T ABLE 17
U.S. RETAIL1
(millions of dollars, except as noted) Canadian Dollars
U.S. Retail Bank net income – reported2 U.S. Retail Bank net income – adjusted2
Equity in net income of an investment in TD Ameritrade Net income – adjusted
Net income – reported
U.S. Dollars Net interest income
Non-interest income
Total revenue – reported Total revenue – adjusted Provision for credit losses
Non-interest expenses – reported Non-interest expenses – adjusted
U.S. Retail Bank net income – reported2
Adjustments for items of note, net of income taxes3 Charge related to the acquisition in U.S. strategic cards portfolio and related integration costs
Litigation and litigation-related charge(s)/reserve(s) U.S. Retail Bank net income – adjusted2
Equity in net income of an investment in TD Ameritrade Net income – adjusted
Net income – reported
Selected volumes and ratios Return on common equity – reported4 Return on common equity – adjusted4 Margin on average earning assets5 Efficiency ratio – reported Efficiency ratio – adjusted
Assets under administration (billions of U.S. dollars) Assets under management (billions of U.S. dollars)6
Number of U.S. retail stores
Average number of full-time equivalent staff 1
Certain comparative amounts and ratios have been recast to conform with the revised presentation, which includes only the Bank’s agreed portion of revenue, PCL, and expenses for the U.S. strategic cards portfolio and was adopted in fiscal 2016. For further details, refer to the “Business Focus” section of this document. 2 Before the equity in net income of the Bank’s investment in TD Ameritrade.
3
For explanations of items of note, refer to the “Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income” table in the “Financial Results Overview” section of this document.
4
Capital allocated to the business segments was based on 8% CET1 Capital in fiscal 2014 and 9% in fiscal 2015 and 2016.
REVIEW OF FINANCIAL PERFORMANCE U.S. Retail net income for the year was $2,959 million (US$2,234 million), which included net income of $2,524 million (US$1,906 million) from the U.S. Retail Bank and $435 million (US$328 million) from TD’s investment in TD Ameritrade. U.S. Retail reported earnings increased US$227 million, or 11%, compared with last year, while adjusted earnings increased US$181 million, or 9%. U.S. Retail Canadian dollar earnings benefited from a strengthening of the U.S. dollar with reported earnings up $471 million, or 19%, and adjusted earnings up $412 million, or 16%. The reported and adjusted ROE for the year was 8.8%, compared with 8.0% and 8.2%, respectively, last year.
The contribution from TD Ameritrade of US$328 million increased US$22 million, or 7%, compared with last year, primarily due to increased asset-based revenue and favourable tax items, partially offset by higher operating expenses and decreased trading volumes. U.S. Retail Bank reported net income for the year was US$1,906 million, an increase of US$205 million, or 12%, compared with last year, primarily due to higher loan and deposit volumes, positive operating leverage, and the positive impact from an acquisition in the strategic cards portfolio, partially offset by higher PCL. U.S. Retail Bank adjusted net income increased US$159 million, or 9%.
5 $ 2016
$ 2,524 2,524 435
$ 2,959 2,959
$ 5,346 1,784
7,130 7,130 559
4,289 4,289
1,906
– –
1,906 328
$ 2,234 2,234
8.8% 8.8
3.12 60.2 60.2
13 63
1,278 25,732 $ 2015
$ 2,112 2,171 376
$ 2,547 2,488
$ 4,925 1,689
6,614 6,670 430
4,165 4,146
1,701
39 7
1,747 306
$ 2,053 2,007
8.0% 8.2
3.12 63.0 62.2
12 77
1,298 25,647 $ 2014
$ 1,805 1,805 305
$ 2,110 2,110
$ 4,749 1,823
6,572 6,572 401
4,136 4,136
1,657
– –
1,657 281
$ 1,938 1,938
8.4% 8.4
3.20 63.0 63.0
12 59
1,318 26,074
The margin on average earning assets excludes the impact related to the TD Ameritrade IDA and the impact of intercompany deposits and cash collateral. In addition, the value of tax-exempt interest income is adjusted to its equivalent before-tax value.
6
On August 30, 2016, a sub-advisory agreement with respect to $14 billion in assets was terminated, of which $3 billion were withdrawn before October 31, 2016 with the remainder to be completed by December 8, 2016. The revenue and net income associated with the terminated sub-advisory agreement is not significant to the Wealth business in U.S. Retail.
U.S. Retail Bank revenue is derived from personal and business banking, wealth management services, and investments. Revenue for the year was US$7,130 million. Reported revenue increased US$516 million, or 8%, compared with last year, while adjusted revenue was up US$460 million, or 7%. Net interest income increased US$421 million, or 9%, primarily reflecting higher loan and deposit volumes, the benefit of the December 2015 Fed rate increase (the “rate increase”) and the benefit of an acquisition in the strategic cards portfolio. Margin on average earning assets was 3.12%, or flat compared with last year, primarily due to higher deposit margins, the rate increase, and favourable balance sheet mix, offset by lower loan margins. Reported non-interest income increased US$95 million, or 6%, primarily reflecting fee income growth in personal banking, and the positive impact from an acquisition in the strategic cards portfolio, offset by a change in time order posting of customer transactions and unfavourable hedging impact. Adjusted non-interest income increased US$39 million, or 2%.
Excluding an acquisition in the strategic cards portfolio, average loan volumes increased US$13 billion, or 11%, compared with last year, due to growth in business and personal loans of 17% and 4%, respectively. Average deposit volumes increased US$19 billion, or 9%, reflecting 7% growth in business deposit volumes, 8% growth in personal deposit volumes and an 11% increase in sweep deposit volume from TD Ameritrade.
TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS
33
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