TD Bank 2014 Annual Report Download - page 40

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS38
(millions of Canadian dollars) Canadian U.S. Wholesale
Retail Retail Banking Corporate Total
Net interest income (loss) $ 8,922 $ 5,173 $ 1,982 $ (3) $ 16,074
Non-interest income (loss) 8,860 2,149 428 (252) 11,185
Total revenue 17,782 7,322 2,410 (255) 27,259
Provision for (recovery of) credit losses 929 779 26 (103) 1,631
Insurance claims and related expenses 3,056 – – – 3,056
Non-interest expenses 7,754 4,768 1,542 1,005 15,069
Net income (loss) before provision for income taxes 6,043 1,775 842 (1,157) 7,503
Provision for (recovery of) income taxes 1,474 269 192 (800) 1,135
Equity in net income of an investment in associate, net of income taxes – 246 – 26 272
Net income (loss) – reported 4,569 1,752 650 (331) 6,640
Adjustments for items of note, net of income taxes 112 100 – 284 496
Net income (loss) – adjusted $ 4,681 $ 1,852 $ 650 $ (47) $ 7,136
REVIEW OF 2013 FINANCIAL PERFORMANCE
TABLE 23
2013 FINANCIAL RESULTS OVERVIEW
Summary of 2013 Performance
NET INTEREST INCOME
Net interest income for the year on a reported and adjusted basis was
$16,074 million, an increase of $1,048 million, or 7%, on a reported
basis, and an increase of $1,012 million, or 7%, on an adjusted basis.
The increase in adjusted net interest income was driven primarily by
increases in the U.S. Retail, Canadian Retail, and Wholesale Banking
segments. U.S. Retail net interest income increased primarily due
to the inclusion of revenue from Target and strong loan and deposit
volume growth, partially offset by lower core margin and loan
accretion. Canadian Retail net interest income increased primarily
due to good loan and deposit volume growth and higher mortgage
refinancing revenue, partially offset by lower margin. Wholesale
Banking net interest income increased primarily due to higher
trading-related net interest income.
NON-INTEREST INCOME
Non-interest income for the year on a reported basis was $11,185 million,
an increase of $665 million, or 6%, compared with last year. Adjusted
non-interest income for the year was $11,114 million, an increase of
$499 million, or 5%, compared with last year. The increase in adjusted
non-interest income was primarily driven by increases in the U.S. Retail
and Canadian Retail segments, partially offset by declines in the
Wholesale Banking and Corporate segments. U.S. Retail non-interest
income increased primarily due to the inclusion of revenue from Target
and Epoch, higher fee-based revenue, and higher gains on sales of
securities and debt securities classified as loans. Canadian Retail non-
interest income increased primarily due to wealth asset growth, higher
volume-related fee growth, and strong direct investing trading
volumes. Wholesale Banking non-interest income decreased primarily
due to lower security gains in the investment portfolio and lower M&A
and advisory fees. Corporate segment non-interest income decreased
primarily due to lower gains from treasury and other hedging activities.
NON-INTEREST EXPENSES
Reported non-interest expenses for the year were $15,069 million,
an increase of $1,053 million, or 8%, compared with last year.
Adjusted non-interest expenses were $14,390 million, an increase
of $1,210 million, or 9%, compared with last year. The increase in
adjusted non-interest expenses was driven by increases in the U.S.
Retail, Canadian Retail, and Corporate segments. U.S. Retail expenses
increased primarily due to increased expenses related to Target, invest-
ments in new stores, and other planned initiatives, partially offset by
productivity gains. Canadian Retail expenses increased primarily due to
higher employee-related costs including higher revenue-based variable
expenses in the wealth business, investment in initiatives to grow the
business, and volume growth, partially offset by productivity gains.
Corporate segment expenses increased primarily due to higher pension
and strategic initiative costs.
INCOME TAX EXPENSE
Reported total income and other taxes increased by $111 million,
or 5%, from 2012. Income tax expense, on a reported basis, was up
$50 million, or 5%, from 2012. Other taxes were up $61 million, or
6%, from 2012. Adjusted total income and other taxes were down
$10 million from 2012. Total income tax expense, on an adjusted
basis, was down $71 million, or 5%, from 2012.
The Bank’s effective income tax rate on a reported basis was 15.1%
for 2013, compared with 14.8% in 2012.
The Bank reports its investment in TD Ameritrade using the equity
method of accounting. TD Ameritrade’s tax expense of $168 million
in the year, compared to $131 million in 2012, was not part of the
Bank’s tax rate.