(Source: PRNewswire-FirstCall)
TORONTO, Aug. 27 /PRNewswire-FirstCall/ -- TD Bank Financial Group (TDBFG) today announced its financial results for the third quarter ended July 31, 2009. Results for the quarter included very strong contributions from the Canadian Personal and Commercial Banking and Wholesale Banking segments, and good results from the Wealth Management and U.S. Personal and Commercial Banking segments, which both continue to manage well through challenging financial markets.
"While we expected TD's businesses to hold up well under the weight of a global recession, their resilience is remarkable and has exceeded our expectations," said Ed Clark, President and Chief Executive Officer, TDBFG. "Adjusted net income was up 17% from last year, a new record, with over $1 billion in retail earnings alone. We're obviously feeling pretty good about these results, which really showcase TD's earnings power and why we see tremendous potential upside in those earnings once conditions normalize."
THIRD QUARTER BUSINESS SEGMENT PERFORMANCE Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking posted record earnings of $677 million in the third quarter, up 5% from the same period last year. The impact of very strong volume growth in personal and commercial lending and improving efficiency more than offset higher provision for credit losses.
"Faced with a challenging economic environment, TD Canada Trust delivered a quarter full of records - record revenue, efficiency, earnings and customer satisfaction, highlighted by TDCT winning the J.D. Power customer-satisfaction award for the fourth year in a row and the Synovate award for customer-service excellence for the fifth year in a row," said Clark. "Looking forward, we remain cautious in this uncertain environment, but we're certainly feeling good about these results and our position as the leader in service and convenience."
Wealth Management
Wealth Management, including TDBFG's equity share in TD Ameritrade, earned net income of $163 million in the quarter, down 19% from the third quarter of last year, as record transactional volumes in online brokerage operations were more than offset by the impact of market declines in the mutual fund and advice-based businesses. As previously announced, TD Ameritrade contributed $68 million in earnings to the segment, with record average trades per day in its quarter ended June 30, 2009.
"Our wealth businesses performed well, with earnings up nearly 30% from the last quarter," said Clark. "With strong client engagement and continued investments in the business, wealth management is very well positioned for the future."
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated $172 million in reported net income. Excluding restructuring and integration charges, the segment earned $242 million in adjusted net income for the quarter, down 11% from the same period last year due to higher loan losses reflecting the recessionary environment.
"These are good results in the current economic context driven by solid fundamentals, with growth in both lending and deposits," said Clark. "While credit losses are certainly higher than last year, we continue to see good relative credit performance."
"The integration continues to be a great success story, with synergies and new store openings continuing on target," Clark added. "We are very pleased with the power of our U.S. retail franchise, TD Bank, America's Most Convenient Bank."
Wholesale Banking
Wholesale Banking earned net income for the quarter of $327 million, up $290 million from the same period last year. Very strong trading and capital market fee revenues led robust results across the business, as credit markets improved and market activity increased. These results more than outweighed realized net security losses related to the strategic decision to exit the public equity investment portfolio, which was completed this quarter.
"TD Securities improved its strategic positioning while also achieving record results - a remarkable achievement," said Clark. "And the resulting decline in both market risk and risk-weighted assets has allowed us to redeploy capital strategically."
"While we do not view performance as sustainable at this level and remain cautious about the volatile operating environment, TD Securities is proving that you can actually reduce risk and get better results."
Conclusion
"Last quarter we said this may be a recession in which we actually grow lending through the downturn. This has been proven out, as our very strong capital position has allowed us to provide access to credit, filling the gaps left by those who have exited the lending market," said Clark. "While the recession is turning out to be less severe than we expected, looking forward we remain cautious and continue to expect a tough 2010. But this quarter's results show that strong businesses can perform even in tough economic conditions."
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, TD Bank Financial Group (TDBFG or the Bank) makes written and oral forward-looking statements, including in this document, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission (SEC), and in other communications. In addition, the Bank's senior management may make forward-looking statements orally to analysts, investors, representatives of the media and others. All such statements are made pursuant to the "safe harbour" provisions of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements include, among others, statements regarding the Bank's objectives and targets for 2009 and beyond, and strategies to achieve them, the outlook for the Bank's business lines, and the Bank's anticipated financial performance. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders and analysts in understanding our financial position as at and for the periods ended on the dates presented and our strategic priorities and objectives, and may not be appropriate for other purposes. The economic assumptions for 2009 for the Bank are set out in the Bank's 2008 Annual Report under the heading "Economic Summary and Outlook" and for each of our business segments, under the heading "Business Outlook and Focus for 2009." Forward-looking statements are typically identified by words such as "will", "should", "believe", "expect", "anticipate", "intend", "estimate", "plan", "may" and "could". By their very nature, these statements require us to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in light of the current, unprecedented financial and economic environment, such risks and uncertainties may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Some of the factors - many of which are beyond our control and the effects of which can be difficult to predict - that could cause such differences include: credit, market (including equity and commodity), liquidity, interest rate, operational, reputational, insurance, strategic, foreign exchange, regulatory, legal and other risks discussed in the Bank's 2008 Annual Report and in other regulatory filings made in Canada and with the SEC; general business and economic conditions in Canada, the U.S. and other countries in which the Bank conducts business, as well as the effect of changes in existing and newly introduced monetary and economic policies in those jurisdictions and changes in the foreign exchange rates for the currencies of those jurisdictions; the degree of competition in the markets in which the Bank operates, both from established competitors and new entrants; defaults by other financial institutions in Canada, the U.S. and other countries; the accuracy and completeness of information the Bank receives on customers and counterparties; the development and introduction of new products and services in markets; developing new distribution channels and realizing increased revenue from these channels; the Bank's ability to execute its strategies, including its integration, growth and acquisition strategies and those of its subsidiaries, particularly in the U.S.; changes in accounting policies (including future accounting changes) and methods the Bank uses to report its financial condition, including uncertainties associated with critical accounting assumptions and estimates; changes to our credit ratings; global capital market activity; increased funding costs for credit due to market illiquidity and increased competition for funding; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; the failure of third parties to comply with their obligations to the Bank or its affiliates as such obligations relate to the handling of personal information; technological changes; the use of new technologies in unprecedented ways to defraud the Bank or its customers and the organized efforts of increasingly sophisticated parties who direct their attempts to defraud the Bank or its customers through many channels; legislative and regulatory developments; change in tax laws; unexpected judicial or regulatory proceedings; the U.S. securities litigation environment; unexpected changes in consumer spending and saving habits; the adequacy of the Bank's risk management framework, including the risk that the Bank's risk management models do not take into account all relevant factors; the possible impact on the Bank's businesses of international conflicts and terrorism; acts of God, such as earthquakes; the effects of disease or illness on local, national or international economies; and the effects of disruptions to public infrastructure, such as transportation, communication, power or water supply. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's businesses, financial results, financial condition or liquidity. The preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank's results. For more information, see the discussion starting on page 64 of the Bank's 2008 Annual Report. All such factors should be considered carefully when making decisions with respect to the Bank, and undue reliance should not be placed on the Bank's forward-looking statements. Any forward-looking information or statements contained in this document represent the views of management only as of the date hereof. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf, except as required under applicable securities legislation.
This document was reviewed by the Bank's Audit Committee and was approved by the Bank's Board of Directors, on the Audit Committee's recommendation, prior to its release.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE -------------------------------------------------------------------------
This Management's Discussion and Analysis (MD A) is presented to enable readers to assess material changes in the financial condition and operating results of TD Bank Financial Group (TDBFG or the Bank) for the three and nine months ended July 31, 2009, compared with the corresponding periods in the prior year. This MD A should be read in conjunction with the Bank's unaudited Interim Consolidated Financial Statements and related Notes included in this Report to Shareholders and with our 2008 Annual Report. This MD A is dated August 26, 2009. Unless otherwise indicated, all amounts are expressed in Canadian dollars and have been primarily derived from the Bank's Annual or Interim Consolidated Financial Statements prepared in accordance with Canadian generally accepted accounting principles (GAAP). Certain comparative amounts have been reclassified to conform to the presentation adopted in the current period. Additional information relating to the Bank is available on the Bank's website at http://www.td.com/, as well as on SEDAR at http://www.sedar.com/ and on the U.S. Securities and Exchange Commission's (SEC's) website at http://www.sec.gov/ (EDGAR filers section).
FINANCIAL HIGHLIGHTS ------------------------------------------------------------------------- For the nine For the three months ended months ended (millions of -------------------------------------------------- Canadian dollars, July 31 Apr. 30 July 31 July 31 July 31 except as noted) 2009 2009 2008 2009(1) 2008 ------------------------------------------------------------------------- Results of operations Total revenue $4,667 $4,325 $4,037 $13,142 $11,029 Provision for credit losses 557 656 288 1,750 775 Non-interest expenses 3,045 3,051 2,701 9,116 7,135 Net income - reported(2) 912 618 997 2,242 2,819 Net income - adjusted(2) 1,303 1,089 1,115 3,541 3,148 Economic profit(3) 258 58 321 492 1,073 Return on common equity - reported 9.8% 6.6% 13.4% 8.2% 14.8% Return on invested capital(3) 12.6% 10.6% 13.1% 11.7% 14.2% ------------------------------------------------------------------------- Financial position Total assets $544,590 $574,882 $508,839 $544,590 $508,839 Total risk-weighted assets 189,745 199,745 184,674 189,745 184,674 Total shareholders' equity 37,788 39,627 31,293 37,788 31,293 ------------------------------------------------------------------------- Financial ratios - reported Efficiency ratio - reported 65.2% 70.6% 66.9% 69.4% 64.7% Efficiency ratio - adjusted 56.6% 60.3% 62.8% 59.4% 60.7% Tier 1 capital to risk-weighted assets 11.2% 10.9% 9.5% 11.2% 9.5% Provision for credit losses as a % of net average loans 0.91% 1.12% 0.51% 0.98% 0.51% ------------------------------------------------------------------------- Common share information - reported (Canadian dollars) Per share Basic earnings $1.01 $0.68 $1.22 $2.51 $3.68 Diluted earnings 1.01 0.68 1.21 2.51 3.65 Dividends 0.61 0.61 0.59 1.83 1.75 Book value 40.27 42.60 36.75 40.27 36.75 Closing share price 63.11 47.10 62.29 63.11 62.29 Shares outstanding (millions) Average basic 851.5 848.8 804.0 844.3 756.8 Average diluted 855.4 849.8 811.0 846.5 763.2 End of period 854.1 850.6 807.3 854.1 807.3 Market capitalization (billions of Canadian dollars) $53.9 $40.1 $50.3 $53.9 $50.3 Dividend yield 4.4% 5.9% 3.7% 5.1% 3.6% Dividend payout ratio 60.1% 89.8% 48.5% 73.2% 48.8% Price to earnings multiple 16.9 12.0 12.1 16.9 12.1 ------------------------------------------------------------------------- Common share information - adjusted (Canadian dollars) Per share Basic earnings $1.47 $1.23 $1.37 $4.05 $4.15 Diluted earnings 1.47 1.23 1.35 4.04 4.12 Dividend payout ratio 41.4% 49.4% 43.3% 45.4% 43.6% Price to earnings multiple 13.1 10.0 11.3 13.1 11.3 ------------------------------------------------------------------------- (1) As explained in the "How the Bank Reports" section, effective the second quarter ended April 30, 2009, as the reporting periods of U.S. entities are aligned with the reporting period of the Bank, the results of U.S. entities for the nine months ended July 31, 2009 have been included with results of the Bank for the nine months ended July 31, 2009, while the results of January 2009 have been included directly in retained earnings of the second quarter and not included in the net income of the Bank. (2) Adjusted and reported results are explained in the "How the Bank Reports" section, which includes reconciliation between reported and adjusted results. (3) Economic profit and return on invested capital are non-GAAP financial measures and are explained in the "Economic Profit and Return on Invested Capital" section. HOW WE PERFORMED Corporate Overview
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group (TDBFG or the Bank). The Bank is the sixth largest bank in North America by branches and serves approximately 17 million customers in four key businesses operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Insurance; Wealth Management, including TD Waterhouse and an investment in TD AMERITRADE Holding Corporation (TD Ameritrade); U.S. Personal and Commercial Banking through TD Banknorth Inc. (TD Banknorth) and TD Bank, America's Most Convenient Bank; and Wholesale Banking, including TD Securities. The Bank also ranks among the world's leading online financial services firms, with more than 5.5 million online customers. The Bank had $545 billion in assets on July 31, 2009. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.
How the Bank Reports
The Bank prepares its Consolidated Financial Statements in accordance with GAAP and refers to results prepared in accordance with GAAP as "reported" results. The Bank also utilizes non-GAAP financial measures referred to as "adjusted" results to assess each of its businesses and to measure overall Bank performance. To arrive at adjusted results, the Bank removes "items of note", net of income taxes, from reported results. The items of note relate to items which management does not believe are indicative of underlying business performance. The Bank believes that adjusted results provide the reader with a better understanding of how management views the Bank's performance. The items of note are listed in the table on the following page. As explained, adjusted results are different from reported results determined in accordance with GAAP. Adjusted results, items of note and related terms used in this document are not defined terms under GAAP and, therefore, may not be comparable to similar terms used by other issuers.
For the purpose of alignment of reporting periods with the Bank, effective the second quarter ended April 30, 2009, the reporting periods of TD Banknorth and Commerce Bancorp, Inc. (Commerce) have been aligned with the reporting period of the Bank as described in Note 1 to the Interim Consolidated Financial Statements. Previously, the reporting periods of TD Banknorth and Commerce were included in the Bank's financial statements on a one month lag. Accordingly, to maintain comparability and include only nine months of results through July 31, 2009, the results of TD Banknorth and Commerce for the nine months ended July 31, 2009 have been included with the results of the Bank for the nine months ended July 31, 2009, while the results of January 2009 have been included directly in retained earnings of the second quarter and not included in the net income of the Bank.
The following tables provide reconciliations between the Bank's reported and adjusted results.
Operating Results - Reported ------------------------------------------------------------------------- For the nine For the three months ended months ended -------------------------------------------------- (millions of July 31 Apr.
