REVIEW OF FINANCIAL PERFORMANCE
Wholesale Banking net income for the year was $920 million, an increase of $47 million, or 5%, compared with the prior year. The increase in earnings was due to higher revenue and a lower effective tax rate, partially offset by higher PCL, and higher non-interest expenses. The ROE for the year was 15.5%, compared with 15.2% in the prior year.
Revenue for the year was $3,030 million, an increase of
$104 million, or 4%, compared with the prior year, reflecting higher origination activity in debt and equity capital markets, higher corporate lending fees and higher fixed income and foreign exchange trading, partially offset by lower equity trading. Net interest income decreased $610 million or 27%, reflecting higher funding costs and lower dividends. Non-interest income increased $714 million reflecting higher trading and fees.
PCL is comprised of specific provisions for credit losses and accrual costs for credit protection. PCL for the year was $74 million, an increase of $56 million compared with the prior year reflecting higher specific provisions in the oil and gas sector.
Non-interest expenses for the year were $1,739 million, an increase of $38 million, or 2%, compared with the prior year reflecting higher variable compensation and the unfavourable impact of foreign exchange translation, partially offset by productivity savings.
KEY PRODUCT GROUPS
Investment Banking and Capital Markets • Includes advisory, underwriting, trading, facilitation, and trade execution services. Corporate Banking • Includes corporate lending, trade finance, and cash management services.
BUSINESS OUTLOOK AND FOCUS FOR 2017 We are cautiously optimistic about improved capital markets activity in 2017. However, we remain watchful of market sentiment as a combination of global market events, uncertainty over the outlook for interest rates and energy markets, increased competition, and evolving capital and regulatory requirements that will continue to impact our business. While these factors will likely affect corporate and investor sentiment in the near term, we believe our diversified, integrated, client-focused business model will continue to deliver solid results and grow our North American franchise. We remain focused on growing and deepening client relationships in Canada and the U.S., being a valued counterparty, and managing our risks, capital, and productivity in 2017.
Our key priorities for 2017 are as follows: • Deepen client relationships. • Continue to be a top ranked investment dealer in Canada. • Grow our U.S. franchise in partnership with U.S. Retail. • Expand our products and services in the U.S. • Invest in an efficient and agile infrastructure to support growth and adapt to industry and regulatory changes.
• Maintain our focus on productivity. • Continue to be an extraordinary place to work.
BUSINESS SEGMENT ANALYSIS Corporate
Corporate segment comprises of a number of service and control functional groups. Certain costs relating to these functions are allocated to operating business segments. The basis of allocation and methodologies are reviewed periodically to align with management’s evaluation of the Bank’s business segments.
T ABLE 20 CORPORATE
(millions of Canadian dollars) Net income (loss) – reported
Adjustments for items of note, net of income taxes1 Amortization of intangibles
Fair value of derivatives hedging the reclassified available-for-sale securities portfolio Impairment of goodwill, non-financial assets, and other charges Restructuring charges
Impact of Alberta flood on the loan portfolio Gain on sale of TD Waterhouse Institutional Services
Total adjustments for items of note Net income (loss) – adjusted
Decomposition of items included in net income (loss) – adjusted Net corporate expenses Other
Non-controlling interests Net income (loss) – adjusted
Selected volumes Average number of full-time equivalent staff
1
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.
2016 $ (931)
246 116 –
356 $ (575)
$ (836) 146 115
$ (575) 13,160
(6) – –
2015 $ (1,275) 255
(55) –
471 – –
671 $ (604)
$ (734) 18
112 $ (604) 12,870 2014 $ (274) 246
(43) – –
(19)
(196) (12)
$ (286)
$ (727) 334 107
$ (286) 12,020
TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS
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