
• Asset Management – the U.S. asset management business is
comprised of the U.S. arm of TDAM’s institutional investment
business and Epoch Investment Partners Inc., acquired in 2013.
Both asset management units work in close partnership with other
TD businesses, including the advice-based business and retail
banking, to align products and services to ensure a legendary client
experience. In 2014, U.S. Retail grew its assets under management
and increased profitability largely due to the acquisition of Epoch
Investment Partners Inc.
BUSINESS OUTLOOK AND FOCUS FOR 2015
For 2015, our assumption is for continued modest but variable
economic growth and continued low interest rates with the
potential for modest increases in the second half of the calendar
year. We expect competition for loans and deposits to remain
intense, credit to remain benign, and the regulatory environ-
ment to be challenging as the complexity of the regulatory
framework continues to evolve and obligations on banks to
comply and adapt increase. Net interest margin is expected to
be relatively stable as loan repricing continues and accretion
benefits on acquired loans decline, but rate competition for new
loans subsides. Provision for credit losses is expected to begin
normalizing, as the high rate of recoveries in 2014 is not
expected to recur and the loan portfolio continues to grow.
Given these assumptions, we expect a challenging 2015 with
modest growth in adjusted earnings. We will continue to focus
on delivering legendary customer service and convenience
across all distribution channels, making the necessary invest-
ments to support future growth and regulatory compliance,
while maintaining our focus on productivity initiatives.
Our key priorities for 2015 are as follows:
• Provide a legendary customer experience across all
distribution channels.
• Focus on organic growth opportunities across our businesses.
• Deliver integrated service and advice in local markets, across
businesses, and channels.
• Invest in and grow our key businesses, continue to deepen
customer relationships, and focus on emerging payment and
loyalty innovations.
• Further optimize the balance sheet to meet increasing capital
requirements and position ourselves for growth opportunities.
• Continue to invest in an efficient, effective, and robust infra-
structure to adapt to industry and regulatory changes.
• Maintain our focus on productivity to enhance the customer
experience, employee satisfaction, and shareholder value.
TD AMERITRADE HOLDING CORPORATION
Refer to Note 12 of the Consolidated Financial Statements for further
information on TD Ameritrade.