Toronto Dominion Bank 6-K, filed Dec 1, 2022
Toronto Dominion Bank (TD)
About this 6-K
Toronto Dominion Bank filed this 6-K on December 1, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
| For the month of December, 2022. | Commission File Number: 001-14446 |
The Toronto-Dominion Bank
(Translation of registrant’s name into English)
c/o General Counsel’s Office
P.O. Box 1, Toronto Dominion Centre,
Toronto, Ontario, M5K 1A2
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F Form 40-F ✓
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
This Form 6-K, excluding Exhibit 99.2, Exhibit 99.3, Exhibit 99.4, Exhibit 99.5, and Exhibit 99.6 hereto, is incorporated by reference into all outstanding Registration Statements of The Toronto-Dominion Bank filed with the U.S. Securities and Exchange Commission.
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Earnings Coverage | |
| 99.2 | Q4 2022 Earnings News Release | |
| 99.3 | Q4 2022 Dividend News Release | |
| 99.4 | Notice of Meeting and Record Date | |
| 99.5 | CEO and CFO Certificates | |
| 99.6 | Independent Auditor’s Report dated November 30, 2022 | |
FORM 6-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| THE TORONTO-DOMINION BANK | ||||||
| DATE: December 1, 2022 | By: | /s/ Caroline Cook | ||||
| Name: | Caroline Cook | |||||
| Title: | Associate Vice President, Legal Treasury and Corporate Securities | |||||
Exhibit 99.1
THE TORONTO-DOMINION BANK
EARNINGS COVERAGE ON SUBORDINATED NOTES AND DEBENTURES,
PREFERRED SHARES CLASSIFIED AS EQUITY, AND LIABILITIES FOR
PREFERRED SHARES AND OTHER EQUITY INSTRUMENTS AND CAPITAL TRUST SECURITIES
FOR THE TWELVE MONTHS ENDED OCTOBER 31, 2022
TD Bank Group (“TD” or the “Bank”) dividend requirements on all its outstanding preferred shares and other equity instruments in respect of the twelve months ended October 31, 2022 and adjusted to a before-tax equivalent using an effective tax rate of 19.5% for the twelve months ended October 31, 2022, amounted to $321.5 million. The Bank’s interest and dividend requirements on all subordinated notes and debentures, preferred shares and liabilities for preferred shares and other equity instruments and capital trust securities, after adjustment for new issues and retirement, amounted to $731.1 million for the twelve months ended October 31, 2022. The Bank’s reported net income, before interest on subordinated debt and liabilities for preferred shares and capital trust securities and income taxes was $20,824 million for the twelve months ended October 31, 2022, which was 28.5 times the Bank’s aggregate dividend and interest requirement for this period.
On an adjusted basis, the Bank’s net income before interest on subordinated debt and liabilities for preferred shares and capital trust securities and income taxes for the twelve months ended October 31, 2022, was $18,244 million, which was 25.0 times the Bank’s aggregate dividend and interest requirement for this period.
The Bank prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), the current generally accepted accounting principles (GAAP), and refers to results prepared in accordance with IFRS as the “reported” results. The Bank also utilizes non-GAAP financial measures such as “adjusted” results (i.e. reported results excluding “items of note”) and non-GAAP ratios to assess each of its businesses and measure overall Bank performance. The Bank believes that non-GAAP financial measures and non-GAAP ratios provide the reader with a better understanding of how management views the Bank’s performance. Non-GAAP financial measures and ratios used in this presentation are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers. See “Financial Results Overview” in the Bank’s 2022 MD&A (available at www.td.com/investor and www.sedar.com), which is incorporated by reference, for further explanation, reported basis results, a list of the items of note, and a reconciliation of adjusted to reported results.
Exhibit 99.2
|
|
TD Bank Group Reports Fourth Quarter and Fiscal 2022 Results Earnings News Release • Three and Twelve months ended October 31, 2022
|
This quarterly earnings news release should be read in conjunction with the Bank’s unaudited fourth quarter 2022 consolidated financial results for the year ended October 31, 2022, included in this Earnings News Release and the audited 2022 Consolidated Financial Statements, prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), which is available on TD’s website at http://www.td.com/investor/. This analysis is dated November 30, 2022. 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 IFRS. Certain comparative amounts have been revised to conform to the presentation adopted in the current period. Additional information including the 2022 MD&A 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) website at http://www.sec.gov (EDGAR filers section).
Reported results conform to generally accepted accounting principles (GAAP), in accordance with IFRS. Adjusted results are non-GAAP financial measures. For additional information about the Bank’s use of non-GAAP financial measures, refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section of this document.
FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter last year:
| • | Reported diluted earnings per share were $3.62 compared with $2.04. |
| • | Adjusted diluted earnings per share were $2.18, compared with $2.09. |
| • | Reported net income was $6,671 million, compared with $3,781 million. |
| • | Adjusted net income was $4,065 million, compared with $3,866 million. |
FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:
| • | Reported diluted earnings per share were $9.47, compared with $7.72. |
| • | Adjusted diluted earnings per share were $8.36, compared with $7.91. |
| • | Reported net income was $17,429 million, compared with $14,298 million. |
| • | Adjusted net income was $15,425 million, compared with $14,649 million. |
FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The fourth quarter reported earnings figures included the following items of note:
| • | Amortization of intangibles of $57 million ($51 million after-tax or 3 cents per share), compared with $74 million ($65 million after-tax or 4 cents per share) in the fourth quarter last year. |
| • | Acquisition and integration charges related to the Schwab transaction of $18 million ($16 million after-tax or 1 cent per share), compared with $22 million ($20 million after-tax or 1 cent per share) in the fourth quarter last year. |
| • | Acquisition and integration-related charges for pending acquisitions of $85 million ($65 million after-tax or 3 cents per share). |
| • | Mitigation of interest rate volatility to closing capital on First Horizon acquisition, net gain of $2,319 million ($1,741 million after-tax or 96 cents per share). |
| • | Gain on sale of Schwab shares of $997 million ($997 million after-tax or 55 cents per share). |
TORONTO, December 1, 2022 – TD Bank Group (“TD” or the “Bank”) today announced its financial results for the fourth quarter ended October 31, 2022. Reported earnings were $6.7 billion, up 76% compared with the fourth quarter last year, and adjusted earnings were $4.1 billion, up 5%.
“I’m extremely pleased with our earnings performance this quarter, which capped off a strong year demonstrating the benefit of our diversified business model and prudent risk and financial management,” said Bharat Masrani, President and CEO, TD Bank Group. “The strength and resilience of our franchise enabled the Bank to invest in our business and deliver for our shareholders.”
Canadian Personal and Commercial Banking delivered a strong quarter with record earnings from continued growth momentum
Canadian Personal and Commercial Banking finished the year in a position of strength with net income of $1,694 million, an increase of 11% compared with the fourth quarter last year reflecting higher margins and strong volume growth. Revenue growth of 16% resulted in a fourth consecutive quarter of record revenue.
The strong momentum in Canadian Personal and Commercial Banking was supported by continued strength in customer acquisition and higher customer activity. The Personal Bank launched a banking package specifically created for International Students – a first among Canadian peers – contributing to record New to Canada growth. TD Canada Trust was ranked “Highest in Customer Satisfaction in Small Business Banking1” by J.D. Power, reflecting the trusted relationships built with our customers.
The U.S. Retail Bank delivered strong results supported by broad-based growth in its businesses
U.S. Retail reported net income for the quarter was $1,539 million (US$1,163 million), an increase of 12% (7% in U.S. dollars) compared with the fourth quarter last year. On an adjusted basis, net income for the quarter was $1,590 million (US$1,200 million), an increase of 16% (10% in U.S. dollars). Reported net income included acquisition and integration-related charges for the First Horizon acquisition of $67 million (US$50 million) or $51 million (US$37 million) after-tax. The Bank’s investment in The Charles Schwab Corporation (Schwab) contributed $310 million (US$237 million) in earnings, an increase of 26% (22% in U.S. dollars) compared with the fourth quarter last year.
The U.S. Retail Bank, which excludes the Bank’s investment in Schwab, reported net income of $1,229 million (US$926 million), an increase of 9% (3% in U.S. dollars) from the fourth quarter last year. On an adjusted basis, net income was a record $1,280 million (US$963 million).
| 1 | TD Canada Trust received the highest score in the J.D. Power 2022 Canada Small Business Banking Satisfaction Study of customers’ satisfaction with their primary business bank. Visit jdpower.com/awards for more details. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 1 |
The U.S. Retail Bank was pleased to announce extended partnership agreements with Nordstrom through 2026 and Target Corporation through 2030. In addition, the Bank continued to modernize its distribution network with enhanced capabilities in sales and advice, including converting select retail stores to wealth advice centres, while expanding its presence in North Carolina and South Florida, including plans to open 15 new stores in Charlotte by 2025.
TD Bank, America’s Most Convenient Bank® (TD AMCB), ranked No. 1 in its footprint by total number of approved U.S. Small Business Administration (SBA) loan units for the sixth consecutive year and ranked #2 National SBA Lender in 2022.
Wealth Management and Insurance delivered solid performance in the fourth quarter amid challenging market conditions
Wealth Management and Insurance net income was $516 million, a decrease of 15% compared with the fourth quarter last year. Insurance claims and related expenses rose 11%, reflecting increased driving activity and more severe weather-related events. This quarter’s results highlighted the benefits of the segment’s diversified business model as higher net interest income and insurance revenue largely offset the impact of market volatility and trading normalization.
Wealth Management and Insurance continued to deliver high quality advice and innovative financial products to help customers navigate the challenging economic environment. Wealth Management expanded its advisor base to better service mass affluent and high net worth client segments. TD Asset Management launched new investment solutions, including a carbon credit ETF and a multi-asset solution with exposure to alternative investments to enhance diversification for retail and institutional clients. TD Insurance continued its digital transformation, with over 20% of new sales this quarter completed digitally.
Solid Wholesale Banking performance reflects strength of diversified business model
Wholesale Banking reported net income for the quarter was $261 million, a decrease of 38%, compared with the fourth quarter last year. On an adjusted basis, net income was $275 million, a decrease of 35%. Revenue was up 1%, as a challenging underwriting environment was offset by higher deposit, lending, and trading-related revenues, reflecting the strength of Wholesale Banking’s diversified business model.
This quarter, TD Securities launched a Carbon Advisory business within the ESG Solutions group, bolstering the team’s capabilities to support clients’ transitions to a low-carbon economy. As part of this effort, TD Securities announced a $10 million investment into the Boreal Wildlands Carbon Project – the largest single private conservation project ever undertaken in Canada – further demonstrating the Bank’s commitment to supporting the growth and development of the voluntary carbon markets.
Capital
TD’s Common Equity Tier 1 Capital ratio was 16.2%.
Conclusion
For the year ahead, there are both tailwinds (including the interest rate environment and the anticipated closing of the announced acquisitions) and headwinds (including geopolitical tensions, the complex operating environment, and the potential for an economic slowdown). On balance, unless macroeconomic conditions were to shift dramatically, TD expects to meet or exceed its medium-term adjusted EPS growth target range of 7-10% in fiscal 2023.
“We enter 2023 from a position of strength, with growing businesses and a powerful purpose-driven brand. While there will be macroeconomic and geopolitical challenges in the year ahead, the progress we made in 2022 gives me great confidence in our future success,” added Masrani.
“I would like to thank our colleagues around the world for living the TD brand and for their unwavering commitment to enriching the lives of our customers and our communities,” concluded Masrani.
The foregoing contains forward-looking statements. Please refer to the “Caution Regarding Forward-Looking Statements”.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 2 |
Caution Regarding Forward-Looking Statements
From time to time, the Bank (as defined in this document) makes written and/or oral forward-looking statements, including in this document, in other filings with Canadian regulators or the United States (U.S.) Securities and Exchange Commission (SEC), and in other communications. In addition, representatives of the Bank may make forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the “safe harbour” provisions of, and are intended to be forward-looking statements under, applicable Canadian and U.S. securities legislation, including the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements made in this document, the Management’s Discussion and Analysis (“2022 MD&A”) in the Bank’s 2022 Annual Report under the heading “Economic Summary and Outlook”, under the headings “Key Priorities for 2023” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking segments, and under the heading “2022 Accomplishments and Focus for 2023” for the Corporate segment, and in other statements regarding the Bank’s objectives and priorities for 2023 and beyond and strategies to achieve them, the regulatory environment in which the Bank operates, and the Bank’s anticipated financial performance. Forward-looking statements are typically identified by words such as “will”, “would”, “should”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plan”, “goal”, “target”, “may”, and “could”.
By their very nature, these forward-looking statements require the Bank to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in light of the uncertainty related to the physical, financial, economic, political, and regulatory environments, such risks and uncertainties – many of which are beyond the Bank’s control and the effects of which can be difficult to predict – may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Risk factors that could cause, individually or in the aggregate, such differences include: strategic, credit, market (including equity, commodity, foreign exchange, interest rate, and credit spreads), operational (including technology, cyber security, and infrastructure), model, insurance, liquidity, capital adequacy, legal, regulatory compliance and conduct, reputational, environmental and social, and other risks. Examples of such risk factors include general business and economic conditions in the regions in which the Bank operates; geopolitical risk; inflation, rising rates and recession; the economic, financial, and other impacts of pandemics, including the COVID-19 pandemic; the ability of the Bank to execute on long-term strategies and shorter-term key strategic priorities, including the successful completion of acquisitions and dispositions, business retention plans, and strategic plans; technology and cyber security risk (including cyber-attacks, data security breaches or technology failures) on the Bank’s information technology, internet, network access or other voice or data communications systems or services; model risk; fraud activity; the failure of third parties to comply with their obligations to the Bank or its affiliates, including relating to the care and control of information, and other risks arising from the Bank’s use of third-party service providers; the impact of new and changes to, or application of, current laws and regulations, including without limitation tax laws, capital guidelines and liquidity regulatory guidance; regulatory oversight and compliance risk; increased competition from incumbents and new entrants (including Fintechs and big technology competitors); shifts in consumer attitudes and disruptive technology; exposure related to significant litigation and regulatory matters; ability of the Bank to attract, develop, and retain key talent; changes to the Bank’s credit ratings; changes in foreign exchange rates, interest rates, credit spreads and equity prices; increased funding costs and market volatility due to market illiquidity and competition for funding; Interbank Offered Rate (IBOR) transition risk; critical accounting estimates and changes to accounting standards, policies, and methods used by the Bank; existing and potential international debt crises; environmental and social risk (including climate change); and the occurrence of natural and unnatural catastrophic events and claims resulting from such events. The Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank’s results. For more detailed information, please refer to the “Risk Factors and Management” section of the 2022 MD&A, as may be updated in subsequently filed quarterly reports to shareholders and news releases (as applicable) related to any events or transactions discussed under the heading “Significant Acquisitions” or “Significant Events and Pending Acquisitions” in the relevant MD&A, which applicable releases may be found on www.td.com. All such factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, should be considered carefully when making decisions with respect to the Bank. The Bank cautions readers not to place undue reliance on the Bank’s forward-looking statements.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2022 MD&A under the heading “Economic Summary and Outlook”, under the headings “Key Priorities for 2023” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking segments, and under the heading “2022 Accomplishments and Focus for 2023” for the Corporate segment, each as may be updated in subsequently filed quarterly reports to shareholders.
Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s shareholders and analysts in understanding the Bank’s financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. 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.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 3 |
TABLE 1: FINANCIAL HIGHLIGHTS
| (millions of Canadian dollars, except as noted) | As at or for the three months ended | As at or for the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Results of operations |
||||||||||||||||||||
| Total revenue – reported |
$ | 15,563 | $ | 10,925 | $ | 10,941 | $ | 49,032 | $ | 42,693 | ||||||||||
| Total revenue – adjusted1 |
12,247 | 11,603 | 10,941 | 46,170 | 42,693 | |||||||||||||||
| Provision for (recovery of) credit losses |
617 | 351 | (123 | ) | 1,067 | (224 | ) | |||||||||||||
| Insurance claims and related expenses |
723 | 829 | 650 | 2,900 | 2,707 | |||||||||||||||
| Non-interest expenses – reported |
6,545 | 6,096 | 5,947 | 24,641 | 23,076 | |||||||||||||||
| Non-interest expenses – adjusted1 |
6,430 | 6,033 | 5,898 | 24,359 | 22,909 | |||||||||||||||
| Net income – reported |
6,671 | 3,214 | 3,781 | 17,429 | 14,298 | |||||||||||||||
| Net income – adjusted1 |
4,065 | 3,813 | 3,866 | 15,425 | 14,649 | |||||||||||||||
| Financial positions (billions of Canadian dollars) |
||||||||||||||||||||
| Total loans net of allowance for loan losses |
$ | 831.0 | $ | 790.8 | $ | 722.6 | $ | 831.0 | $ | 722.6 | ||||||||||
| Total assets |
1,917.5 | 1,840.8 | 1,728.7 | 1,917.5 | 1,728.7 | |||||||||||||||
| Total deposits |
1,230.0 | 1,201.7 | 1,125.1 | 1,230.0 | 1,125.1 | |||||||||||||||
| Total equity |
111.4 | 102.6 | 99.8 | 111.4 | 99.8 | |||||||||||||||
| Total risk-weighted assets2 |
517.0 | 495.7 | 460.3 | 517.0 | 460.3 | |||||||||||||||
| Financial ratios |
||||||||||||||||||||
| Return on common equity (ROE) – reported3 |
26.5 | % | 13.5 | % | 15.7 | % | 18.0 | % | 15.5 | % | ||||||||||
| Return on common equity – adjusted1 |
16.0 | 16.1 | 16.1 | 15.9 | 15.9 | |||||||||||||||
| Return on tangible common equity (ROTCE)1 |
35.4 | 18.4 | 21.3 | 24.3 | 21.2 | |||||||||||||||
| Return on tangible common equity – adjusted1 |
21.2 | 21.6 | 21.4 | 21.2 | 21.4 | |||||||||||||||
| Efficiency ratio – reported3 |
42.1 | 55.8 | 54.4 | 50.3 | 54.1 | |||||||||||||||
| Efficiency ratio – adjusted1,3 |
52.5 | 52.0 | 53.9 | 52.8 | 53.7 | |||||||||||||||
| Provision for (recovery of) credit losses as a % of net average loans and acceptances |
0.29 | 0.17 | (0.07 | ) | 0.14 | (0.03 | ) | |||||||||||||
| Common share information – reported (Canadian dollars) |
||||||||||||||||||||
| Per share earnings |
||||||||||||||||||||
| Basic |
$ | 3.62 | $ | 1.76 | $ | 2.04 | $ | 9.48 | $ | 7.73 | ||||||||||
| Diluted |
3.62 | 1.75 | 2.04 | 9.47 | 7.72 | |||||||||||||||
| Dividends per share |
0.89 | 0.89 | 0.79 | 3.56 | 3.16 | |||||||||||||||
| Book value per share3 |
55.00 | 52.54 | 51.66 | 55.00 | 51.66 | |||||||||||||||
| Closing share price4 |
87.19 | 83.18 | 89.84 | 87.19 | 89.84 | |||||||||||||||
| Shares outstanding (millions) |
||||||||||||||||||||
| Average basic |
1,812.10 | 1,804.5 | 1,820.5 | 1,810.50 | 1,817.7 | |||||||||||||||
| Average diluted |
1,814.40 | 1,807.1 | 1,823.2 | 1,813.60 | 1,820.2 | |||||||||||||||
| End of period |
1,820.70 | 1,813.1 | 1,822.0 | 1,820.70 | 1,822.0 | |||||||||||||||
| Market capitalization (billions of Canadian dollars) |
$ | 158.70 | $ | 150.8 | $ | 163.7 | $ | 158.70 | $ | 163.7 | ||||||||||
| Dividend yield3 |
4.20 | % | 4.0 | % | 3.7 | % | 3.80 | % | 3.9 | % | ||||||||||
| Dividend payout ratio3 |
24.60 | 50.6 | 38.7 | 37.50 | 40.9 | |||||||||||||||
| Price-earnings ratio3 |
9.20 | 10.6 | 11.6 | 9.20 | 11.6 | |||||||||||||||
| Total shareholder return (1 year)3 |
0.90 | 4.2 | 58.9 | 0.90 | 58.9 | |||||||||||||||
| Common share information – adjusted (Canadian dollars)1,3 |
||||||||||||||||||||
| Per share earnings |
||||||||||||||||||||
| Basic |
$ | 2.18 | $ | 2.09 | $ | 2.09 | $ | 8.38 | $ | 7.92 | ||||||||||
| Diluted |
2.18 | 2.09 | 2.09 | 8.36 | 7.91 | |||||||||||||||
| Dividend payout ratio |
40.80 | % | 42.5 | % | 37.8 | % | 42.50 | % | 39.9 | % | ||||||||||
| Price-earnings ratio |
10.40 | 10.0 | 11.3 | 10.40 | 11.3 | |||||||||||||||
| Capital Ratios2 |
||||||||||||||||||||
| Common Equity Tier 1 Capital ratio |
16.2 | % | 14.9 | % | 15.2 | % | 16.2 | % | 15.2 | % | ||||||||||
| Tier 1 Capital ratio |
18.3 | 16.3 | 16.5 | 18.3 | 16.5 | |||||||||||||||
| Total Capital ratio |
20.7 | 18.8 | 19.1 | 20.7 | 19.1 | |||||||||||||||
| Leverage ratio |
4.9 | 4.3 | 4.8 | 4.9 | 4.8 | |||||||||||||||
| Total Loss Absorbing Capacity (TLAC) ratio |
35.2 | 32.0 | 28.3 | 35.2 | 28.3 | |||||||||||||||
| TLAC Leverage ratio |
9.4 | 8.5 | 8.2 | 9.4 | 8.2 | |||||||||||||||
| 1 | The Toronto-Dominion Bank (“TD” or the “Bank”) prepares its Consolidated Financial Statements in accordance with IFRS, the current Generally Accepted Accounting Principles (GAAP), and refers to results prepared in accordance with IFRS as the “reported” results. The Bank also utilizes non-GAAP financial measures such as “adjusted” results and non-GAAP ratios to assess each of its businesses and to measure overall Bank performance. To arrive at adjusted results, the Bank adjusts reported results for “items of note”. Refer to the “How We Performed” section of this document for further explanation, a list of the items of note, and a reconciliation of adjusted to reported results. Non-GAAP financial measures and ratios used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers. |
| 2 | These measures have been included in this document in accordance with the Office of the Superintendent of Financial Institutions Canada’s Capital Adequacy Requirements, Leverage Requirements, and TLAC guidelines. Refer to the “Capital Position” section in the 2022 MD&A for further details. |
| 3 | For additional information about this metric, refer to the Glossary in the 2022 MD&A, which is incorporated by reference. |
| 4 | Toronto Stock Exchange (TSX) closing market price. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 4 |
SIGNIFICANT EVENTS AND PENDING ACQUISITIONS
Acquisition of Cowen Inc.
On August 2, 2022, the Bank and Cowen Inc. (“Cowen”) announced a definitive agreement for TD to acquire Cowen in an all-cash transaction valued at US$1.3 billion, or US$39.00 for each share of Cowen common stock. The Bank is currently planning to close the transaction in the first calendar quarter of 2023, subject to customary closing conditions, including approvals from certain U.S., Canadian, and foreign regulatory authorities. Regulatory approvals are not within the Bank’s control. The results of the acquired business will be consolidated by the Bank from the closing date and reported in the Wholesale Banking segment. Based on the estimated financial performance and balance sheets of the Bank and Cowen, including transaction-related impacts, the Bank expects that its Common Equity Tier 1 (CET1) Capital ratio will be comfortably above 11% upon the closing of the Cowen acquisition, pro forma for the closing of the Bank’s acquisition of First Horizon Corporation (“First Horizon”).
Sale of Schwab Common Shares
On August 1, 2022, in order to provide the capital required for the acquisition of Cowen, the Bank sold 28.4 million non-voting common shares of The Charles Schwab Corporation (“Schwab”) at a price of US$66.53 per share for proceeds of $2.5 billion (US$1.9 billion). Approximately 15 million shares were sold to Schwab pursuant to a repurchase agreement at a price equal to the price obtained in the sale of 13.4 million shares sold to a broker dealer pursuant to Rule 144 of the Securities Act of 1933. All shares sold automatically converted into shares of Schwab voting common stock and the shares acquired by Schwab are no longer outstanding. The sales reduced the Bank’s ownership interest in Schwab from approximately 13.4% to 12.0%. The Bank recognized $997 million as other income (net of $368 million loss from accumulated other comprehensive income (AOCI) reclassified to earnings), in the fourth quarter of fiscal 2022.
Acquisition of First Horizon Corporation
On February 28, 2022, the Bank and First Horizon announced a definitive agreement for the Bank to acquire First Horizon in an all-cash transaction valued at US$13.4 billion, or US$25.00 for each common share of First Horizon. In connection with this transaction, the Bank has invested US$494 million in non-voting First Horizon preferred stock (convertible in certain circumstances into up to 4.9% of First Horizon’s common stock). The Bank is currently planning to close the transaction in the first half of fiscal 2023, subject to customary closing conditions, including approvals from U.S. and Canadian regulatory authorities. Regulatory approvals are not within the Bank’s control. The results of the acquired business will be consolidated by the Bank from the closing date and reported in the U.S. Retail segment.
First Horizon shareholders will receive, at closing, an additional US$0.65 per share on an annualized basis for the period from November 27, 2022 through the day immediately prior to the closing. Either party will have the right to terminate the agreement if the transaction has not closed by February 27, 2023 (the “outside date”), subject to the right of either party (under certain conditions) to extend the outside date to May 27, 2023.
During the year, the Bank implemented a strategy to mitigate interest rate volatility to capital on closing of the acquisition.
The fair value of First Horizon’s fixed rate financial assets and liabilities and certain intangible assets are sensitive to interest rate changes. The fair value of net assets will determine the amount of goodwill to be recognized on closing of the acquisition. Increases in goodwill and intangibles will negatively impact capital ratios because they are deducted from capital under OSFI Basel III rules. In order to mitigate this volatility to closing capital, the Bank de-designated certain interest rate swaps hedging fixed income investments in fair value hedge accounting relationships.
After the de-designation, mark-to-market gains (losses) on these swaps are recognized in earnings, without any corresponding offset from the previously hedged investments. Such gains (losses) will mitigate the capital impact from changes in the amount of goodwill recognized on closing of the acquisition. The de-designation also triggered the amortization of the investments’ basis adjustment to net interest income over the remaining expected life of the investments.
For the year ended October 31, 2022, the Bank reported $1,487 million in non-interest income related to the mark-to-market on the swaps, and $154 million in net interest income related to the basis adjustment amortization. In addition, for the year ended October 31, 2022, the Bank reported $121 million in non-interest income related to the net interest earned on the swaps since the de-designation of the hedge accounting relationships.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 5 |
HOW WE PERFORMED
ECONOMIC SUMMARY AND OUTLOOK
The outlook for the global economy for the next two years was downgraded relative to the prior quarter. In Europe, an energy crisis continues to impact household finances and weigh on industrial output. China is reckoning with the fallout of its real estate slowdown and strict COVID-19 controls. In North America, COVID-19 is causing fewer supply chain disruptions, but the legacy of high domestic inflation and tight labour markets has led to central banks raising policy rates at the fastest pace in roughly four decades. This has significantly weakened the economic growth prospects over the next twelve to twenty-four months.
The U.S. economy expanded by 2.6% annualized in the third calendar quarter of 2022, after having contracted in the first half of the year. However, this was largely due to a surge in exports relative to imports. In contrast, domestic demand grew by a soft 0.5%. Consumer spending growth decelerated to 1.4% relative to the prior calendar quarter of 2.0%, as inflation continued to weigh on the purchasing power of households, which are also normalizing spending away from goods after a surge during the pandemic. The ongoing downturn in housing also weighed on the economy in the third calendar quarter, subtracting 1.4 percentage points from growth.
As the lagged effect of interest rate increases is expected to continue to feed through the economy in 2023, it should lead to some cooling in the job market, where the unemployment rate was 3.7% in October, near a cyclical low. Consumer Price Index (CPI) inflation has shown modest signs of cooling, but at 7.7% year-over-year in October, it is still close to 40-year highs. Slower global growth and a high U.S. dollar are expected to help goods inflation ease, while services inflation is likely to prove more persistent.
The Federal Reserve continued its aggressive pace of rate increases, with a fourth 75 basis points (bps) hike in early November. TD Economics expects further interest rate hikes will take the Federal Funds rate to a range of 4.50-5.00% in calendar 2023. This historically large increase in interest rates raises the risk that the economy will slow more quickly and trigger an outright recession. Financial markets have reflected this risk with the yield curve inverting.
The Canadian economy has begun to slow after growing at a very healthy pace in the first half of the year. The interest-rate sensitive housing market was the first area of the economy to respond to the Bank of Canada’s rapid increase in the policy rate. As of October, home sales were down 40% from the peak in February of this year. Housing demand is expected to cool further as higher interest rates continue to weigh on affordability. Canadian inflation has begun to decelerate but remained high at 6.9% year-over-year in October. The labour market has also remained quite strong through October, although TD Economics expects job market conditions to ease in the coming quarters, in line with weaker demand in the broader economy.
The Bank of Canada raised its overnight interest rate by 50 bps in October, to 3.75%. TD Economics expects further increases in the overnight rate to a range of 4.25-4.50% in calendar 2023. With interest rates expected to increase to a lesser degree in Canada than in the United States, the Canadian dollar may reach a low of 70 U.S. cents in the first half of calendar 2023.
HOW THE BANK REPORTS
The Bank prepares its Consolidated Financial Statements in accordance with IFRS, the current GAAP, and refers to results prepared in accordance with IFRS as “reported” results.
Non-GAAP and Other Financial Measures
In addition to reported results, the Bank also presents certain financial measures, including non-GAAP financial measures that are historical, non-GAAP ratios, supplementary financial measures and capital management measures, to assess its results. Non-GAAP financial measures, such as “adjusted” results, are utilized to assess the Bank’s businesses and to measure the Bank’s overall performance. To arrive at adjusted results, the Bank adjusts for “items of note”, from reported results. Items of note are items which management does not believe are indicative of underlying business performance and are disclosed in Table 3. Non-GAAP ratios include a non-GAAP financial measure as one or more of its components. Examples of non-GAAP ratios include adjusted basic and diluted earnings per share (EPS), adjusted dividend payout ratio, adjusted efficiency ratio, and adjusted effective income tax rate. The Bank believes that non-GAAP financial measures and non-GAAP ratios provide the reader with a better understanding of how management views the Bank’s performance. Non-GAAP financial measures and non-GAAP ratios used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers. Supplementary financial measures depict the Bank’s financial performance and position, and capital management measures depict the Bank’s capital position, and both are explained in this document where they first appear.
U.S. Strategic Cards
The Bank’s U.S. strategic cards portfolio is comprised of agreements with certain U.S. retailers pursuant to which TD is the U.S. issuer of private label and co-branded consumer credit cards to their U.S. customers. Under the terms of the individual agreements, the Bank and the retailers share in the profits generated by the relevant portfolios after credit losses. Under IFRS, TD is required to present the gross amount of revenue and provisions for credit losses (PCL) related to these portfolios in the Bank’s Consolidated Statement of Income. At the segment level, the retailer program partners’ share of revenues and credit losses is presented in the Corporate segment, with an offsetting amount (representing the partners’ net share) recorded in Non-interest expenses, resulting in no impact to Corporate’s reported Net income (loss). The Net income (loss) included in the U.S. Retail segment includes only the portion of revenue and credit losses attributable to TD under the agreements.
Investment in The Charles Schwab Corporation
On October 6, 2020, the Bank acquired an approximately 13.5% stake in Schwab following the completion of Schwab’s acquisition of TD Ameritrade Holding Corporation (“TD Ameritrade”) of which the Bank was a major shareholder (the “Schwab transaction”). On August 1, 2022, the Bank sold 28.4 million non-voting common shares of Schwab, which reduced the Bank’s ownership interest in Schwab to approximately 12.0%. For further details, refer to Note 12 of the 2022 Consolidated Financial Statements. The Bank’s share of Schwab’s earnings is reported with a one-month lag, and the Bank started recording its share of Schwab’s earnings on this basis in the first quarter of fiscal 2021. The U.S. Retail segment reflects the Bank’s share of net income from its investment in Schwab. The Corporate segment net income (loss) includes amounts for amortization of acquired intangibles and the acquisition and integration charges related to the Schwab transaction.
On November 25, 2019, the Bank and Schwab entered into an insured deposit account agreement (the “Schwab IDA Agreement”), which became effective upon closing of the Schwab transaction and has an initial expiration date of July 1, 2031. Refer to the “Related Party Transactions” section in the 2022 MD&A for further details.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 6 |
The following table provides the operating results on a reported basis for the Bank.
TABLE 2: OPERATING RESULTS – Reported
| (millions of Canadian dollars) | For the three months ended | For the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Net interest income |
$ | 7,630 | $ | 7,044 | $ | 6,262 | $ | 27,353 | $ | 24,131 | ||||||||||
| Non-interest income |
7,933 | 3,881 | 4,679 | 21,679 | 18,562 | |||||||||||||||
| Total revenue |
15,563 | 10,925 | 10,941 | 49,032 | 42,693 | |||||||||||||||
| Provision for (recovery of) credit losses |
617 | 351 | (123 | ) | 1,067 | (224 | ) | |||||||||||||
| Insurance claims and related expenses |
723 | 829 | 650 | 2,900 | 2,707 | |||||||||||||||
| Non-interest expenses |
6,545 | 6,096 | 5,947 | 24,641 | 23,076 | |||||||||||||||
| Income before income taxes and share of net income from investment in Schwab |
7,678 | 3,649 | 4,467 | 20,424 | 17,134 | |||||||||||||||
| Provision for (recovery of) income taxes |
1,297 | 703 | 910 | 3,986 | 3,621 | |||||||||||||||
| Share of net income from investment in Schwab |
290 | 268 | 224 | 991 | 785 | |||||||||||||||
| Net income – reported |
6,671 | 3,214 | 3,781 | 17,429 | 14,298 | |||||||||||||||
| Preferred dividends and distributions on other equity instruments |
107 | 43 | 63 | 259 | 249 | |||||||||||||||
| Net income available to common shareholders |
$ | 6,564 | $ | 3,171 | $ | 3,718 | $ | 17,170 | $ | 14,049 | ||||||||||
The following table provides a reconciliation between the Bank’s adjusted and reported results.
TABLE 3: NON-GAAP FINANCIAL MEASURES – Reconciliation of Adjusted to Reported Net Income1
| (millions of Canadian dollars) | For the three months ended | For the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Operating results – adjusted |
||||||||||||||||||||
| Net interest income6 |
$ | 7,627 | $ | 7,001 | $ | 6,262 | $ | 27,307 | $ | 24,131 | ||||||||||
| Non-interest income1,6 |
4,620 | 4,602 | 4,679 | 18,863 | 18,562 | |||||||||||||||
| Total revenue |
12,247 | 11,603 | 10,941 | 46,170 | 42,693 | |||||||||||||||
| Provision for (recovery of) credit losses |
617 | 351 | (123 | ) | 1,067 | (224 | ) | |||||||||||||
| Insurance claims and related expenses |
723 | 829 | 650 | 2,900 | 2,707 | |||||||||||||||
| Non-interest expenses2 |
6,430 | 6,033 | 5,898 | 24,359 | 22,909 | |||||||||||||||
| Income before income taxes and share of net income from investment in Schwab |
4,477 | 4,390 | 4,516 | 17,844 | 17,301 | |||||||||||||||
| Provision for income taxes |
747 | 892 | 921 | 3,595 | 3,658 | |||||||||||||||
| Share of net income from investment in Schwab3 |
335 | 315 | 271 | 1,176 | 1,006 | |||||||||||||||
| Net income – adjusted |
4,065 | 3,813 | 3,866 | 15,425 | 14,649 | |||||||||||||||
| Preferred dividends and distributions on other equity instruments |
107 | 43 | 63 | 259 | 249 | |||||||||||||||
| Net income available to common shareholders – adjusted |
3,958 | 3,770 | 3,803 | 15,166 | 14,400 | |||||||||||||||
| Pre-tax adjustments for items of note |
||||||||||||||||||||
| Amortization of acquired intangibles4 |
(57 | ) | (58 | ) | (74 | ) | (242 | ) | (285 | ) | ||||||||||
| Acquisition and integration charges related to the Schwab transaction5 |
(18 | ) | (23 | ) | (22 | ) | (111 | ) | (103 | ) | ||||||||||
| Acquisition and integration-related charges for pending acquisitions2 |
(85 | ) | (29 | ) | – | (114 | ) | – | ||||||||||||
| Mitigation of interest rate volatility to closing capital on First Horizon acquisition6 |
2,319 | (678 | ) | – | 1,641 | – | ||||||||||||||
| Gain on sale of Schwab shares1 |
997 | – | – | 997 | – | |||||||||||||||
| Litigation settlement recovery1 |
– | – | – | 224 | – | |||||||||||||||
| Less: Impact of income taxes |
||||||||||||||||||||
| Amortization of acquired intangibles |
(6 | ) | (6 | ) | (9 | ) | (26 | ) | (32 | ) | ||||||||||
| Acquisition and integration charges related to the Schwab transaction |
(2 | ) | (3 | ) | (2 | ) | (16 | ) | (5 | ) | ||||||||||
| Acquisition and integration-related charges for pending acquisitions5 |
(20 | ) | (7 | ) | – | (27 | ) | – | ||||||||||||
| Mitigation of interest rate volatility to closing capital on First Horizon acquisition |
578 | (173 | ) | – | 405 | – | ||||||||||||||
| Gain on sale of Schwab shares |
– | – | – | – | – | |||||||||||||||
| Litigation settlement recovery |
– | – | – | 55 | – | |||||||||||||||
| Total adjustments for items of note |
2,606 | (599 | ) | (85 | ) | 2,004 | (351 | ) | ||||||||||||
| Net income available to common shareholders – reported |
$ | 6,564 | $ | 3,171 | $ | 3,718 | $ | 17,170 | $ | 14,049 | ||||||||||
| 1 | Adjusted non-interest income excludes the following item of note: |
| i. | The Bank reached a settlement in TD Bank, N.A. v. Lloyd’s Underwriter et al., in Canada, pursuant to which the Bank recovered losses resulting from the previous resolution by the Bank of multiple proceedings in the U.S. related to an alleged Ponzi scheme, perpetrated by, among others, Scott Rothstein – Q2 2022: $224 million. This amount is reported in the U.S. Retail segment; and |
| ii. | The Bank sold 28.4 million non-voting common shares of Schwab and recognized a gain on the sale – Q4 2022: $997 million. This amount is reported in the Corporate segment. |
| 2 | Adjusted non-interest expenses exclude the following items of note related to the Bank’s asset acquisitions and business combinations: |
| i. | Amortization of acquired intangibles – Q4 2022: $24 million, Q3 2022: $23 million, 2022: $106 million, Q4 2021: $40 million, 2021: $148 million. These charges are reported in the Corporate segment; |
| ii. | The Bank’s own integration and acquisition costs related to the Schwab transaction – Q4 2022: $6 million, Q3 2022: $11 million, 2022: $62 million, Q4 2021: $9 million, 2021: $19 million. These costs are reported in the Corporate segment; and |
| iii. | Acquisition and integration-related charges for pending acquisitions – Q4 2022: $85 million, Q3 2022: $29 million, 2022: $114 million. These charges are primarily related to professional services and other incremental operating expenses for various acquisitions, and are reported in the U.S. Retail and Wholesale Banking segments. |
| 3 | Adjusted share of net income from investment in Schwab excludes the following items of note on an after-tax basis. The earnings impact of both items is reported in the Corporate segment: |
| i. | Amortization of Schwab-related acquired intangibles – Q4 2022: $33 million, Q3 2022: $35 million, 2022: $136 million, Q4 2021: $34 million, 2021: $137 million; and |
| ii. | The Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade – Q4 2022: $12 million, Q3 2022: $12 million, 2022: $49 million, Q4 2021: $13 million, 2021: $84 million. |
| 4 | Amortization of acquired intangibles relates to intangibles acquired as a result of asset acquisitions and business combinations, including the after-tax amounts for amortization of acquired intangibles relating to the Share of net income from investment in Schwab, reported in the Corporate segment. Refer to footnotes 2 and 3 for amounts. |
| 5 | Acquisition and integration charges related to the Schwab transaction include the Bank’s own integration and acquisition costs, as well as the Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade on an after-tax basis, both reported in the Corporate segment. Refer to footnotes 2 and 3 for amounts. |
| 6 | Mitigation of interest rate volatility to closing capital on First Horizon acquisition includes the following components, reported in the Corporate segment: i) mark-to-market gains (losses) on interest rate swaps recorded in non-interest income – Q4 2022: $2,208 million, Q3 2022: $(721) million, ii) basis adjustment amortization related to de-designated fair value hedge accounting relationships, recorded in net interest income – Q4 2022: $111 million, Q3 2022: $43 million, and iii) interest income (expense) recognized on the interest rate swaps, reclassified from non-interest income to net interest income with no impact to total adjusted net income – Q4 2022: $108 million. Refer to the “Significant Events and Pending Acquisitions” section for further details. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 7 |
TABLE 4: RECONCILIATION OF REPORTED TO ADJUSTED EARNINGS PER SHARE1
| (Canadian dollars) | For the three months ended | For the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Basic earnings per share – reported |
$ | 3.62 | $ | 1.76 | $ | 2.04 | $ | 9.48 | $ | 7.73 | ||||||||||
| Adjustments for items of note |
(1.44 | ) | 0.33 | 0.05 | (1.11 | ) | 0.19 | |||||||||||||
| Basic earnings per share – adjusted |
$ | 2.18 | $ | 2.09 | $ | 2.09 | $ | 8.38 | $ | 7.92 | ||||||||||
| Diluted earnings per share – reported |
$ | 3.62 | $ | 1.75 | $ | 2.04 | $ | 9.47 | $ | 7.72 | ||||||||||
| Adjustments for items of note |
(1.44 | ) | 0.33 | 0.05 | (1.10 | ) | 0.19 | |||||||||||||
| Diluted earnings per share – adjusted |
$ | 2.18 | $ | 2.09 | $ | 2.09 | $ | 8.36 | $ | 7.91 | ||||||||||
| 1 | EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares outstanding during the period. Numbers may not add due to rounding. |
TABLE 5: NON-GAAP FINANCIAL MEASURES – Reconciliation of Reported to Adjusted Provision for Income Taxes
| (millions of Canadian dollars, except as noted) | For the three months ended | For the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Provision for income taxes – reported |
$ | 1,297 | $ | 703 | $ | 910 | $ | 3,986 | $ | 3,621 | ||||||||||
| Total adjustments for items of note |
(550 | ) | 189 | 11 | (391 | ) | 37 | |||||||||||||
| Provision for income taxes – adjusted |
$ | 747 | $ | 892 | $ | 921 | $ | 3,595 | $ | 3,658 | ||||||||||
| Effective income tax rate – reported |
16.9 | % | 19.3 | % | 20.4 | % | 19.5 | % | 21.1 | % | ||||||||||
| Effective income tax rate – adjusted1 |
16.7 | 20.3 | 20.4 | 20.1 | 21.1 | |||||||||||||||
| 1 | For additional information about this metric, refer to the Glossary in the 2022 MD&A. |
RETURN ON COMMON EQUITY
The consolidated Bank ROE is calculated as reported net income available to common shareholders as a percentage of average common equity. The consolidated Bank adjusted ROE is calculated as adjusted net income available to common shareholders as a percentage of average common equity. Adjusted ROE is a non-GAAP ratio, and can be utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated as the segment net income attributable to common shareholders as a percentage of average allocated capital. The Bank’s methodology for allocating capital to its business segments is largely aligned with the common equity capital requirements under Basel III. Capital allocated to the business segments increased to 10.5% CET1 Capital effective the first quarter of 2022 compared with 9% in fiscal 2021.
TABLE 6: RETURN ON COMMON EQUITY
| (millions of Canadian dollars, except as noted) | For the three months ended | For the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Average common equity |
$ | 98,199 | $ | 92,963 | $ | 93,936 | $ | 95,326 | $ | 90,677 | ||||||||||
| Net income available to common shareholders – reported |
6,564 | 3,171 | 3,718 | 17,170 | 14,049 | |||||||||||||||
| Items of note, net of income taxes |
(2,606 | ) | 599 | 85 | (2,004 | ) | 351 | |||||||||||||
| Net income available to common shareholders – adjusted |
$ | 3,958 | $ | 3,770 | $ | 3,803 | $ | 15,166 | $ | 14,400 | ||||||||||
| Return on common equity – reported |
26.5 | % | 13.5 | % | 15.7 | % | 18.0 | % | 15.5 | % | ||||||||||
| Return on common equity – adjusted |
16.0 | 16.1 | 16.1 | 15.9 | 15.9 | |||||||||||||||
RETURN ON TANGIBLE COMMON EQUITY
Tangible common equity (TCE) is calculated as common shareholders’ equity less goodwill, imputed goodwill and intangibles on the investments in Schwab and other acquired intangible assets, net of related deferred tax liabilities. ROTCE is calculated as reported net income available to common shareholders after adjusting for the after-tax amortization of acquired intangibles, which are treated as an item of note, as a percentage of average TCE. Adjusted ROTCE is calculated using reported net income available to common shareholders, adjusted for all items of note, as a percentage of average TCE. TCE, ROTCE, and adjusted ROTCE can be utilized in assessing the Bank’s use of equity. TCE is a non-GAAP financial measure, and ROTCE and adjusted ROTCE are non-GAAP ratios.
TABLE 7: RETURN ON TANGIBLE COMMON EQUITY
| (millions of Canadian dollars, except as noted) | For the three months ended | For the twelve months ended | ||||||||||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
||||||||||||||||
| Average common equity |
$ | 98,199 | $ | 92,963 | $ | 93,936 | $ | 95,326 | $ | 90,677 | ||||||||||
| Average goodwill |
17,334 | 16,704 | 16,408 | 16,803 | 16,404 | |||||||||||||||
| Average imputed goodwill and intangibles on investments in Schwab |
6,374 | 6,600 | 6,570 | 6,515 | 6,667 | |||||||||||||||
| Average other acquired intangibles1 |
463 | 476 | 565 | 492 | 439 | |||||||||||||||
| Average related deferred tax liabilities |
(172 | ) | (172 | ) | (173 | ) | (172 | ) | (171 | ) | ||||||||||
| Average tangible common equity |
74,200 | 69,355 | 70,566 | 71,688 | 67,338 | |||||||||||||||
| Net income available to common shareholders – reported |
6,564 | 3,171 | 3,718 | 17,170 | 14,049 | |||||||||||||||
| Amortization of acquired intangibles, net of income taxes |
51 | 52 | 65 | 216 | 253 | |||||||||||||||
| Net income available to common shareholders adjusted for amortization of acquired intangibles, net of income taxes |
6,615 | 3,223 | 3,783 | 17,386 | 14,302 | |||||||||||||||
| Other items of note, net of income taxes |
(2,657 | ) | 547 | 20 | (2,220 | ) | 98 | |||||||||||||
| Net income available to common shareholders – adjusted |
$ | 3,958 | $ | 3,770 | $ | 3,803 | $ | 15,166 | $ | 14,400 | ||||||||||
| Return on tangible common equity |
35.4 | % | 18.4 | % | 21.3 | % | 24.3 | % | 21.2 | % | ||||||||||
| Return on tangible common equity – adjusted |
21.2 | 21.6 | 21.4 | 21.2 | 21.4 | |||||||||||||||
| 1 | Excludes intangibles relating to software and asset servicing rights. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 8 |
IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
The following table reflects the estimated impact of foreign currency translation on key U.S. Retail segment income statement items. The impact is calculated as the difference in translated earnings using the average US to Canadian dollars exchange rates in the periods noted.
TABLE 8: IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
| (millions of Canadian dollars, except as noted) | For the three months ended |
For the twelve months ended |
||||||
| October 31, 2022 vs. |
October 31, 2022 vs. |
|||||||
| U.S. Retail Bank |
||||||||
| Total revenue – reported |
$ | 201 | $ | 312 | ||||
| Total revenue – adjusted1 |
201 | 311 | ||||||
| Non-interest expenses – reported |
110 | 171 | ||||||
| Non-interest expenses – adjusted1 |
106 | 166 | ||||||
| Net income – reported, after-tax |
69 | 111 | ||||||
| Net income – adjusted, after-tax1 |
72 | 114 | ||||||
| Share of net income from investment in Schwab2 |
11 | 15 | ||||||
| U.S. Retail segment net income – reported, after-tax |
80 | 126 | ||||||
| U.S. Retail segment net income – adjusted, after-tax1 |
83 | 129 | ||||||
| Earnings per share (Canadian dollars) |
||||||||
| Basic – reported |
$ | 0.04 | $ | 0.07 | ||||
| Basic – adjusted1 |
0.05 | 0.07 | ||||||
| Diluted – reported |
0.04 | 0.07 | ||||||
| Diluted – adjusted1 |
0.05 | 0.07 | ||||||
| 1 | For additional information about the Bank’s use of non-GAAP financial measures, refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section of this document. |
| 2 | Share of net income from investment in Schwab and the foreign exchange impact are reported with a one-month lag. |
| Average foreign exchange rate (equivalent of CAD $1.00) | For the three months ended | For the twelve months ended | ||||||||||||||
| October 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
|||||||||||||
| U.S. dollar |
0.751 | 0.796 | 0.777 | 0.795 | ||||||||||||
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 9 |
HOW OUR BUSINESSES PERFORMED
For management reporting purposes, commencing the fourth quarter of 2022, the Bank’s operations and activities are organized around the following four key business segments: Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking. The Bank’s other activities are grouped into the Corporate segment. The comparative period information has been adjusted to reflect the new segment alignment.
Results of each business segment reflect revenue, expenses, assets, and liabilities generated by the businesses in that segment. Where applicable, the Bank measures and evaluates the performance of each segment based on adjusted results and ROE, and for those segments the Bank indicates that the measure is adjusted. For further details, refer to Note 29 of the Bank’s Consolidated Financial Statements for the year ended October 31, 2022.
PCL related to performing (Stage 1 and Stage 2) and impaired (Stage 3) financial assets, loan commitments, and financial guarantees is recorded within the respective segment.
Net interest income within Wholesale Banking is calculated on a taxable equivalent basis (TEB), which means that the value of non-taxable or tax-exempt income, including dividends, is adjusted to its equivalent before-tax value. Using TEB allows the Bank to measure income from all securities and loans consistently and makes for a more meaningful comparison of net interest income with similar institutions. The TEB increase to net interest income and provision for income taxes reflected in Wholesale Banking results is reversed in the Corporate segment. The TEB adjustment for the quarter was $36 million, compared with $36 million in the fourth quarter last year, and $41 million in the prior quarter.
Share of net income from investment in Schwab is reported in the U.S. Retail segment. Amounts for amortization of acquired intangibles and the acquisition and integration charges related to the Schwab transaction are recorded in the Corporate segment.
TABLE 9: CANADIAN PERSONAL AND COMMERCIAL BANKING
| (millions of Canadian dollars, except as noted) | For the three months ended | |||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
||||||||||
| Net interest income |
$ | 3,388 | $ | 3,199 | $ | 2,863 | ||||||
| Non-interest income |
1,066 | 1,061 | 991 | |||||||||
| Total revenue |
4,454 | 4,260 | 3,854 | |||||||||
| Provision for (recovery of) credit losses – impaired |
184 | 142 | 140 | |||||||||
| Provision for (recovery of) credit losses – performing |
45 | 28 | (87 | ) | ||||||||
| Total provision for (recovery of) credit losses |
229 | 170 | 53 | |||||||||
| Non-interest expenses |
1,921 | 1,807 | 1,720 | |||||||||
| Provision for (recovery of) income taxes |
610 | 605 | 552 | |||||||||
| Net income |
$ | 1,694 | $ | 1,678 | $ | 1,529 | ||||||
|
Selected volumes and ratios |
||||||||||||
| Return on common equity1 |
41.9 | % | 42.3 | % | 46.4 | % | ||||||
| Net interest margin (including on securitized assets)2 |
2.70 | 2.59 | 2.48 | |||||||||
| Efficiency ratio |
43.1 | 42.4 | 44.6 | |||||||||
| Number of Canadian Retail branches at period end |
1,060 | 1,060 | 1,061 | |||||||||
| Average number of full-time equivalent staff |
28,936 | 28,944 | 27,693 | |||||||||
| 1 | Capital allocated to the business segment was increased to 10.5% CET1 Capital effective the first quarter of fiscal 2022 compared with 9% in the prior year. |
| 2 | Net interest margin is calculated by dividing net interest income by average interest-earning assets. Average interest-earning assets used in the calculation of net interest margin is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section of this document and the Glossary in the 2022 MD&A, for additional information about these metrics. |
Quarterly comparison – Q4 2022 vs. Q4 2021
Canadian Personal and Commercial Banking net income for the quarter was $1,694 million, an increase of $165 million, or 11%, compared with the fourth quarter last year, reflecting higher revenue, partially offset by higher non-interest expenses and PCL. The annualized ROE for the quarter was 41.9%, compared with 46.4%, in the fourth quarter last year.
Revenue for the quarter was $4,454 million, an increase of $600 million, or 16%, compared with the fourth quarter last year.
Net interest income was $3,388 million, an increase of $525 million, or 18%, reflecting higher margins and volume growth. Average loan volumes increased $44 billion, or 9%, reflecting 8% growth in personal loans and 15% growth in business loans. Average deposit volumes increased $18 billion, or 4%, reflecting 8% growth in personal deposits and 2% decrease in business deposits. Net interest margin was 2.70%, an increase of 22 bps, primarily due to higher margins on deposits reflecting rising interest rates, partially offset by lower margin on loans, and changes in balance sheet mix.
Non-interest income was $1,066 million, an increase of $75 million, or 8%, reflecting increased client activity, including credit card-related and foreign exchange revenue.
PCL was $229 million, an increase of $176 million compared with the fourth quarter last year. PCL – impaired for the quarter was $184 million, an increase of $44 million, or 31%, reflecting some normalization of credit performance. PCL – performing was $45 million, compared with a recovery of $87 million in the prior year. The performing build this quarter reflects some normalization of credit performance, deterioration in the economic outlook, and volume growth. Total PCL as an annualized percentage of credit volume was 0.17%, an increase of 13 bps compared with the fourth quarter last year.
Non-interest expenses for the quarter were $1,921 million, an increase of $201 million, or 12%, compared with the fourth quarter last year, primarily reflecting higher spend supporting business growth, including technology and employee-related expenses.
The efficiency ratio for the quarter was 43.1%, compared with 44.6% in the fourth quarter last year.
Quarterly comparison – Q4 2022 vs. Q3 2022
Canadian Personal and Commercial Banking net income for the quarter was $1,694 million, an increase of $16 million, or 1%, compared with the prior quarter, reflecting revenue growth, partially offset by higher non-interest expenses and PCL. The annualized ROE for the quarter was 41.9%, compared with 42.3% in the prior quarter.
Revenue increased $194 million, or 5%, compared with the prior quarter. Net interest income increased $189 million, or 6%, reflecting higher margins and volume growth. Average loan volumes increased $9 billion, or 2%, reflecting 2% growth in personal loans and 3% growth in business loans. Average deposit volumes were relatively flat compared with the prior quarter, reflecting 2% growth in personal deposits and 2% decrease in business deposits. Net interest margin was 2.70%, an increase of 11 bps, due to higher margins on deposits reflecting rising interest rates, partially offset by lower margin on loans.
Non-interest income was relatively flat compared with the prior quarter.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 10 |
PCL increased by $59 million compared with the prior quarter. PCL – impaired increased by $42 million, or 30%, reflecting some normalization of credit performance. PCL – performing was $45 million, an increase of $17 million. The performing build this quarter reflects some normalization of credit performance, deterioration in the economic outlook, and volume growth. Total PCL as an annualized percentage of credit volume was 0.17%, an increase of 4 bps.
Non-interest expenses increased $114 million, or 6%, compared with the prior quarter, primarily reflecting higher spend supporting business growth, including employee-related expenses, technology, and marketing costs.
The efficiency ratio for the quarter was 43.1%, compared with 42.4% in the prior quarter.
TABLE 10: U.S. RETAIL
| (millions of dollars, except as noted) | For the three months ended | |||||||||||
| Canadian Dollars | October 31 2022 |
July 31 2022 |
October 31 2021 |
|||||||||
| Net interest income |
$ | 2,957 | $ | 2,453 | $ | 2,103 | ||||||
| Non-interest income |
638 | 648 | 677 | |||||||||
| Total revenue |
3,595 | 3,101 | 2,780 | |||||||||
| Provision for (recovery of) credit losses – impaired |
166 | 135 | 68 | |||||||||
| Provision for (recovery of) credit losses – performing |
59 | (28 | ) | (144 | ) | |||||||
| Total provision for (recovery of) credit losses |
225 | 107 | (76 | ) | ||||||||
| Non-interest expenses – reported |
1,976 | 1,715 | 1,617 | |||||||||
| Non-interest expenses – adjusted1,2 |
1,909 | 1,686 | 1,617 | |||||||||
| Provision for (recovery of) income taxes – reported |
165 | 126 | 111 | |||||||||
| Provision for (recovery of) income taxes – adjusted1 |
181 | 133 | 111 | |||||||||
| U.S. Retail Bank net income – reported |
1,229 | 1,153 | 1,128 | |||||||||
| U.S. Retail Bank net income – adjusted1 |
1,280 | 1,175 | 1,128 | |||||||||
| Share of net income from investment in Schwab3,4 |
310 | 289 | 246 | |||||||||
| Net income – reported |
$ | 1,539 | $ | 1,442 | $ | 1,374 | ||||||
| Net income – adjusted1 |
1,590 | 1,464 | 1,374 | |||||||||
|
U.S. Dollars |
||||||||||||
| Net interest income |
$ | 2,220 | $ | 1,905 | $ | 1,673 | ||||||
| Non-interest income |
479 | 504 | 539 | |||||||||
| Total revenue |
2,699 | 2,409 | 2,212 | |||||||||
| Provision for (recovery of) credit losses – impaired |
125 | 105 | 53 | |||||||||
| Provision for (recovery of) credit losses – performing |
44 | (22 | ) | (115 | ) | |||||||
| Total provision for (recovery of) credit losses |
169 | 83 | (62 | ) | ||||||||
| Non-interest expenses – reported |
1,482 | 1,332 | 1,288 | |||||||||
| Non-interest expenses – adjusted1,2 |
1,432 | 1,310 | 1,288 | |||||||||
| Provision for (recovery of) income taxes – reported |
122 | 98 | 89 | |||||||||
| Provision for (recovery of) income taxes – adjusted1 |
135 | 103 | 89 | |||||||||
| U.S. Retail Bank net income – reported |
926 | 896 | 897 | |||||||||
| U.S. Retail Bank net income – adjusted1 |
963 | 913 | 897 | |||||||||
| Share of net income from investment in Schwab3,4 |
237 | 226 | 195 | |||||||||
| Net income – reported |
$ | 1,163 | $ | 1,122 | $ | 1,092 | ||||||
| Net income – adjusted1 |
1,200 | 1,139 | 1,092 | |||||||||
|
Selected volumes and ratios |
||||||||||||
| Return on common equity – reported5 |
15.4 | % | 14.8 | % | 14.5 | % | ||||||
| Return on common equity – adjusted1,5 |
15.8 | 15.0 | 14.5 | |||||||||
| Net interest margin1,6 |
3.13 | 2.62 | 2.21 | |||||||||
| Efficiency ratio – reported |
54.9 | 55.3 | 58.2 | |||||||||
| Efficiency ratio – adjusted1 |
53.1 | 54.4 | 58.2 | |||||||||
| Assets under administration (billions of U.S. dollars)7 |
$ | 34 | $ | 32 | $ | 30 | ||||||
| Assets under management (billions of U.S. dollars)7 |
33 | 36 | 41 | |||||||||
| Number of U.S. retail stores |
1,160 | 1,158 | 1,148 | |||||||||
| Average number of full-time equivalent staff |
26,710 | 25,968 | 24,771 | |||||||||
| 1 | For additional information about the Bank’s use of non-GAAP financial measures, refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section of this document. |
| 2 | Adjusted non-interest expenses exclude the acquisition and integration-related charges for the First Horizon acquisition – Q4 2022: $67 million or US$50 million ($51 million or US$37 million after-tax), Q3 2022: $29 million or US$22 million ($22 million or US$17 million after-tax) |
| 3 | The Bank’s share of Schwab’s earnings is reported with a one-month lag. Refer to Note 12 of the 2022 Consolidated Financial Statements for further details. |
| 4 | The after-tax amounts for amortization of acquired intangibles and the Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade are recorded in the Corporate segment. |
| 5 | Capital allocated to the business segment was increased to 10.5% CET1 Capital effective in the first quarter of the fiscal 2022 compared with 9% in the prior year. |
| 6 | Net interest margin is calculated by dividing U.S. Retail segment’s net interest income by average interest-earning assets excluding the impact related to sweep deposits arrangements and the impact of intercompany deposits and cash collateral, which management believes better reflects segment performance. In addition, the value of tax-exempt interest income is adjusted to its equivalent before-tax value. Net interest income and average interest-earning assets used in the calculation are non-GAAP financial measures. |
| 7 | For additional information about this metric, refer to the Glossary in the 2022 MD&A. |
Quarterly comparison – Q4 2022 vs. Q4 2021
U.S. Retail reported net income for the quarter was $1,539 million (US$1,163 million), an increase of $165 million (US$71 million), or 12% (7% in U.S. dollars) compared with the fourth quarter last year. On an adjusted basis, net income for the quarter was $1,590 million (US$1,200 million), an increase of $216 million (US$108 million), or 16% (10% in U.S. dollars). The reported and adjusted annualized ROE for the quarter were 15.4% and 15.8%, respectively, compared with 14.5% in the fourth quarter last year.
U.S. Retail net income includes contributions from the U.S. Retail Bank and the Bank’s investment in Schwab. Reported net income for the quarter from the Bank’s investment in Schwab was $310 million (US$237 million), an increase of $64 million (US$42 million), or 26% (22% in U.S. dollars), reflecting higher net interest income, partially offset by higher expenses, lower asset management fees and lower trading revenue.
U.S. Retail Bank reported net income was $1,229 million (US$926 million), an increase of $101 million (US$29 million), or 9% (3% in U.S. dollars), compared with the fourth quarter last year, primarily reflecting higher revenue, partially offset by higher PCL and non-interest expenses including acquisition and integration-related charges for the First Horizon acquisition. U.S. Retail Bank adjusted net income was $1,280 million (US$963 million), an increase of $152 million (US$66 million), or 13% (7% in U.S. dollars), compared with the fourth quarter last year, reflecting higher revenue, partially offset by higher PCL and non-interest expenses.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 11 |
U.S. Retail Bank revenue is derived from the personal and business banking and wealth management businesses. Revenue for the quarter was US$2,699 million, an increase of US$487 million, or 22%, compared with the fourth quarter last year. Net interest income of US$2,220 million, increased US$547 million, or 33%, driven by the benefit of higher deposit margins from the rising rate environment, higher business and personal deposits and higher loan volumes along with higher earnings on investments, partially offset by lower income from PPP loan forgiveness and lower margin on loans. Net interest margin of 3.13%, increased 92 bps, as higher margin on deposits reflecting the rising interest rate environment and positive balance sheet mix was partially offset by lower income from PPP loan forgiveness and lower margin on loans. Non-interest income of US$479 million decreased US$60 million, or 11%, compared with the fourth quarter last year, reflecting lower overdraft fees and higher valuation of certain investments in the prior year.
Average loan volumes increased US$7 billion, or 4%, compared with the fourth quarter last year. Personal loans increased 10%, reflecting higher residential mortgage and auto originations coupled with lower prepayments, and higher credit card volumes. Business loans were flat, reflecting strong originations, new customer growth, higher commercial line utilization and increased customer activity, offset by PPP loan forgiveness. Excluding PPP loans, business loans increased 5%. Average deposit volumes were flat, reflecting a 5% increase in personal deposits, flat business deposit volumes, and a 5% decrease in sweep deposits.
Assets under administration (AUA) were US$34 billion as at October 31, 2022, an increase of US$4 billion, or 13%, compared with the fourth quarter last year, reflecting net asset growth. Assets under Management (AUM) were US$33 billion as at October 31, 2022, a decrease of US$8 billion, or 20%, compared with the fourth quarter last year, reflecting market depreciation and net asset outflows.
PCL for the quarter was US$169 million, compared with a recovery of US$62 million in the fourth quarter last year. PCL – impaired was US$125 million, an increase of US$72 million, or 136%, reflecting some normalization of credit performance. PCL – performing was US$44 million, compared with a recovery of US$115 million in the prior year. The performing build this quarter reflects some normalization of credit performance, deterioration in the economic outlook, and volume growth. U.S. Retail PCL including only the Bank’s share of PCL in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.40%, an increase of 55 bps, compared with the fourth quarter last year.
Reported non-interest expenses for the quarter were US$1,482 million, an increase of US$194 million, or 15%, compared with the fourth quarter last year, reflecting higher employee-related expenses, acquisition and integration-related charges for the First Horizon acquisition and higher investments in the business. On an adjusted basis, excluding acquisition and integration-related charges for the First Horizon acquisition, non-interest expenses increased US$144 million, or 11%.
The reported and adjusted efficiency ratios for the quarter were 54.9% and 53.1%, respectively, compared with 58.2%, in the fourth quarter last year.
Quarterly comparison – Q4 2022 vs. Q3 2022
U.S. Retail reported net income of $1,539 million (US$1,163 million) increased $97 million (US$41 million), or 7% (4% in U.S. dollars), compared with the prior quarter. On an adjusted basis, net income for the quarter was $1,590 million (US$1,200 million), an increase of $126 million (US$61 million), or 9% (5% in U.S. dollars). The reported and adjusted annualized ROE for the quarter were 15.4% and 15.8%, respectively, compared with 14.8% and 15.0%, respectively, in the prior quarter.
The contribution from Schwab of $310 million (US$237 million), increased $21 million (US$11 million), or 7% (5% in U.S. dollars), reflecting higher net interest income.
U.S. Retail Bank reported net income was $1,229 million (US$926 million), an increase of $76 million (US$30 million), or 7% (3% in U.S. dollars), compared with the prior quarter, reflecting higher revenue, partially offset by higher PCL and non-interest expenses including acquisition and integration-related charges for the First Horizon acquisition. U.S. Retail Bank adjusted net income was $1,280 million (US$963 million), an increase of $105 million (US$50 million), or 9% (5% in U.S. dollars), reflecting higher revenue, partially offset by higher PCL and non-interest expenses.
Revenue increased US$290 million, or 12%, compared with the prior quarter. Net interest income of US$2,220 million increased US$315 million, or 17%, reflecting the benefit of higher deposit margins due to the rising interest rate environment, partially offset by lower margin on loans. Net interest margin of 3.13% increased 51 bps quarter over quarter, as higher margin on deposits reflecting the rising interest rate environment and positive balance sheet mix was partially offset by lower margin on loans. Non-interest income of US$479 million decreased US$25 million, or 5%, reflecting lower overdraft fees.
Average loan volumes increased US$4 billion, or 2%, compared with the prior quarter. Personal loans increased 4%, reflecting higher originations in residential mortgage, auto, and home equity coupled with lower prepayments, and higher credit card volumes. Business loans increased 1%, or 2% excluding PPP loans, reflecting strong originations, new customer growth, and increased customer activity. Average deposit volumes decreased US$10 billion, or 3%, compared with the prior quarter reflecting a 1% decrease in personal deposits and a 7% decline in sweep deposits, partially offset by a 1% increase in business deposits.
AUA were US$34 billion as at October 31, 2022, an increase of US$2 billion, or 6%, compared with the prior quarter, reflecting net asset growth. AUM were US$33 billion as at October 31, 2022, a decrease of US$3 billion, or 8%, reflecting market depreciation and net asset outflows.
PCL increased by US$86 million compared with the prior quarter. PCL – impaired increased US$20 million, or 19%, reflecting some further normalization of credit performance. PCL – performing was US$44 million, compared with a recovery of US$22 million in the prior quarter. The performing build this quarter reflects some normalization of credit performance, deterioration in the economic outlook and volume growth. U.S. Retail PCL including only the Bank’s share of PCL in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.40%, higher by 20 bps.
Reported non-interest expenses for the quarter were US$1,482 million, an increase of US$150 million, or 11%, reflecting higher employee-related expenses, higher investments in the business, and acquisition and integration-related charges for the First Horizon acquisition. On an adjusted basis, excluding acquisition and integration-related charges for the First Horizon acquisition, non-interest expenses increased US$122 million, or 9%.
The reported and adjusted efficiency ratios for the quarter were 54.9% and 53.1%, respectively, compared with 55.3% and 54.4%, respectively, in the prior quarter.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 12 |
TABLE 11: WEALTH MANAGEMENT AND INSURANCE
| (millions of Canadian dollars, except as noted) | For the three months ended | |||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
||||||||||
| Net interest income |
$ | 272 | $ | 249 | $ | 199 | ||||||
| Non-interest income |
2,359 | 2,511 | 2,467 | |||||||||
| Total revenue |
2,631 | 2,760 | 2,666 | |||||||||
| Provision for (recovery of) credit losses – impaired |
– | – | – | |||||||||
| Provision for (recovery of) credit losses – performing |
– | – | – | |||||||||
| Total provision for (recovery of) credit losses |
– | – | – | |||||||||
| Insurance claims and related expenses |
723 | 829 | 650 | |||||||||
| Non-interest expenses |
1,208 | 1,150 | 1,192 | |||||||||
| Provision for (recovery of) income taxes |
184 | 206 | 216 | |||||||||
| Net income |
$ | 516 | $ | 575 | $ | 608 | ||||||
| Selected volumes and ratios |
||||||||||||
| Return on common equity1 |
39.5 | % | 44.6 | % | 51.4 | % | ||||||
| Efficiency ratio |
45.9 | 41.7 | 44.7 | |||||||||
| Assets under administration (billions of Canadian dollars)2 |
$ | 517 | $ | 526 | $ | 557 | ||||||
| Assets under management (billions of Canadian dollars) |
397 | 408 | 427 | |||||||||
| Average number of full-time equivalent staff |
15,952 | 16,092 | 14,512 | |||||||||
| 1 | Capital allocated to the business segment was increased to 10.5% CET1 Capital effective the first quarter of 2022 compared with 9% in the prior year. |
| 2 | Includes AUA administered by TD Investor Services, which is part of the Canadian Personal and Commercial Banking segment. |
Quarterly comparison – Q4 2022 vs. Q4 2021
Wealth Management and Insurance net income for the quarter was $516 million, a decrease of $92 million, or 15%, compared with the fourth quarter last year, reflecting lower non-interest income in the wealth management business and higher claims in the insurance business, partially offset by higher net interest income. The annualized ROE for the quarter was 39.5%, compared with 51.4%, in the fourth quarter last year.
Revenue for the quarter was $2,631 million, a decrease of $35 million, or 1%, compared with the fourth quarter last year. Non-interest income was $2,359 million, a decrease of $108 million, or 4%, reflecting lower transaction and fee-based revenue in the wealth management business and a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease in insurance claims, partially offset by higher insurance premiums. Net interest income was $272 million, an increase of $73 million, or 37%, reflecting volume growth and higher margins.
AUA were $517 billion as at October 31, 2022, a decrease of $40 billion, or 7%, and AUM were $397 billion as at October 31, 2022, a decrease of $30 billion, or 7%, compared with the fourth quarter last year, both reflecting market depreciation, partially offset by net asset growth.
Insurance claims and related expenses were $723 million, an increase of $73 million, or 11%, compared with the fourth quarter last year, reflecting increased driving activity, inflationary costs and more severe weather-related events, partially offset by favourable prior years’ claims development and the impact of a higher discount rate which resulted in a similar decrease in the fair value of investments supporting claims liabilities reported in non-interest income.
Non-interest expenses for the quarter were $1,208 million, an increase of $16 million, or 1%, compared with the fourth quarter last year, reflecting higher spend supporting business growth, including higher employee-related expenses and technology costs, largely offset by the impact of lower legal provisions and variable compensation.
The efficiency ratio for the quarter was 45.9%, compared with 44.7% in the fourth quarter last year.
Quarterly comparison – Q4 2022 vs. Q3 2022
Wealth Management and Insurance net income for the quarter was $516 million, a decrease of $59 million, or 10%, compared with the prior quarter, reflecting lower revenue and higher non-interest expenses, partially offset by lower insurance claims and related expenses. The annualized ROE for the quarter was 39.5%, compared with 44.6%, in the prior quarter.
Revenue decreased $129 million, or 5%, compared with the prior quarter. Non-interest income decreased $152 million, or 6%, reflecting lower transaction and fee-based revenue in the wealth management business, lower insurance premiums and a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease in insurance claims. Net interest income increased $23 million, or 9%, reflecting higher margins.
AUA decreased $9 billion, or 2% compared with the prior quarter, reflecting market depreciation, partially offset by net asset growth. AUM decreased $11 billion, or 3%, compared with the prior quarter, primarily reflecting market depreciation.
Insurance claims and related expenses decreased $106 million, or 13%, compared with the prior quarter, reflecting the impact of a higher discount rate which resulted in a similar decrease in the fair value of investments supporting claims liabilities reported in non-interest income, favourable prior years’ claims development and current year claims experience.
Non-interest expenses for the quarter increased $58 million, or 5%, compared with the prior quarter, reflecting higher spend supporting business growth, including marketing and technology costs and higher employee-related expenses.
The efficiency ratio for the quarter was 45.9%, compared with 41.7% in the prior quarter.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 13 |
TABLE 12: WHOLESALE BANKING
| (millions of Canadian dollars, except as noted) | For the three months ended | |||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
||||||||||
| Net interest income (TEB) |
$ | 683 | $ | 786 | $ | 689 | ||||||
| Non-interest income |
476 | 290 | 461 | |||||||||
| Total revenue |
1,159 | 1,076 | 1,150 | |||||||||
| Provision for (recovery of) credit losses – impaired |
24 | – | (14 | ) | ||||||||
| Provision for (recovery of) credit losses – performing |
2 | 25 | (63 | ) | ||||||||
| Total provision for (recovery of) credit losses |
26 | 25 | (77 | ) | ||||||||
| Non-interest expenses – reported |
802 | 691 | 658 | |||||||||
| Non-interest expenses – adjusted1,2 |
784 | 691 | 658 | |||||||||
| Provision for (recovery of) income taxes (TEB) – reported |
70 | 89 | 149 | |||||||||
| Provision for (recovery of) income taxes (TEB) – adjusted1 |
74 | 89 | 149 | |||||||||
| Net income – reported |
261 | 271 | 420 | |||||||||
| Net income – adjusted1 |
$ | 275 | $ | 271 | $ | 420 | ||||||
| Selected volumes and ratios |
||||||||||||
| Trading-related revenue (TEB)3 |
$ | 560 | $ | 547 | $ | 510 | ||||||
| Average gross lending portfolio (billions of Canadian dollars)4 |
85.0 | 72.2 | 58.1 | |||||||||
| Return on common equity – reported5 |
8.2 | % | 8.9 | % | 18.6 | % | ||||||
| Return on common equity – adjusted1,5 |
8.6 | 8.9 | 18.6 | |||||||||
| Efficiency ratio – reported |
69.2 | 64.2 | 57.2 | |||||||||
| Efficiency ratio – adjusted1 |
67.6 | 64.2 | 57.2 | |||||||||
| Average number of full-time equivalent staff |
5,301 | 5,163 | 4,910 | |||||||||
| 1 | For additional information about the Bank’s use of non-GAAP financial measures, refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section of this document. |
| 2 | Adjusted non-interest expenses exclude the acquisition and integration-related charges primarily for the Cowen acquisition – Q4 2022: $18 million ($14 million after-tax). |
| 3 | Includes net interest income TEB of $407 million (July 2022 – $567 million, October 2021 – $514 million), and trading income (loss) of $153 million (July 2022 – ($20) million, October 2021 – ($4) million). Trading-related revenue (TEB) is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section and the Glossary in the 2022 MD&A, for additional information about this metric. |
| 4 | Includes gross loans and bankers’ acceptances relating to Wholesale Banking, excluding letters of credit, cash collateral, credit default swaps, and allowance for credit losses. |
| 5 | Capital allocated to the business segment was increased to 10.5% CET1 Capital effective in the first quarter of the fiscal 2022 compared with 9% in the prior year. |
Quarterly comparison – Q4 2022 vs. Q4 2021
Wholesale Banking reported net income for the quarter was $261 million, a decrease of $159 million, or 38%, compared with the fourth quarter last year, reflecting higher non-interest expenses and PCL. On an adjusted basis, net income was $275 million, a decrease of $145 million, or 35%.
Revenue for the quarter was $1,159 million, an increase of $9 million, or 1%, compared with the fourth quarter last year, reflecting higher global transaction banking, trading-related, and lending revenue, partially offset by lower underwriting revenue and markdowns in certain loan underwriting commitments.
PCL for the quarter was $26 million, compared with a recovery of $77 million in the fourth quarter last year. PCL – impaired was $24 million primarily reflecting credit migration. PCL – performing was $2 million.
Reported non-interest expenses were $802 million, an increase of $144 million, or 22%, compared with the fourth quarter last year, reflecting the continued investments in Wholesale Banking’s U.S. dollar strategy, including the hiring of banking, sales and trading, and technology professionals, timing of employee-related costs, acquisition and integration-related charges primarily for the Cowen acquisition, and the impact of foreign exchange translation. On an adjusted basis, non-interest expenses were $784 million, an increase of $126 million or 19%.
Quarterly comparison – Q4 2022 vs. Q3 2022
Wholesale Banking reported net income for the quarter was $261 million, a decrease of $10 million, or 4%, compared with the prior quarter, reflecting higher non-interest expenses, partially offset by higher revenue. On an adjusted basis, net income was $275 million, an increase of $4 million, or 1%.
Revenue for the quarter increased $83 million, or 8%, reflecting higher global transaction banking revenue, loan fees, and lending revenue, partially offset by lower advisory revenue and markdowns in certain loan underwriting commitments.
PCL increased by $1 million compared with the prior quarter. PCL – impaired was $24 million primarily reflecting credit migration. PCL – performing was $2 million.
Reported non-interest expenses for the quarter increased $111 million, or 16%, reflecting the timing of employee-related costs, continued investments in technology, acquisition and integration-related charges primarily for the Cowen acquisition, and the impact of foreign exchange translation. On an adjusted basis, non-interest expenses increased $93 million or 13%.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 14 |
TABLE 13: CORPORATE
| (millions of Canadian dollars) | For the three months ended | |||||||||||
| October 31 2022 |
July 31 2022 |
October 31 2021 |
||||||||||
| Net income (loss) – reported |
$ | 2,661 | $ | (752 | ) | $ | (150 | ) | ||||
| Adjustments for items of note |
||||||||||||
| Amortization of acquired intangibles before income taxes |
57 | 58 | 74 | |||||||||
| Acquisition and integration charges related to the Schwab transaction |
18 | 23 | 22 | |||||||||
| Mitigation of interest rate volatility to closing capital on First Horizon acquisition |
(2,319 | ) | 678 | – | ||||||||
| Gain on sale of Schwab shares |
(997 | ) | – | – | ||||||||
| Less: impact of income taxes |
(570 | ) | 182 | 11 | ||||||||
| Net income (loss) – adjusted1 |
$ | (10 | ) | $ | (175 | ) | $ | (65 | ) | |||
| Decomposition of items included in net income (loss) – adjusted |
||||||||||||
| Net corporate expenses2 |
$ | (187 | ) | $ | (196 | ) | $ | (202 | ) | |||
| Other |
177 | 21 | 137 | |||||||||
| Net income (loss) – adjusted1 |
$ | (10 | ) | $ | (175 | ) | $ | (65 | ) | |||
| Selected volumes |
||||||||||||
| Average number of full-time equivalent staff |
21,373 | 20,950 | 17,772 | |||||||||
| 1 | For additional information about the Bank’s use of non-GAAP financial measures, refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section of this document. |
| 2 | For additional information about this metric, refer to the Glossary in the 2022 MD&A. |
Quarterly comparison – Q4 2022 vs. Q4 2021
Corporate segment’s reported net income for the quarter was $2,661 million, compared with reported net loss of $150 million in the fourth quarter last year. The year-over-year increase primarily reflects gains from mitigation of interest rate volatility to closing capital on First Horizon acquisition and from the sale of Schwab shares, lower net corporate expenses, and a higher contribution from other items. The decrease in net corporate expenses largely reflects corporate real estate optimization costs in the prior year. The increase in other items primarily reflects the favourable tax impact of earnings mix and the recognition of unused tax losses, partially offset by lower revenue from treasury and balance sheet management activities this quarter. The adjusted net loss for the quarter was $10 million, compared with an adjusted net loss of $65 million in the fourth quarter last year.
Quarterly comparison – Q4 2022 vs. Q3 2022
Corporate segment’s reported net income for the quarter was $2,661 million, compared with reported net loss of $752 million in the prior quarter. The quarter-over-quarter increase primarily reflects gains from mitigation of interest rate volatility to closing capital on First Horizon acquisition and from the sale of Schwab shares, lower net corporate expenses, and a higher contribution from other items. The increase in other items primarily reflects the favourable tax impact of earnings mix and the recognition of unused tax losses, partially offset by lower revenue from treasury and balance sheet management activities this quarter. The adjusted net loss for the quarter was $10 million, compared with an adjusted net loss of $175 million in the prior quarter.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 15 |
CONSOLIDATED FINANCIAL STATEMENTS
| CONSOLIDATED BALANCE SHEET1 | ||||||||
| (millions of Canadian dollars) | As at | |||||||
| October 31 2022 |
October 31 2021 |
|||||||
| ASSETS |
||||||||
| Cash and due from banks |
$ | 8,556 | $ | 5,931 | ||||
| Interest-bearing deposits with banks |
137,294 | 159,962 | ||||||
| 145,850 | 165,893 | |||||||
| Trading loans, securities, and other |
143,726 | 147,590 | ||||||
| Non-trading financial assets at fair value through profit or loss |
10,946 | 9,390 | ||||||
| Derivatives |
103,873 | 54,427 | ||||||
| Financial assets designated at fair value through profit or loss |
5,039 | 4,564 | ||||||
| Financial assets at fair value through other comprehensive income |
69,675 | 79,066 | ||||||
| 333,259 | 295,037 | |||||||
| Debt securities at amortized cost, net of allowance for credit losses |
342,774 | 268,939 | ||||||
| Securities purchased under reverse repurchase agreements |
160,167 | 167,284 | ||||||
| Loans |
||||||||
| Residential mortgages |
293,924 | 268,340 | ||||||
| Consumer instalment and other personal |
206,152 | 189,864 | ||||||
| Credit card |
36,010 | 30,738 | ||||||
| Business and government |
301,389 | 240,070 | ||||||
| 837,475 | 729,012 | |||||||
| Allowance for loan losses |
(6,432 | ) | (6,390 | ) | ||||
| Loans, net of allowance for loan losses |
831,043 | 722,622 | ||||||
| Other |
||||||||
| Customers’ liability under acceptances |
19,733 | 18,448 | ||||||
| Investment in Schwab |
8,088 | 11,112 | ||||||
| Goodwill |
17,656 | 16,232 | ||||||
| Other intangibles |
2,303 | 2,123 | ||||||
| Land, buildings, equipment, and other depreciable assets |
9,400 | 9,181 | ||||||
| Deferred tax assets |
2,193 | 2,265 | ||||||
| Amounts receivable from brokers, dealers, and clients |
19,760 | 32,357 | ||||||
| Other assets |
25,302 | 17,179 | ||||||
| 104,435 | 108,897 | |||||||
| Total assets |
$ | 1,917,528 | $ | 1,728,672 | ||||
| LIABILITIES |
||||||||
| Trading deposits |
$ | 23,805 | $ | 22,891 | ||||
| Derivatives |
91,133 | 57,122 | ||||||
| Securitization liabilities at fair value |
12,612 | 13,505 | ||||||
| Financial liabilities designated at fair value through profit or loss |
162,786 | 113,988 | ||||||
| 290,336 | 207,506 | |||||||
| Deposits |
||||||||
| Personal |
660,838 | 633,498 | ||||||
| Banks |
38,263 | 20,917 | ||||||
| Business and government |
530,869 | 470,710 | ||||||
| 1,229,970 | 1,125,125 | |||||||
| Other |
||||||||
| Acceptances |
19,733 | 18,448 | ||||||
| Obligations related to securities sold short |
45,505 | 42,384 | ||||||
| Obligations related to securities sold under repurchase agreements |
128,024 | 144,097 | ||||||
| Securitization liabilities at amortized cost |
15,072 | 15,262 | ||||||
| Amounts payable to brokers, dealers, and clients |
25,195 | 28,993 | ||||||
| Insurance-related liabilities |
7,468 | 7,676 | ||||||
| Other liabilities |
33,552 | 28,133 | ||||||
| 274,549 | 284,993 | |||||||
| Subordinated notes and debentures |
11,290 | 11,230 | ||||||
| Total liabilities |
1,806,145 | 1,628,854 | ||||||
| EQUITY |
||||||||
| Shareholders’ Equity |
||||||||
| Common shares |
24,363 | 23,066 | ||||||
| Preferred shares and other equity instruments |
11,253 | 5,700 | ||||||
| Treasury – common shares |
(91 | ) | (152 | ) | ||||
| Treasury – preferred shares and other equity instruments |
(7 | ) | (10 | ) | ||||
| Contributed surplus |
179 | 173 | ||||||
| Retained earnings |
73,698 | 63,944 | ||||||
| Accumulated other comprehensive income (loss) |
1,988 | 7,097 | ||||||
| Total equity |
111,383 | 99,818 | ||||||
| Total liabilities and equity |
$ | 1,917,528 | $ | 1,728,672 | ||||
| 1 | The amounts as at October 31, 2022 and October 31, 2021, have been derived from the audited financial statements. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 16 |
| CONSOLIDATED STATEMENT OF INCOME1 | ||||||||||||||||
| (millions of Canadian dollars, except as noted) | For the three months ended | For the twelve months ended | ||||||||||||||
| October 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
|||||||||||||
| Interest income2 |
||||||||||||||||
| Loans |
$ | 9,793 | $ | 6,009 | $ | 29,666 | $ | 23,959 | ||||||||
| Securities |
||||||||||||||||
| Interest |
3,419 | 960 | 7,928 | 3,721 | ||||||||||||
| Dividends |
500 | 394 | 1,822 | 1,594 | ||||||||||||
| Deposits with banks |
987 | 76 | 1,616 | 307 | ||||||||||||
| 14,699 | 7,439 | 41,032 | 29,581 | |||||||||||||
| Interest expense |
||||||||||||||||
| Deposits |
5,255 | 776 | 9,748 | 3,742 | ||||||||||||
| Securitization liabilities |
185 | 88 | 573 | 343 | ||||||||||||
| Subordinated notes and debentures |
105 | 93 | 397 | 374 | ||||||||||||
| Other |
1,524 | 220 | 2,961 | 991 | ||||||||||||
| 7,069 | 1,177 | 13,679 | 5,450 | |||||||||||||
| Net interest income |
7,630 | 6,262 | 27,353 | 24,131 | ||||||||||||
| Non-interest income |
||||||||||||||||
| Investment and securities services |
1,381 | 1,565 | 5,869 | 6,179 | ||||||||||||
| Credit fees |
438 | 374 | 1,615 | 1,453 | ||||||||||||
| Trading income (loss) |
(219 | ) | (12 | ) | (257 | ) | 313 | |||||||||
| Service charges |
719 | 711 | 2,871 | 2,655 | ||||||||||||
| Card services |
750 | 651 | 2,890 | 2,435 | ||||||||||||
| Insurance revenue |
1,310 | 1,248 | 5,380 | 4,877 | ||||||||||||
| Other income (loss) |
3,554 | 142 | 3,311 | 650 | ||||||||||||
| 7,933 | 4,679 | 21,679 | 18,562 | |||||||||||||
| Total revenue |
15,563 | 10,941 | 49,032 | 42,693 | ||||||||||||
| Provision for (recovery of) credit losses |
617 | (123 | ) | 1,067 | (224 | ) | ||||||||||
| Insurance claims and related expenses |
723 | 650 | 2,900 | 2,707 | ||||||||||||
| Non-interest expenses |
||||||||||||||||
| Salaries and employee benefits |
3,507 | 3,051 | 13,394 | 12,378 | ||||||||||||
| Occupancy, including depreciation |
433 | 440 | 1,660 | 1,882 | ||||||||||||
| Technology and equipment, including depreciation |
521 | 449 | 1,902 | 1,694 | ||||||||||||
| Amortization of other intangibles |
147 | 179 | 599 | 706 | ||||||||||||
| Communication and marketing |
403 | 378 | 1,355 | 1,203 | ||||||||||||
| Brokerage-related and sub-advisory fees |
97 | 112 | 408 | 427 | ||||||||||||
| Professional, advisory and outside services |
692 | 568 | 2,190 | 1,620 | ||||||||||||
| Other |
745 | 770 | 3,133 | 3,166 | ||||||||||||
| 6,545 | 5,947 | 24,641 | 23,076 | |||||||||||||
| Income before income taxes and share of net income from investment in Schwab |
7,678 | 4,467 | 20,424 | 17,134 | ||||||||||||
| Provision for (recovery of) income taxes |
1,297 | 910 | 3,986 | 3,621 | ||||||||||||
| Share of net income from investment in Schwab |
290 | 224 | 991 | 785 | ||||||||||||
| Net income |
6,671 | 3,781 | 17,429 | 14,298 | ||||||||||||
| Preferred dividends and distributions on other equity instruments |
107 | 63 | 259 | 249 | ||||||||||||
| Net income available to common shareholders |
$ | 6,564 | $ | 3,718 | $ | 17,170 | $ | 14,049 | ||||||||
| Earnings per share (Canadian dollars) |
||||||||||||||||
| Basic |
$ | 3.62 | $ | 2.04 | $ | 9.48 | $ | 7.73 | ||||||||
| Diluted |
3.62 | 2.04 | 9.47 | 7.72 | ||||||||||||
| Dividends per common share (Canadian dollars) |
0.89 | 0.79 | 3.56 | 3.16 | ||||||||||||
| 1 | The amounts for the three months ended October 31, 2022, and October 31, 2021, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2022 and October 31, 2021, have been derived from the audited financial statements. |
| 2 | Includes $12,315 million and $35,277 million, for the three and twelve months ended October 31, 2022, respectively (three and twelve months ended October 31, 2021 – $6,646 million and $26,706 million, respectively) which have been calculated based on the effective interest rate method. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 17 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME1 |
| (millions of Canadian dollars) | For the three months ended | For the twelve months ended | ||||||||||||||
| October 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
|||||||||||||
| Net income |
$ | 6,671 | $ | 3,781 | $ | 17,429 | $ | 14,298 | ||||||||
| Other comprehensive income (loss) |
||||||||||||||||
| Items that will be subsequently reclassified to net income |
||||||||||||||||
| Net change in unrealized gain/(loss) on financial assets at fair value through other comprehensive income |
||||||||||||||||
| Change in unrealized gain/ (loss) |
(269 | ) | (124 | ) | (1,343 | ) | 27 | |||||||||
| Reclassification to earnings of net loss /(gain) |
7 | (11 | ) | 2 | (75 | ) | ||||||||||
| Changes in allowance for credit losses recognized in earnings |
(2 | ) | 3 | (5 | ) | 1 | ||||||||||
| Income taxes relating to: |
||||||||||||||||
| Change in unrealized gain/(loss) |
63 | 30 | 360 | (2 | ) | |||||||||||
| Reclassification to earnings of net loss/(gain) |
– | 2 | – | 16 | ||||||||||||
| (201 | ) | (100 | ) | (986 | ) | (33 | ) | |||||||||
| Net change in unrealized foreign currency translation gain/(loss) on investments in foreign operations, net of hedging activities |
||||||||||||||||
| Unrealized gain/(loss) |
5,871 | (699 | ) | 9,230 | (6,082 | ) | ||||||||||
| Reclassification to earnings of net loss /(gain) |
50 | – | 50 | – | ||||||||||||
| Net gain/(loss) on hedges |
(2,084 | ) | 312 | (3,271 | ) | 2,649 | ||||||||||
| Reclassification to earnings of net loss /(gain) on hedges |
(68 | ) | – | (68 | ) | – | ||||||||||
| Income taxes relating to: |
||||||||||||||||
| Net gain/(loss) on hedges |
548 | (82 | ) | 859 | (694 | ) | ||||||||||
| Reclassification to earnings of net loss /(gain) on hedges |
18 | – | 18 | – | ||||||||||||
| 4,335 | (469 | ) | 6,818 | (4,127 | ) | |||||||||||
| Net change in gain/(loss) on derivatives designated as cash flow hedges |
||||||||||||||||
| Change in gain/(loss) |
(1,485 | ) | (2,016 | ) | (6,179 | ) | (3,172 | ) | ||||||||
| Reclassification to earnings of loss/(gain) |
(3,600 | ) | 185 | (4,100 | ) | 607 | ||||||||||
| Income taxes relating to: |
||||||||||||||||
| Change in gain/(loss) |
419 | 518 | 1,660 | 761 | ||||||||||||
| Reclassification to earnings of loss/(gain) |
890 | (41 | ) | 972 | (92 | ) | ||||||||||
| (3,776 | ) | (1,354 | ) | (7,647 | ) | (1,896 | ) | |||||||||
| Share of other comprehensive income (loss) from investment in Schwab |
(721 | ) | (198 | ) | (3,200 | ) | (768 | ) | ||||||||
| Items that will not be subsequently reclassified to net income |
||||||||||||||||
| Remeasurement gain/(loss) on employee benefit plans |
||||||||||||||||
| Gain/(loss) |
(399 | ) | 659 | 1,105 | 2,422 | |||||||||||
| Income taxes |
105 | (172 | ) | (290 | ) | (635 | ) | |||||||||
| (294 | ) | 487 | 815 | 1,787 | ||||||||||||
| Change in net unrealized gain/(loss) on equity securities designated at fair value through other comprehensive income |
||||||||||||||||
| Change in net unrealized gain/(loss) |
(62 | ) | 55 | (214 | ) | 587 | ||||||||||
| Income taxes |
16 | (15 | ) | 56 | (154 | ) | ||||||||||
| (46 | ) | 40 | (158 | ) | 433 | |||||||||||
| Gain/(loss) from changes in fair value due to own credit risk on financial liabilities designated at fair value through profit or loss |
||||||||||||||||
| Gain/(loss) |
52 | 19 | 87 | 69 | ||||||||||||
| Income taxes |
(14 | ) | (5 | ) | (23 | ) | (18 | ) | ||||||||
| 38 | 14 | 64 | 51 | |||||||||||||
| Total other comprehensive income (loss) |
(665 | ) | (1,580 | ) | (4,294 | ) | (4,553 | ) | ||||||||
| Total comprehensive income (loss) |
$ | 6,006 | $ | 2,201 | $ | 13,135 | $ | 9,745 | ||||||||
| Attributable to: |
||||||||||||||||
| Common shareholders |
$ | 5,899 | $ | 2,138 | $ | 12,876 | $ | 9,496 | ||||||||
| Preferred shareholders and other equity instrument holders |
107 | 63 | 259 | 249 | ||||||||||||
| 1 | The amounts for the three months ended October 31, 2022, and October 31, 2021, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2022 and October 31, 2021, have been derived from the audited financial statements. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 18 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY1 |
|
(millions of Canadian dollars) |
For the three months ended | For the twelve months ended | ||||||||||||||
| |
October 31 2022 |
|
|
October 31 2021 |
|
|
October 31 2022 |
|
|
October 31 2021 |
| |||||
| Common shares |
||||||||||||||||
| Balance at beginning of period |
$ | 23,744 | $ | 22,945 | $ | 23,066 | $ | 22,487 | ||||||||
| Proceeds from shares issued on exercise of stock options |
23 | 19 | 120 | 165 | ||||||||||||
| Shares issued as a result of dividend reinvestment plan |
596 | 102 | 1,442 | 414 | ||||||||||||
| Purchase of shares for cancellation and other |
– | – | (265 | ) | – | |||||||||||
| Balance at end of period |
24,363 | 23,066 | 24,363 | 23,066 | ||||||||||||
| Preferred shares and other equity instruments |
||||||||||||||||
| Balance at beginning of period |
7,350 | 6,700 | 5,700 | 5,650 | ||||||||||||
| Issue of shares and other equity instruments |
3,903 | – | 5,553 | 1,750 | ||||||||||||
| Redemption of shares and other equity instruments |
– | (1,000 | ) | – | (1,700 | ) | ||||||||||
| Balance at end of period |
11,253 | 5,700 | 11,253 | 5,700 | ||||||||||||
| Treasury – common shares |
||||||||||||||||
| Balance at beginning of period |
(104 | ) | (189 | ) | (152 | ) | (37 | ) | ||||||||
| Purchase of shares |
(2,721 | ) | (2,461 | ) | (10,852 | ) | (10,859 | ) | ||||||||
| Sale of shares |
2,734 | 2,498 | 10,913 | 10,744 | ||||||||||||
| Balance at end of period |
(91 | ) | (152 | ) | (91 | ) | (152 | ) | ||||||||
| Treasury – preferred shares and other equity instruments |
||||||||||||||||
| Balance at beginning of period |
(16 | ) | (5 | ) | (10 | ) | (4 | ) | ||||||||
| Purchase of shares and other equity instruments |
(113 | ) | (98 | ) | (255 | ) | (205 | ) | ||||||||
| Sale of shares and other equity instruments |
122 | 93 | 258 | 199 | ||||||||||||
| Balance at end of period |
(7 | ) | (10 | ) | (7 | ) | (10 | ) | ||||||||
| Contributed surplus |
||||||||||||||||
| Balance at beginning of period |
169 | 125 | 173 | 121 | ||||||||||||
| Net premium (discount) on sale of treasury instruments |
(19 | ) | 5 | (3 | ) | – | ||||||||||
| Issuance of stock options, net of options exercised |
2 | 3 | 18 | 6 | ||||||||||||
| Other |
27 | 40 | (9 | ) | 46 | |||||||||||
| Balance at end of period |
179 | 173 | 179 | 173 | ||||||||||||
| Retained earnings |
||||||||||||||||
| Balance at beginning of period |
69,090 | 61,167 | 63,944 | 53,845 | ||||||||||||
| Net income attributable to equity instrument holders |
6,671 | 3,781 | 17,429 | 14,298 | ||||||||||||
| Common dividends |
(1,613 | ) | (1,437 | ) | (6,442 | ) | (5,741 | ) | ||||||||
| Preferred dividends and distributions on other equity instruments |
(107 | ) | (63 | ) | (259 | ) | (249 | ) | ||||||||
| Share and other equity instrument issue expenses |
(19 | ) | – | (24 | ) | (5 | ) | |||||||||
| Net premium on repurchase of common shares and redemption of preferred shares and other equity instruments |
– | – | (1,930 | ) | (1 | ) | ||||||||||
| Remeasurement gain/(loss) on employee benefit plans |
(294 | ) | 487 | 815 | 1,787 | |||||||||||
| Realized gain/(loss) on equity securities designated at fair value through other comprehensive income |
(30 | ) | 9 | 165 | 10 | |||||||||||
| Balance at end of period |
73,698 | 63,944 | 73,698 | 63,944 | ||||||||||||
| Accumulated other comprehensive income (loss) |
||||||||||||||||
| Net unrealized gain/(loss) on financial assets at fair value through other comprehensive income: |
||||||||||||||||
| Balance at beginning of period |
(275 | ) | 610 | 510 | 543 | |||||||||||
| Other comprehensive income (loss) |
(199 | ) | (103 | ) | (981 | ) | (34 | ) | ||||||||
| Allowance for credit losses |
(2 | ) | 3 | (5 | ) | 1 | ||||||||||
| Balance at end of period |
(476 | ) | 510 | (476 | ) | 510 | ||||||||||
| Net unrealized gain/(loss) on equity securities designated at fair value through other comprehensive income: |
||||||||||||||||
| Balance at beginning of period |
69 | 141 | 181 | (252 | ) | |||||||||||
| Other comprehensive income (loss) |
(76 | ) | 49 | 7 | 443 | |||||||||||
| Reclassification of loss/(gain) to retained earnings |
30 | (9 | ) | (165 | ) | (10 | ) | |||||||||
| Balance at end of period |
23 | 181 | 23 | 181 | ||||||||||||
| Gain/(loss) from changes in fair value due to own credit risk on financial liabilities designated at fair value through profit or loss: |
||||||||||||||||
| Balance at beginning of period |
40 | – | 14 | (37 | ) | |||||||||||
| Other comprehensive income (loss) |
38 | 14 | 64 | 51 | ||||||||||||
| Balance at end of period |
78 | 14 | 78 | 14 | ||||||||||||
| Net unrealized foreign currency translation gain/(loss) on investments in foreign operations, net of hedging activities: |
||||||||||||||||
| Balance at beginning of period |
7,713 | 5,699 | 5,230 | 9,357 | ||||||||||||
| Other comprehensive income (loss) |
4,335 | (469 | ) | 6,818 | (4,127 | ) | ||||||||||
| Balance at end of period |
12,048 | 5,230 | 12,048 | 5,230 | ||||||||||||
| Net gain/(loss) on derivatives designated as cash flow hedges: |
||||||||||||||||
| Balance at beginning of period |
(1,941 | ) | 3,284 | 1,930 | 3,826 | |||||||||||
| Other comprehensive income (loss) |
(3,776 | ) | (1,354 | ) | (7,647 | ) | (1,896 | ) | ||||||||
| Balance at end of period |
(5,717 | ) | 1,930 | (5,717 | ) | 1,930 | ||||||||||
| Share of accumulated other comprehensive income (loss) from Investment in Schwab |
(3,968 | ) | (768 | ) | (3,968 | ) | (768 | ) | ||||||||
| Total accumulated other comprehensive income |
1,988 | 7,097 | 1,988 | 7,097 | ||||||||||||
| Total equity |
$ | 111,383 | $ | 99,818 | $ | 111,383 | $ | 99,818 | ||||||||
| 1 | The amounts for the three months ended October 31, 2022, and October 31, 2021, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2022 and October 31, 2021, have been derived from the audited financial statements. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 19 |
| CONSOLIDATED STATEMENT OF CASH FLOWS1 |
| (millions of Canadian dollars) | For the three months ended | For the twelve months ended | ||||||||||||||
| October 31 2022 |
October 31 2021 |
October 31 2022 |
October 31 2021 |
|||||||||||||
| Cash flows from (used in) operating activities |
||||||||||||||||
| Net income |
$ | 6,671 | $ | 3,781 | $ | 17,429 | $ | 14,298 | ||||||||
| Adjustments to determine net cash flows from (used in) operating activities |
||||||||||||||||
| Provision for (recovery of) credit losses |
617 | (123 | ) | 1,067 | (224 | ) | ||||||||||
| Depreciation |
316 | 296 | 1,167 | 1,360 | ||||||||||||
| Amortization of other intangibles |
147 | 179 | 599 | 706 | ||||||||||||
| Net securities loss/(gain) |
(8 | ) | (11 | ) | (60 | ) | (14 | ) | ||||||||
| Share of net income from investment in Schwab |
(290 | ) | (224 | ) | (991 | ) | (785 | ) | ||||||||
| Gain on sale of Schwab shares |
(997 | ) | – | (997 | ) | – | ||||||||||
| Deferred taxes |
469 | 99 | 502 | 258 | ||||||||||||
| Changes in operating assets and liabilities |
||||||||||||||||
| Interest receivable and payable |
(150 | ) | (30 | ) | (412 | ) | (288 | ) | ||||||||
| Securities sold under repurchase agreements |
1,078 | (11,766 | ) | (16,073 | ) | (44,779 | ) | |||||||||
| Securities purchased under reverse repurchase agreements |
1,108 | (5,130 | ) | 7,117 | 1,878 | |||||||||||
| Securities sold short |
(4,563 | ) | 5,661 | 3,121 | 7,030 | |||||||||||
| Trading loans, securities, and other |
4,407 | (152 | ) | 3,864 | 1,177 | |||||||||||
| Loans net of securitization and sales |
(40,791 | ) | (3,314 | ) | (109,463 | ) | (3,660 | ) | ||||||||
| Deposits |
33,435 | (110 | ) | 105,759 | (6,494 | ) | ||||||||||
| Derivatives |
(9,817 | ) | 1,722 | (15,435 | ) | 3,734 | ||||||||||
| Non-trading financial assets at fair value through profit or loss |
480 | (138 | ) | (1,556 | ) | (842 | ) | |||||||||
| Financial assets and liabilities designated at fair value through profit or loss |
22,697 | 21,701 | 48,323 | 54,498 | ||||||||||||
| Securitization liabilities |
(215 | ) | (138 | ) | (1,083 | ) | (719 | ) | ||||||||
| Current taxes |
(1,121 | ) | (682 | ) | (4,100 | ) | 239 | |||||||||
| Brokers, dealers and clients amounts receivable and payable |
2,165 | (3,968 | ) | 8,799 | (4,592 | ) | ||||||||||
| Other, including unrealized foreign currency translation loss/(gain) |
(13,047 | ) | 6,472 | (8,628 | ) | 27,348 | ||||||||||
| Net cash from (used in) operating activities |
2,591 | 14,125 | 38,949 | 50,129 | ||||||||||||
| Cash flows from (used in) financing activities |
||||||||||||||||
| Redemption or repurchase of subordinated notes and debentures |
(42 | ) | (11 | ) | 6 | (7 | ) | |||||||||
| Common shares issued, net |
21 | 17 | 108 | 145 | ||||||||||||
| Repurchase of common shares |
– | – | (2,195 | ) | – | |||||||||||
| Preferred shares and other equity instruments issued |
3,884 | – | 5,529 | 1,745 | ||||||||||||
| Redemption of preferred shares and other equity instruments |
– | – | (1,000 | ) | (700 | ) | ||||||||||
| Sale of treasury shares and other equity instruments |
2,837 | 2,596 | 11,168 | 10,943 | ||||||||||||
| Purchase of treasury shares and other equity instruments |
(2,834 | ) | (2,559 | ) | (11,107 | ) | (11,064 | ) | ||||||||
| Dividends paid on shares and distributions paid on other equity instruments |
(2,156 | ) | (1,387 | ) | (6,665 | ) | (5,555 | ) | ||||||||
| Repayment of lease liabilities |
(185 | ) | (102 | ) | (663 | ) | (543 | ) | ||||||||
| Net cash from (used in) financing activities |
1,525 | (1,446 | ) | (4,819 | ) | (5,036 | ) | |||||||||
| Cash flows from (used in) investing activities |
||||||||||||||||
| Interest-bearing deposits with banks |
(532 | ) | 6,967 | 30,455 | (729 | ) | ||||||||||
| Activities in financial assets at fair value through other comprehensive income |
||||||||||||||||
| Purchases |
(7,079 | ) | (5,526 | ) | (31,135 | ) | (21,056 | ) | ||||||||
| Proceeds from maturities |
8,002 | 6,631 | 33,158 | 33,541 | ||||||||||||
| Proceeds from sales |
1,540 | 2,594 | 6,723 | 5,363 | ||||||||||||
| Activities in debt securities at amortized cost |
||||||||||||||||
| Purchases |
(30,848 | ) | (36,360 | ) | (149,560 | ) | (153,896 | ) | ||||||||
| Proceeds from maturities |
20,250 | 12,888 | 68,719 | 92,131 | ||||||||||||
| Proceeds from sales |
5,160 | 652 | 8,720 | 2,365 | ||||||||||||
| Net purchases of land, buildings, equipment, other depreciable assets, and other intangibles |
(461 | ) | (358 | ) | (1,454 | ) | (1,129 | ) | ||||||||
| Net cash acquired from (paid for) divestitures and acquisitions |
2,479 | – | 2,479 | (1,858 | ) | |||||||||||
| Net cash from (used in) investing activities |
(1,489 | ) | (12,512 | ) | (31,895 | ) | (45,268 | ) | ||||||||
| Effect of exchange rate changes on cash and due from banks |
255 | (53 | ) | 390 | (339 | ) | ||||||||||
| Net increase (decrease) in cash and due from banks |
2,882 | 114 | 2,625 | (514 | ) | |||||||||||
| Cash and due from banks at beginning of period |
5,674 | 5,817 | 5,931 | 6,445 | ||||||||||||
| Cash and due from banks at end of period |
$ | 8,556 | $ | 5,931 | $ | 8,556 | $ | 5,931 | ||||||||
| Supplementary disclosure of cash flows from operating activities |
||||||||||||||||
| Amount of income taxes paid (refunded) during the period |
$ | 301 | $ | 1,590 | $ | 4,404 | $ | 4,071 | ||||||||
| Amount of interest paid during the period |
6,428 | 1,136 | 12,523 | 5,878 | ||||||||||||
| Amount of interest received during the period |
13,408 | 6,974 | 37,642 | 28,127 | ||||||||||||
| Amount of dividends received during the period |
281 | 443 | 1,792 | 1,844 | ||||||||||||
| 1 | The amounts for the three months ended October 31, 2022, and October 31, 2021, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2022 and October 31, 2021, have been derived from the audited financial statements. |
Appendix A – Segmented Information
For management reporting purposes, commencing the fourth quarter of 2022, the Bank reports its results under four key business segments: Canadian Personal and Commercial Banking, which includes the results of the Canadian personal and commercial banking businesses, and TD Auto Finance Canada; U.S. Retail, which includes the results of the U.S. personal and commercial banking businesses, U.S. credit cards, TD Auto Finance U.S., U.S. wealth business, and the Bank’s investment in Schwab; Wealth Management and Insurance; and Wholesale Banking. The Bank’s other activities are grouped into the Corporate segment.
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 20 |
Results for these segments for the years ended October 31, 2022 and October 31, 2021 are presented in the following tables.
| Results by Business Segment1,2 |
|
|||||||||||||||||||||||||||||||||||||||||||||||
| (millions of Canadian dollars) |
||||||||||||||||||||||||||||||||||||||||||||||||
| |
Canadian Personal and Commercial Banking |
|
U.S. Retail | |
Wealth Management and Insurance |
|
Wholesale Banking3 | Corporate3 | Total | |||||||||||||||||||||||||||||||||||||||
| For the three months ended October 31 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||
| Net interest income (loss) |
$ | 3,388 | $ | 2,863 | $ | 2,957 | $ | 2,103 | $ | 272 | $ | 199 | $ | 683 | $ | 689 | $ | 330 | $ | 408 | $ | 7,630 | $ | 6,262 | ||||||||||||||||||||||||
| Non-interest income (loss) |
1,066 | 991 | 638 | 677 | 2,359 | 2,467 | 476 | 461 | 3,394 | 83 | 7,933 | 4,679 | ||||||||||||||||||||||||||||||||||||
| Total revenue |
4,454 | 3,854 | 3,595 | 2,780 | 2,631 | 2,666 | 1,159 | 1,150 | 3,724 | 491 | 15,563 | 10,941 | ||||||||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses |
229 | 53 | 225 | (76 | ) | – | – | 26 | (77 | ) | 137 | (23 | ) | 617 | (123 | ) | ||||||||||||||||||||||||||||||||
| Insurance claims and related expenses |
– | – | – | – | 723 | 650 | – | – | – | – | 723 | 650 | ||||||||||||||||||||||||||||||||||||
| Non-interest expenses |
1,921 | 1,720 | 1,976 | 1,617 | 1,208 | 1,192 | 802 | 658 | 638 | 760 | 6,545 | 5,947 | ||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes and share of net income from investment in Schwab |
2,304 | 2,081 | 1,394 | 1,239 | 700 | 824 | 331 | 569 | 2,949 | (246 | ) | 7,678 | 4,467 | |||||||||||||||||||||||||||||||||||
| Provision for (recovery of) income taxes |
610 | 552 | 165 | 111 | 184 | 216 | 70 | 149 | 268 | (118 | ) | 1,297 | 910 | |||||||||||||||||||||||||||||||||||
| Share of net income from investment in Schwab4,5 |
– | – | 310 | 246 | – | – | – | – | (20 | ) | (22 | ) | 290 | 224 | ||||||||||||||||||||||||||||||||||
| Net income (loss) |
$ | 1,694 | $ | 1,529 | $ | 1,539 | $ | 1,374 | $ | 516 | $ | 608 | $ | 261 | $ | 420 | $ | 2,661 | $ | (150 | ) | $ | 6,671 | $ | 3,781 | |||||||||||||||||||||||
|
For the twelve months ended October 31 |
||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||
| Net interest income (loss) |
$ | 12,396 | $ | 11,195 | $ | 9,604 | $ | 8,074 | $ | 945 | $ | 762 | $ | 2,937 | $ | 2,630 | $ | 1,471 | $ | 1,470 | $ | 27,353 | $ | 24,131 | ||||||||||||||||||||||||
| Non-interest income (loss) |
4,190 | 3,722 | 2,821 | 2,684 | 9,915 | 9,827 | 1,894 | 2,070 | 2,859 | 259 | 21,679 | 18,562 | ||||||||||||||||||||||||||||||||||||
| Total revenue |
16,586 | 14,917 | 12,425 | 10,758 | 10,860 | 10,589 | 4,831 | 4,700 | 4,330 | 1,729 | 49,032 | 42,693 | ||||||||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses |
491 | 256 | 335 | (250 | ) | 1 | 2 | 37 | (118 | ) | 203 | (114 | ) | 1,067 | (224 | ) | ||||||||||||||||||||||||||||||||
| Insurance claims and related expenses |
– | – | – | – | 2,900 | 2,707 | – | – | – | – | 2,900 | 2,707 | ||||||||||||||||||||||||||||||||||||
| Non-interest expenses |
7,176 | 6,648 | 6,920 | 6,417 | 4,711 | 4,355 | 3,033 | 2,709 | 2,801 | 2,947 | 24,641 | 23,076 | ||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes and share of net income from investment in Schwab |
8,919 | 8,013 | 5,170 | 4,591 | 3,248 | 3,525 | 1,761 | 2,109 | 1,326 | (1,104 | ) | 20,424 | 17,134 | |||||||||||||||||||||||||||||||||||
| Provision for (recovery of) income taxes |
2,361 | 2,128 | 625 | 504 | 853 | 929 | 436 | 539 | (289 | ) | (479 | ) | 3,986 | 3,621 | ||||||||||||||||||||||||||||||||||
| Share of net income from investment in Schwab4,5 |
– | – | 1,075 | 898 | – | – | – | – | (84 | ) | (113 | ) | 991 | 785 | ||||||||||||||||||||||||||||||||||
| Net income (loss) |
$ | 6,558 | $ | 5,885 | $ | 5,620 | $ | 4,985 | $ | 2,395 | $ | 2,596 | $ | 1,325 | $ | 1,570 | $ | 1,531 | $ | (738 | ) | $ | 17,429 | $ | 14,298 | |||||||||||||||||||||||
| Total Assets by Business Segment6 |
|
|||||||||||||||||||||||
| (millions of Canadian dollars) |
||||||||||||||||||||||||
| |
Canadian Personal and Commercial Baking |
|
U.S. Retail | |
Wealth Management and Insurance |
|
|
Wholesale Banking |
|
Corporate | Total | |||||||||||||
| As at October 31, 2022 | ||||||||||||||||||||||||
| Total assets |
$ 526,374 | $ | 585,297 | $ 23,721 | $ | 635,094 | $ | 147,042 | $ | 1,917,528 | ||||||||||||||
|
|
As at October 31, 2021 |
| ||||||||||||||||||||||
| Total assets |
$ 484,857 | $ | 559,503 | $ 24,579 | $ | 514,681 | $ | 145,052 | $ | 1,728,672 | ||||||||||||||
| 1 | The amounts for the three months ended October 31, 2022 and October 31, 2021 have been derived from the unaudited financial statements. The amounts for the twelve months ended October 31, 2022 and October 31, 2021 have been derived from the audited financial statements. |
| 2 | The retailer program partners’ share of revenues and credit losses is presented in the Corporate segment, with an offsetting amount (representing the partners’ net share) recorded in Non-interest expenses, resulting in no impact to Corporate reported Net income (loss). The Net income (loss) included in the U.S. Retail segment includes only the portion of revenue and credit losses attributable to the Bank under the agreements. |
| 3 | Net interest income within Wholesale Banking is calculated on a TEB. The TEB adjustment reflected in Wholesale Banking is reversed in the Corporate segment. |
| 4 | The after-tax amounts for amortization of acquired intangibles and the Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade are recorded in the Corporate segment. |
| 5 | The Bank’s share of Schwab’s earnings is reported with a one-month lag. Refer to Note 12 for further details. |
| 6 | Total assets as at October 31, 2022 and October 31, 2021 have been derived from the audited financial statements. |
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 21 |
SHAREHOLDER AND INVESTOR INFORMATION
Shareholder Services
| If you: | And your inquiry relates to: | Please contact: | ||
| Are a registered shareholder (your name appears on your TD share certificate) | Missing dividends, lost share certificates, estate questions, address changes to the share register, dividend bank account changes, the dividend reinvestment plan, eliminating duplicate mailings of shareholder materials, or stopping (or resuming) receiving annual and quarterly reports |
Transfer Agent: TSX Trust Company Montréal, Québec H3B 3K3 1-800-387-0825 (Canada and U.S. only) or 416-682-3860 Facsimile: 1-888-249-6189 shareholderinquiries@tmx.com or http://www.tsxtrust.com
| ||
| Hold your TD shares through the Direct Registration System in the United States |
Missing dividends, lost share certificates, estate questions, address changes to the share register, eliminating duplicate mailings of shareholder materials or stopping (or resuming) receiving annual and quarterly reports |
Co-Transfer Agent and Registrar: Computershare Providence, RI 02940-3006 or Computershare 150 Royall Street Canton, MA 02021 1-866-233-4836 TDD for hearing impaired: 1-800-231-5469 Shareholders outside of U.S.: 201-680-6578 TDD shareholders outside of U.S.: 201-680-6610 www.computershare.com/investor
| ||
| Beneficially own TD shares that are held in the name of an intermediary, such as a bank, a trust company, a securities broker, or other nominee | Your TD shares, including questions regarding the dividend reinvestment plan and mailings of shareholder materials | Your intermediary | ||
For all other shareholder inquiries, please contact TD Shareholder Relations at 416-944-6367 or 1-866-756-8936 or email tdshinfo@td.com. Please note that by leaving us an e-mail or voicemail message, you are providing your consent for us to forward your inquiry to the appropriate party for response.
Annual Report on Form 40-F (U.S.)
A copy of the Bank’s Annual Report on Form 40-F for fiscal 2022 will be filed with the Securities and Exchange Commission later today and will be available at http://www.td.com. You may obtain a printed copy of the Bank’s Annual Report on Form 40-F for fiscal 2022 free of charge upon request to TD Shareholder Relations at 416-944-6367 or 1-866-756-8936 or e-mail tdshinfo@td.com.
Access to Quarterly Results Materials
Interested investors, the media, and others may view this fourth quarter earnings news release, results slides, supplementary financial information, supplemental regulatory disclosure, and the 2022 Consolidated Financial Statements and MD&A documents on the TD website at www.td.com/investor/.
General Information
Products and services: Contact TD Canada Trust, 24 hours a day, seven days a week: 1-866-567-8888 French: 1-866-233-2323
Cantonese/Mandarin: 1-800-328-3698
Telephone device for the hearing impaired (TTY): 1-800-361-1180
Website: www.td.com
Email: customer.service@td.com
Media contacts: https://stories.td.com/media-contacts
Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on December 1, 2022. The call will be available live via TD’s website at 1:30 p.m. ET. The call and audio webcast will feature presentations by TD executives on the Bank’s financial results for the fourth quarter, followed by a question-and-answer period with analysts. The presentation material referenced during the call will be available on the TD website at www.td.com/investor on December 1, 2022 before 1:30 p.m. ET. A listen-only telephone line is available at 416-641-6150 or 1-866-696-5894 (toll free) and the passcode is 2727354#.
The audio webcast and presentations will be archived at www.td.com/investor. Replay of the teleconference will be available from 5:00 p.m. ET on December 1, 2022, until 11:59 p.m. ET on December 16, 2022 by calling 905-694-9451 or 1-800-408-3053 (toll free). The passcode is 7300743#.
Annual Meeting
Thursday, April 20, 2023
Toronto, Ontario
Record Date for Notice and Voting:
February 21, 2023
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 22 |
About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (“TD” or the “Bank”). TD is the sixth largest bank in North America by assets and serves over 27 million customers in four key businesses operating in a number of locations in financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Auto Finance Canada; U.S. Retail, including TD Bank, America’s Most Convenient Bank®, TD Auto Finance U.S., TD Wealth (U.S.), and an investment in The Charles Schwab Corporation; Wealth Management and Insurance, including TD Wealth (Canada), TD Direct Investing, and TD Insurance; and Wholesale Banking, including TD Securities. TD also ranks among the world’s leading online financial services firms, with more than 15 million active online and mobile customers. TD had $1.9 trillion in assets on October 31, 2022. The Toronto-Dominion Bank trades under the symbol “TD” on the Toronto and New York Stock Exchanges.
For further information contact:
Brooke Hales, Vice President, Investor Relations, 416-307-8647
Elizabeth Goldenshtein, Senior Manager, Corporate Communications, 647-625-3124
| TD BANK GROUP • FOURTH QUARTER 2022 • EARNINGS NEWS RELEASE | Page 23 |
Exhibit 99.3
TD BANK GROUP DECLARES DIVIDENDS
(all amounts in Canadian dollars)
TORONTO – December 1, 2022 – The Toronto-Dominion Bank (the “Bank”) today announced that a dividend in an amount of ninety-six cents (96 cents) per fully paid common share in the capital stock of the Bank has been declared for the quarter ending January 31, 2023, payable on and after January 31, 2023, to shareholders of record at the close of business on January 6, 2023.
In lieu of receiving their dividends in cash, holders of the Bank’s common shares may choose to have their dividends reinvested in additional common shares of the Bank in accordance with the Dividend Reinvestment Plan (the “Plan”).
Under the Plan, the Bank has the discretion to either purchase the additional common shares in the open market or issue them from treasury. If issued from treasury, the Bank may decide to apply a discount of up to 5% to the Average Market Price (as defined in the Plan) of the additional shares. For the January 31, 2023 dividend, the Bank will issue the additional shares from treasury, with a 2% discount.
Registered holders of record of the Bank’s common shares wishing to join the Plan can obtain an Enrolment Form from TSX Trust Company (1-800-387-0825) or on the Bank’s website, www.td.com/investor/drip.jsp. In order to participate in the Plan in time for this dividend, Enrolment Forms for registered holders must be received by TSX Trust Company at P.O. Box 4229, Postal Station A, Toronto, Ontario, M5W 0G1, or by facsimile at 1-888-488-1416, before the close of business on January 6, 2023. Beneficial or non-registered holders of the Bank’s common shares wishing to join the Plan must contact their financial institution or broker for instructions on how to enroll in advance of the above date.
Registered holders who participate in the Plan and who wish to terminate that participation so that cash dividends to which they are entitled to be paid on and after January 31, 2023 are not reinvested in common shares under the Plan must deliver written notice to TSX Trust Company at the above address by no later than January 6, 2023. Beneficial or non-registered holders who participate in the Plan and who wish to terminate that participation so that cash dividends to which they are entitled to be paid on and after January 31, 2023 are not reinvested in common shares under the Plan must contact their financial institution or broker for instructions on how to terminate participation in the Plan in advance of January 6, 2023.
The Bank also announced that dividends have been declared on the following Non-Cumulative Redeemable Class A First Preferred Shares of the Bank, payable on and after January 31, 2023, to shareholders of record at the close of business on January 6, 2023:
| ● | Series 1, in an amount per share of $0.228875; |
| ● | Series 3, in an amount per share of $0.2300625; |
| ● | Series 5, in an amount per share of $0.24225; |
| ● | Series 7, in an amount per share of $0.2000625; |
| ● | Series 9, in an amount per share of $0.202625; |
| ● | Series 16, in an amount per share of $0.3938125; |
| ● | Series 18, in an amount per share of $0.29375; |
| ● | Series 20, in an amount per share of $0.296875; |
| ● | Series 22, in an amount per share of $0.325; and |
| ● | Series 24, in an amount per share of $0.31875. |
The Bank for the purposes of the Income Tax Act (Canada) and any similar provincial legislation advises that the dividend declared for the quarter ending January 31, 2023 and all future dividends will be eligible dividends unless indicated otherwise.
About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (“TD” or the “Bank”). TD is the sixth largest bank in North America by assets and serves more than 27 million customers in four key businesses operating in a number of locations in financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Auto Finance Canada; U.S. Retail, including TD Bank, America’s Most Convenient Bank®, TD Auto Finance U.S., TD Wealth (U.S.), and an investment in The Charles Schwab Corporation; Wealth Management and Insurance, including TD Wealth (Canada), TD Direct Investing, and TD Insurance; and Wholesale Banking, including TD Securities. TD also ranks among the world’s leading online financial services firms, with more than 15 million active online and mobile customers. TD had $1.9 trillion in assets on October 31, 2022. The Toronto-Dominion Bank trades under the symbol “TD” on the Toronto and New York Stock Exchanges.
| For more information contact: | Jennifer dela Cruz Senior Legal Officer, Corporate Legal Department – Shareholder Relations (416) 944-6367 Toll free 1-866-756-8936 | |
| Elizabeth Goldenshtein Senior Manager, Corporate Communications (647) 625-3124 | ||
Exhibit 99.4
December 1, 2022
The Toronto Stock Exchange
Canadian Securities Commissions
CDS Clearing and Depository Services Inc.
The Depository Trust & Clearing Corporation
Dear Sir/Madam:
| Re: | The Toronto-Dominion Bank (the “Bank”) – Notice of Meeting and Record Dates |
Pursuant to s. 2.2 of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), we advise as follows:
| Name of Reporting Issuer | The Toronto-Dominion Bank | |
| Meeting Date | April 20, 2023 | |
| Record Date for Notice | February 21, 2023 | |
| Record Date for Voting | February 21, 2023 | |
| Beneficial Ownership Determination Date | February 21, 2023 | |
| Classes or series of securities that entitle the holder to receive notice of the meeting | Common shares | |
| Classes or series of securities that entitle the holder to vote at the meeting | Common shares | |
| Notice & Access – Registered Holders | Yes | |
| Notice & Access – Beneficial Holders | Yes | |
| Issuer Sending Material Directly to NOBOs | No | |
| Issuer Paying to Send Material to OBOs | Yes | |
| Whether the meeting is a special meeting1 | No | |
| Yours very truly, |
| /s/ Caroline Cook
|
| Caroline Cook |
| Associate Vice President, Legal Treasury and Corporation Securities |
1 As defined by NI 54-101 meaning a meeting at which a special resolution, as defined in the Bank Act (Canada), is expected to be submitted to common shareholders.
Exhibit 99.5
FORM 52-109F1
CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE
I, Bharat Masrani, Group President and Chief Executive Officer of The Toronto-Dominion Bank, certify the following:
| 1. | Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of The Toronto-Dominion Bank (the “issuer”) for the financial year ended October 31, 2022. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria) in 2013. |
| 5.2 | N/A |
| 5.3 | N/A |
| 6. | Evaluation: The issuer’s other certifying officer(s) and I have |
| (a) | evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and |
| (b) | evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A |
| (i) | our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and |
| (ii) | N/A |
| 7. | Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on August 1, 2022 and ended on October 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
| 8. | Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR. |
| Date: December 1, 2022 |
| /s/ Bharat Masrani
|
| Bharat Masrani Group President and Chief Executive Officer |
FORM 52-109F1
CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE
I, Kelvin Tran, Senior Executive Vice President and Chief Financial Officer of The Toronto-Dominion Bank, certify the following:
| 1. | Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of The Toronto-Dominion Bank (the “issuer”) for the financial year ended October 31, 2022. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria) in 2013. |
| 5.2 | N/A |
| 5.3 | N/A |
| 6. | Evaluation: The issuer’s other certifying officer(s) and I have |
| (a) | evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and |
| (b) | evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A |
| (i) | our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and |
| (ii) | N/A |
| 7. | Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s ICFR that occurred during the period beginning on August 1, 2022 and ended on October 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
| 8. | Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR. |
| Date: December 1, 2022 |
| /s/ Kelvin Tran
|
| Kelvin Tran |
Senior Executive Vice President and Chief Financial Officer
Exhibit 99.6
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Directors of The Toronto-Dominion Bank
Opinion
We have audited the consolidated financial statements of The Toronto-Dominion Bank and its subsidiaries (TD) which comprise the Consolidated Balance Sheet as at October 31, 2022 and 2021, and the Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, and Consolidated Statement of Cash Flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”).
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of TD as at October 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended, in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of TD in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the year ended October 31, 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
| Allowance for credit losses | ||
| Key audit matter | TD describes its significant accounting judgments, estimates, and assumptions in relation to the allowance for credit losses in Note 3 of the consolidated financial statements. As disclosed in Note 8 to the consolidated financial statements, TD recognized $7,366 million in allowances for credit losses on its consolidated balance sheet using an expected credit loss model (ECL). The ECL is an unbiased and probability-weighted estimate of credit losses expected to occur in the future, which is based on the probability of default (PD), loss given default (LGD) and exposure at default (EAD) or the expected cash shortfall relating to the underlying financial asset. The ECL is determined by evaluating a range of possible outcomes incorporating the time value of money and reasonable and supportable information about past events, current conditions, and future economic forecasts. ECL allowances are measured at amounts equal to either (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments that have experienced a significant increase in credit risk (SICR) since initial recognition or when there is objective evidence of impairment.
Auditing the allowance for credit losses was complex and required the application of significant judgment and involvement of specialists because of the sophistication of the models, the forward-looking nature of the key assumptions, and the inherent interrelationship of the critical variables used in measuring the ECL. Key areas of judgment include evaluating: (i) the models and methodologies used for measuring both the 12-month and lifetime expected credit losses; (ii) the assumptions used in the ECL scenarios including forward-looking information (FLI) and assigning probability weighting; (iii) the determination of SICR; and (iv) the assessment of the qualitative component applied to the modelled ECL based on management’s expert credit judgment. | |
| How our audit addressed the key audit matter |
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over the allowance for credit losses. The controls we tested included, amongst others, the development and validation of models and selection of appropriate inputs including economic forecasting, determination of non-retail borrower risk ratings, the integrity of the data used including the associated controls over relevant information technology (IT) systems, and the governance and oversight over the modelled results and the use of expert credit judgment.
To test the allowance for credit losses, our audit procedures included, amongst others, involving our credit risk specialists to assess whether the methodology and assumptions, including management’s SICR triggers, used in significant models that estimate the ECL across various portfolios are consistent with the requirements of IFRS. This included reperforming the model validation procedures for a sample of models to evaluate whether management’s conclusions were appropriate. With the assistance of our economic specialists, we evaluated the models, methodology and process used by management to develop the FLI variable forecasts for each scenario and the scenario probability weights. For a sample of FLI variables, we compared management’s FLI to independently derived forecasts and publicly available information. On a sample basis, we recalculated the ECL to test the mathematical accuracy of management’s models. We tested the completeness and accuracy of data used in measuring the ECL by agreeing to source documents and systems and evaluated a sample of management’s non-retail borrower risk ratings against TD’s risk rating policy. With the assistance of our credit risk specialists, we also evaluated management’s methodology and governance over the application of expert credit judgment by evaluating that the amounts recorded were reflective of underlying credit quality and macroeconomic trends. We also assessed the adequacy of disclosures related to the allowance for credit losses. | |
| Fair value measurement of derivatives | ||
| Key audit matter | TD describes its significant accounting judgments, estimates, and assumptions in relation to the fair value measurement of derivatives in Note 3 of the consolidated financial statements. As disclosed in Note 5 of the consolidated financial statements, TD has derivative assets of $103,873 million and derivative liabilities of $91,133 million recorded at fair value. Certain of these | |
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| derivatives are complex and illiquid and require valuation techniques that may include complex models and non-observable inputs, requiring management’s estimation and judgment.
Auditing the valuation of certain derivatives required the application of significant auditor judgment and involvement of valuation specialists in assessing the complex models and non-observable inputs used, including any significant valuation adjustments applied. Certain valuation inputs used to determine fair value that may be non-observable include volatilities, correlations, and credit spreads. The valuation of certain derivatives is sensitive to these inputs as they are forward-looking and could be affected by future economic and market conditions. | ||
| How our audit addressed the key audit matter |
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls, including the associated controls over relevant IT systems, over the valuation of TD’s derivative portfolio. The controls we tested included, amongst others, the controls over the suitability and mechanical accuracy of models used in the valuation of derivatives, controls over management’s independent assessment of fair values, including the integrity of data used in the valuation such as the significant inputs noted above, and controls over the review of significant valuation adjustments applied.
To test the valuation of these derivatives, our audit procedures included, amongst others, an evaluation of the methodologies and significant inputs used by TD. With the assistance of our valuation specialists, we performed an independent valuation for a sample of derivatives to assess the modelling assumptions and significant inputs used to estimate the fair value, which involved obtaining significant inputs from independent external sources. For a sample of valuation adjustments, we utilized the assistance of our valuation specialists to evaluate the methodology applied and performed a recalculation of these adjustments. We also assessed the adequacy of the disclosures related to the fair value measurement of derivatives. | |
| Valuation of provision for unpaid claims | ||
| Key audit matter | TD describes its significant accounting judgments, estimates, and assumptions in relation to the valuation of provisions for unpaid claims in Note 3 of the consolidated financial statements. As disclosed in Note 22 to the consolidated financial statements, TD has recognized $7,468 million in insurance-related liabilities on its consolidated balance sheet. The insurance-related liabilities include a provision for unpaid claims, which is determined in accordance with accepted actuarial practices.
Auditing the provision for unpaid claims required the application of significant judgement and involved the use of specialists due to the complex nature of the models, methodologies and assumptions applied in the determination of the provision. Claims liabilities are determined in accordance with generally accepted actuarial practices. The main assumption underlying the estimate of the claims liability is that past claims development experience can be used to project future claims development and therefore ultimate claim costs. Actuarial methods are applied to extrapolate the development of paid and incurred losses, frequency and severity of claims based on the observed development of earlier years and expected loss ratios. Additional qualitative judgement is applied to assess the extent to which past trends may or may not apply in the future to arrive at the estimated ultimate claims costs that present the most likely outcome taking into account all the uncertainties involved. | |
| How our audit addressed the key audit matter |
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over the valuation of the provision for unpaid claims including the associated controls over relevant IT systems. The controls we tested included, amongst others, the controls related to TD’s claims and actuarial processes including over the completeness and accuracy of data flow through the claims administration systems, and the overall review of the provision for unpaid claims by management.
We evaluated the objectivity, independence and expertise of the actuarial valuator appointed by management. To test the valuation for unpaid claims, our audit procedures included, amongst others, involving our actuarial specialists to independently calculate the provision for unpaid claims on a sample basis. This included assessing the accuracy of TD’s data by agreeing to source systems on a sample basis and benchmarking the assumptions against industry trends. With the assistance of our actuarial specialists, we assessed TD’s actuary’s methodologies and significant assumptions, including comparing the rationale for the judgments applied against generally accepted actuarial practices. We also performed data integrity testing of incurred claims, paid claims, and earned premiums used in the estimation of the provision for unpaid claims. | |
| Measurement of provision for uncertain tax positions | ||
| Key audit matter | TD describes its significant accounting judgments, estimates, and assumptions in relation to income taxes in Note 3 and Note 25 of the consolidated financial statements. As a financial institution operating in multiple jurisdictions, TD is subject to complex and constantly evolving tax legislation. Uncertainty in a tax position may arise as tax laws are subject to interpretation. TD uses significant judgment in i) determining whether it is probable that TD will have to make a payment to tax authorities upon their examination of certain uncertain tax positions and ii) measuring the amount of the liability.
Auditing TD’s provision for uncertain tax positions involved the application of judgment and is based on interpretation of tax legislation and jurisprudence. | |
| How our audit addressed the key audit matter |
We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over TD’s provision for uncertain tax positions. The controls we tested included, amongst others, the controls over the assessment of the technical merits of tax positions and management’s process to measure the provision for uncertain tax positions.
With the assistance of our tax professionals, we assessed the technical merits and the amount recorded for uncertain tax positions. Our audit procedures included, amongst others, using our knowledge of, and experience with, the application of tax laws by the relevant income tax authorities to evaluate TD’s interpretations and assessment of tax laws with respect to uncertain tax positions. We assessed the implications of correspondence received by TD from the relevant tax authorities and evaluated income tax opinions or other third-party advice obtained. We also assessed the adequacy of the disclosures related to uncertain tax positions. | |
Other Information
Management is responsible for the other information. The other information comprises:
| • | Management’s Discussion and Analysis; and |
| • | The information, other than the consolidated financial statements and our auditor’s report thereon, in the 2022 Annual Report. |
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Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis and the 2022 Annual Report prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing TD’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate TD or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing TD’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| • | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of TD’s internal control. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| • | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on TD’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause TD to cease to continue as a going concern. |
| • | Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
| • | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within TD to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Helen Mitchell.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
November 30, 2022
| TD BANK GROUP • 2022 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES | Page 3 |
December 1, 2022
Shareholders and Directors of The Toronto-Dominion Bank
We are aware that The Toronto-Dominion Bank will furnish EY’s Independent Auditor’s Report prepared in accordance with Canadian generally accepted auditing standards and dated November 30, 2022 as Exhibit 99.6 to its Form 6-K filed on December 1, 2022.
Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
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