2015 FINANCIAL RESULTS OVERVIEW 2015 Financial Performance by Business Line
Canadian Retail net income for the year ended October 31, 2015 on a reported basis was $5,938 million, an increase of $704 million, or 13%, compared with the year ended October 31, 2014. The increase in reported earnings reflected increased revenue, partially offset by expense growth. Adjusted net income for the year ended October 31, 2015 was $5,938 million, an increase of $448 million, or 8%, compared with the year ended October 31, 2014. Revenue for the year ended October 31, 2015 was $19,685 million, an increase of $524 million, or 3%, compared with the year ended October 31, 2014. Net interest income increased $243 million, or 3%, reflecting loan and deposit volume growth and the full year impact of Aeroplan, partially offset by lower margins. Non-interest income increased $281 million, or 3%, reflecting wealth asset growth, higher personal and business banking fee-based revenue, and insurance premium growth, partially offset by a change in mix of reinsurance contracts. PCL for the year ended October 31, 2015 was $887 million, a decrease of $59 million, or 6% compared with the year ended October 31, 2014. Personal banking PCL was $855 million, a decrease of $20 million, or 2%, due primarily to the sale of charged off accounts and strong credit performance, partially offset by higher provisions in the auto lending portfolio. Business banking PCL was $32 million, a decrease of $39 million compared with the year ended October 31, 2014. Insurance claims and related expenses were $2,500 million, a decrease of $333 million, or 12%, compared with the year ended October 31, 2014, primarily due to a change in mix of reinsurance contracts, more favourable prior years’ claims development, less severe weather conditions and lower current year claims costs. Reported non-interest expenses for the year ended October 31, 2015 were $8,407 million, a decrease of $31 million compared with the year ended October 31, 2014. The decrease in reported non-interest expenses reflected higher employee-related expenses, including higher revenue-based variable expenses in the wealth business, business growth, and higher initiative spend, partially offset by productivity savings. Adjusted non-interest expenses for the year ended October 31, 2015 were $8,407 million, an increase of $316 million, or 4%, compared with the year ended October 31, 2014.
U.S. Retail net income for the year on a reported basis was $2,488 million (US$2,007 million), which included net income of $2,112 million (US$1,701 million) from the U.S. Retail Bank and $376 million (US$306 million) from TD’s investment in TD Ameritrade. U.S. Retail adjusted net income for the year was $2,547 million (US$2,053 million). Canadian dollar earnings benefited from a strengthening of the U.S. dollar during the year. The reported and adjusted annualized ROE for the year was 8.0% and 8.2% respectively, compared with 8.4% last year. U.S. Retail Bank reported net income for the year was US$1,701 million, an increase of US$44 million, or 3%, compared with last year, primarily due to strong organic growth, lower PCL, good expense management, and a lower effective tax rate, partially offset by lower loan margins, lower gains on sales of securities, and a charge related to an acquisition in the strategic cards portfolio and related integration costs. U.S. Retail Bank adjusted earnings of US$1,747 million increased US$90 million, or 5%. The contribution from TD Ameritrade of US$306 million was up 9% compared with last year, primarily due to strong asset growth and higher transaction revenue, partially offset by higher operating expenses and lower investment gains. Reported revenue for the year was US$6,614 million, an increase of US$42 million, primarily due to strong organic loan and deposit growth, higher fee revenue, and the benefit of an acquisition in the strategic cards portfolio, partially offset by net margin compression, as well as, lower accretion, lower gains on sales of securities, and
a charge related to an acquisition in the strategic cards portfolio and related integration costs. Adjusted revenue was US$6,670 million, an increase of US$98 million, or 1%, compared with last year. PCL for the year was US$430 million, an increase of US$29 million, or 7%, compared with last year, primarily due to volume growth and the South Carolina flooding reserve, partially offset by continued credit quality improvement across various portfolios. Reported non-interest expenses for the year were US$4,165 million, an increase of US$29 million, compared with last year, primarily due to the impact of an acquisition in the strategic cards portfolio, investments to support business growth and increased provisions, partially offset by productivity savings. On an adjusted basis, non-interest expenses were US$4,146 million, an increase of US$10 million compared with last year.
Wholesale Banking net income for the year was $873 million, an increase of $60 million, or 7%, compared with last year. The increase in earnings was due to higher revenue, partially offset by higher non- interest expenses and a higher effective tax rate. Revenue for the year was $2,926 million, an increase of $246 million, or 9%, compared with the prior year. Revenue increased mainly due to higher trading- related revenue, while our continued focus on originations both in Canada and the U.S. resulted in robust debt underwriting fees and strong corporate lending growth. The increase in debt underwriting fees was largely driven by improved client activity, and corporate lending revenue increased on strong loan volume growth. The revenue increase also included the positive impact of foreign exchange translation. This was partially offset by lower mergers and acquisition (M&A) and equity underwriting fees. Trading-related revenue increased due to improved foreign exchange and fixed income trading that benefited from strong client activity in the year despite a challenging global environment, and higher equity trading on improved client volumes and increased volatility in the latter half of the year. 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. PCL for the year was $18 million, an increase of $7 million compared with last year, and consisted of the accrual cost of credit protection and a specific credit provision in the corporate lending portfolio. PCL in the prior year consisted primarily of the accrual cost of credit protection. Non-interest expenses for the year were $1,701 million, an increase of $112 million, or 7%, compared with last year. Non-interest expenses increased primarily due to the impact of foreign exchange translation and higher operating expenses.
Corporate segment reported net loss for the year was $1,275 million, compared with a reported net loss of $274 million last year. Current year reported net loss includes restructuring charges of $686 million ($471 million after-tax) on a net basis. The adjusted net loss for the year was $604 million, compared with an adjusted net loss of $286 million last year. The year-over-year increase in the reported net loss was attributable to Other items. Other items were lower due to the gain on sale of TD Ameritrade shares ($85 million after-tax) and favourable impact of tax items in the prior year, lower revenue from treasury and balance sheet management activities, and higher provisions for incurred but not identified credit losses due to volume growth and refinements in allowance methodology in the Canadian Retail and Wholesale loan portfolios.
40 TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS
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