BUSINESS HIGHLIGHTS • Earnings of $920 million and an ROE of 15.5%. • Higher revenue, reflecting a strengthening franchise in Canada and growth in the U.S.
• Notable deals in the year: – Joint book-runner on TransCanada Corporation’s $4.2 billion equity underwriting – the largest ever bought deal in Canada
– Lead book-runner on Suncor Energy’s $2.5 billion equity underwriting
– Joint book-runner on Aritzia Inc.’s $460 million initial public offering (IPO) – the largest Canadian IPO of the year
• Signed an agreement to acquire Albert Fried & Company – a New York-based broker-dealer with services and capabilities including self-clearing, securities lending, and a prime brokerage technology platform in its final stages of development12
.
• Ranked #1 overall in Thomson Reuters’ Analyst Awards for equity research13
.
• Maintained a top-three dealer status in Canada (for the nine-month period ended September 30, 2016)14
– #1 in equity options block trading; – #1 in equity underwriting; – #2 in equity block trading; – #2 in government debt and corporate debt underwriting; and
– #3 in Canadian syndicated loans (on a rolling twelve-month basis).
• Continued investment in our infrastructure model to be more efficient and agile and meet regulatory changes.
CHALLENGES IN 2016 • Sustained low interest rate environment and uncertainty over the timing of rate increases.
• Global fiscal and political environment contributed to investor uncertainty.
• Low energy prices resulted in increased specific provisions for credit losses in the oil and gas sector.
• Regulatory changes continued to have an impact on TD Securities’ businesses.
T ABLE 19 WHOLESALE BANKING
(millions of Canadian dollars, except as noted) Net interest income (TEB)
Non-interest income Total revenue
Provision for credit losses1 Non-interest expenses
Net income
Selected volumes and ratios Trading-related revenue
Gross drawn (billions of Canadian dollars)2 Return on common equity3 Efficiency ratio
Average number of full-time equivalent staff 1
PCL is comprised of specific provisions for credit losses and accrual costs for credit protection. The change in market value of the credit protection, in excess of the accrual cost, is reported in the Corporate segment. Refer to Note 30 for further details.
2 2016
$ 1,685 1,345
3,030 74
1,739 $ 920
$ 1,636 20.7
15.5% 57.4
3,766 2015
$ 2,295 631
2,926 18
1,701 $ 873
$ 1,545 16.1
15.2% 58.1
3,748
Includes gross loans and bankers’ acceptances, excluding letters of credit, cash collateral, credit default swaps (CDS), and reserves for the corporate lending business.
3
Capital allocated to the business segments was based on 8% CET1 Capital in fiscal 2014 and 9% in fiscal 2015 and 2016.
2014
$ 2,210 470
2,680 11
1,589 $ 813
$ 1,394 12.2
17.5% 59.3
3,654 :
INDUSTRY PROFILE
The wholesale banking sector is a mature, highly competitive market with competition arising from banks, large global investment firms, and independent niche dealers. Wholesale banking provides services to government, corporate and institutional clients. Products include capital markets services, investment banking, and corporate banking. Regulatory requirements for wholesale banking businesses have continued to evolve, impacting strategy and returns for the sector. Overall, wholesale banks have continued to shift their focus to client- driven trading revenue and fee income to reduce risk and to preserve capital. Competition is expected to remain intense for transactions with high quality counterparties, as securities firms focus on prudent risk and capital management. Longer term, wholesale banks that have a diversified client-focused business model, offer a wide range of products and services, and exhibit effective cost and capital management will be well-positioned to achieve attractive returns for shareholders.
OVERALL BUSINESS STRATEGY
• Expand our client franchise through organic growth. • Provide superior advice and execution to meet clients’ needs. • Strengthen our position as a top investment dealer in Canada. • Grow our U.S. franchise. • Leverage our enterprise partners. • Maintain a prudent risk profile by focusing on high quality clients, counterparties, and products.
• Adapt to rapid industry and regulatory changes. • Be an extraordinary and inclusive place to work by attracting, developing, and retaining top talent.
12 13
Acquisition is subject to the satisfaction of closing conditions, including obtaining regulatory approvals.
The Thomson Reuters Analyst Awards are recognized as the gold standard in objective measurement of sell-side analyst performance. The awards recognize the world’s top individual sell-side analysts and sell-side firms. They measure the performance of sell-side analysts based on the returns of their buy/sell recommendations relative to industry benchmarks, and the accuracy of their earnings estimates in 16 regions across the globe. TD Securities ranking is based on receiving the highest number of equity research awards in 2016.
36 TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS
14
Equity options block trading and equity block trading: block trades by value on all Canadian exchanges, Source: IRESS. Equity underwriting, Source: Bloomberg. Government and corporate debt underwriting: excludes self-led domestic bank deals and credit card deals, bonus credit to lead, Source: Bloomberg; Canadian syndicated loans: deal volume awarded proportionately to the Lead Arrangers. Source: Bloomberg. Rankings reflect TD Securities’ position among Canadian peers.
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