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TD Bank Group Reports Fourth Quarter and Fiscal 2019 Results

Canada NewsWire

This quarterly earnings news release should be read in conjunction with the Bank's unaudited fourth quarter 2019 consolidated financial results for the year ended October 31, 2019, included in this Earnings News Release and the audited 2019 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 December 4, 2019. 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 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 measures are non-GAAP measures. Refer to the "How the Bank Reports" section of the 2019 Management's Discussion and Analysis (MD&A) for an explanation of reported and adjusted results.

FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter last year:

  • Reported diluted earnings per share were $1.54, compared with $1.58.
  • Adjusted diluted earnings per share were $1.59, compared with $1.63.
  • Reported net income was $2,856 million, compared with $2,960 million.
  • Adjusted net income was $2,946 million, compared with $3,048 million.

FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:

  • Reported diluted earnings per share were $6.25, compared with $6.01.
  • Adjusted diluted earnings per share were $6.69, compared with $6.47.
  • Reported net income was $11,686 million, compared with $11,334 million.
  • Adjusted net income was $12,503 million, compared with $12,183 million.

FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The fourth quarter reported earnings figures included the following items of note:

  • Amortization of intangibles of $74 million ($62 million after tax or 3 cents per share), compared with $76 million ($63 million after tax or 4 cents per share) in the fourth quarter last year.
  • Charges associated with the acquisition of Greystone of $30 million ($28 million after tax or 2 cents per share).

TORONTO, Dec. 5, 2019 /CNW/ - TD Bank Group ("TD" or the "Bank") today announced its financial results for the fourth quarter ended October 31, 2019. Fourth quarter reported earnings were $2.9 billion, down 4% on a reported and down 3% on an adjusted basis, compared with the same quarter last year. Results include restructuring charges of $154 million ($114 million after tax or 6 cents per share) in the current quarter.

"In 2019, we demonstrated the strength and resilience of our franchise as we continued to acquire and serve our customers while increasing loan and deposit volumes," said Bharat Masrani, Group President and Chief Executive Officer, TD Bank Group. "Throughout the year, we generated earnings growth amidst a challenging macroeconomic environment while we made strategic investments to strengthen our business, deliver for our customers, and modernize and simplify our operations."

Canadian Retail
Canadian Retail reported net income was $1,745 million and adjusted net income was $1,773 million, an increase of $4 million on a reported basis and $32 million on an adjusted basis, compared with the same quarter last year. Revenue growth of 5% reflected increased loan and deposit volumes and higher revenue in the Wealth and Insurance businesses, which combined with good expense controls led to positive operating leverage this quarter. Canadian Retail continues to invest in front-line advisors and customer service specialists, to help customers feel confident about their financial future. In addition, the segment made further investments in core infrastructure and new digital capabilities such as its new TD Wheels app and new mobile-enabled credit card controls.

U.S. Retail
U.S. Retail reported and adjusted net income was $1,191 million (US$900 million), an increase of 7% (5% in U.S. dollars) on a reported basis and 5% (3% in U.S. dollars) on an adjusted basis, compared with the same quarter last year. TD Ameritrade contributed $291 million (US$219 million) in reported and adjusted earnings to the segment, an increase of 28% (25% in U.S. dollars) on a reported basis and 15% (13% in U.S. dollars) on an adjusted basis, compared to the same quarter last year.

The U.S. Retail Bank, which excludes the Bank's investment in TD Ameritrade, contributed $900 million (US$681 million), up 2% (flat in U.S. dollars) from the same quarter last year. Higher loan and deposit volumes were offset by lower margins. This quarter, the U.S. Retail Bank ranked "Highest in Customer Satisfaction with Small Business Banking in the South Region" according to the J.D. Power Small Business Banking Satisfaction Study, a testament to the investments made to upgrade the Small Business Banking digital platform and the segment's ongoing dedication to providing legendary customer service and convenience.

Wholesale
Wholesale Banking net income was $160 million, down $126 million compared with the fourth quarter last year. This quarter, the Wholesale Bank had solid performance in trading, advisory, and underwriting activities. Lower revenue was primarily impacted by derivative valuation charges incurred in the fourth quarter, mainly in connection with significant upgrades made to the derivative valuation system and related methodologies. The Wholesale Bank also saw increased provisions for credit losses related to a limited number of exposures, and higher expenses, including restructuring, as it reduces the cost structure of certain areas of the business. This year, TD Securities once again placed first overall in the StarMine Analyst Awards and was tied for First in Overall Canadian Fixed Income by Greenwich.

Capital
TD's Common Equity Tier 1 Capital ratio on a Basel III fully phased-in basis was 12.1%.

Innovation
"We have made terrific progress extending our digital leadership in 2019, investing in new capabilities across the Bank," added Masrani. "This quarter, we opened our new TD Cyber Fusion Centre, co-locating leading experts from across TD with a focus on strengthening our cyber defences, protecting our customers and safeguarding the Bank. We are also deploying the power of Artificial Intelligence in innovative ways, accelerating the introduction of new digital experiences while leading industry-wide conversations on the development of this groundbreaking technology through our recently released Responsible AI report."

Conclusion
"As we enter 2020, we remain focused on our long-term strategy and are proud of the businesses we continue to build. No matter the operating environment, we are guided by our proven business model, purpose-driven brand, and forward-focused approach, all with the aim to deliver for our customers, colleagues, and shareholders each and every day," added Masrani.

"I want to thank our more than 85,000 colleagues around the globe for living the TD brand, and for their unwavering commitment to delivering legendary experiences for our customers," concluded Masrani.

The foregoing contains forward-looking statements. Please refer to the "Caution Regarding Forward-Looking Statements".

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 ("2019 MD&A") in the Bank's 2019 Annual Report under the heading "Economic Summary and Outlook", for the Canadian Retail, U.S. Retail, and Wholesale Banking segments under headings "Business Outlook and Focus for 2020", and for the Corporate segment, "Focus for 2020", and in other statements regarding the Bank's objectives and priorities for 2020 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: credit, market (including equity, commodity, foreign exchange, interest rate, and credit spreads), liquidity, operational (including technology and infrastructure), model, reputational, insurance, strategic, regulatory, legal, environmental, capital adequacy, and other risks. Examples of such risk factors include the general business and economic conditions in the regions in which the Bank operates; geopolitical risk; 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; the ability of the Bank to attract, develop, and retain key executives; disruptions in or attacks (including cyber-attacks) on the Bank's information technology, internet, network access or other voice or data communications systems or services; fraud or other criminal activity to which the Bank is exposed; 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; 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 and the bank recapitalization "bail-in" regime; exposure related to significant litigation and regulatory matters; increased competition from incumbents and non-traditional competitors, including Fintech and big technology competitors; changes to the Bank's credit ratings; changes in currency and interest rates (including the possibility of negative interest rates); 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; 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 2019 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 headings "Significant and Subsequent Events, and Pending Transactions" in the relevant MD&A, which applicable releases may be found on www.td.com. All such factors should be considered carefully, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, when making decisions with respect to the Bank and 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 2019 MD&A under the headings "Economic Summary and Outlook", for the Canadian Retail, U.S. Retail, and Wholesale Banking segments, "Business Outlook and Focus for 2020", and for the Corporate segment, "Focus for 2020", 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.

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 


July 31 


October 31 


October 31 


October 31 



2019


2019


2018


2019


2018


Results of operations 
















Total revenue – reported 

$

10,340


$

10,499


$

10,136


$

41,065


$

38,892


Total revenue – adjusted


10,340



10,499



10,136



41,065



38,981


Provision for credit losses 


891



655



670



3,029



2,480


Insurance claims and related expenses 


705



712



684



2,787



2,444


Non-interest expenses – reported 


5,543



5,374



5,366



22,020



20,195


Non-interest expenses – adjusted


5,463



5,298



5,313



21,085



19,943


Net income – reported 


2,856



3,248



2,960



11,686



11,334


Net income – adjusted


2,946



3,338



3,048



12,503



12,183


Financial position (billions of Canadian dollars) 
















Total loans net of allowance for loan losses 

$

684.6


$

675.9


$

646.4


$

684.6


$

646.4


Total assets 


1,415.3



1,405.4



1,334.9



1,415.3



1,334.9


Total deposits 


887.0



870.3



851.4



887.0



851.4


Total equity 


87.7



86.4



80.0



87.7



80.0


Total Common Equity Tier 1 Capital risk-weighted assets


456.0



454.9



435.6



456.0



435.6


Financial ratios 
















Return on common equity – reported 


13.6

%


15.8

%


15.8

%


14.5

%


15.7

%

Return on common equity – adjusted2,4


14.0



16.2



16.3



15.6



16.9


Return on tangible common equity2,4


18.9



22.0



22.7



20.5



22.7


Return on tangible common equity – adjusted2,4


19.1



22.2



22.9



21.5



23.9


Efficiency ratio – reported 


53.6



51.2



52.9



53.6



51.9


Efficiency ratio – adjusted


52.8



50.5



52.4



51.3



51.2


Provision for credit losses as a % of net average loans and 
















acceptances


0.51



0.38



0.41



0.45



0.39


Common share information – reported (Canadian dollars) 
















Per share earnings 
















Basic 

$

1.54


$

1.75


$

1.58


$

6.26


$

6.02


Diluted 


1.54



1.74



1.58



6.25



6.01


Dividends per share 


0.74



0.74



0.67



2.89



2.61


Book value per share 


45.20



44.30



40.50



45.20



40.50


Closing share price


75.21



77.15



73.03



75.21



73.03


Shares outstanding (millions) 
















Average basic 


1,811.7



1,825.3



1,826.5



1,824.2



1,835.4


Average diluted 


1,814.5



1,828.6



1,830.5



1,827.3



1,839.5


End of period 


1,811.9



1,819.2



1,828.3



1,811.9



1,828.3


Market capitalization (billions of Canadian dollars) 

$

136.3


$

140.4


$

133.5


$

136.3


$

133.5


Dividend yield


4.0

%


3.9

%


3.5

%


3.9

%


3.5

%

Dividend payout ratio 


48.0



42.3



42.3



46.1



43.3


Price-earnings ratio 


12.0



12.3



12.2



12.0



12.2


Total shareholder return (1-year)


7.1



3.9



3.1



7.1



3.1


Common share information – adjusted (Canadian dollars)
















Per share earnings 
















Basic 

$

1.59


$

1.79


$

1.63


$

6.71


$

6.48


Diluted 


1.59



1.79



1.63



6.69



6.47


Dividend payout ratio 


46.5

%


41.1

%


41.1

%


43.0

%


40.2

%

Price-earnings ratio 


11.2



11.4



11.3



11.2



11.3


Capital Ratios 
















Common Equity Tier 1 Capital ratio


12.1

%


12.0

%


12.0

%


12.1

%


12.0

%

Tier 1 Capital ratio


13.5



13.4



13.7



13.5



13.7


Total Capital ratio


16.3



16.1



16.2



16.3



16.2


Leverage ratio 


4.0



4.1



4.2



4.0



4.2


1

Certain comparative amounts have been recast to conform with the presentation adopted in the current period.

2

Adjusted measures are non-GAAP measures. Refer to the "How the Bank Reports" section of this document for an explanation of reported and adjusted results.

3

Each capital ratio has its own risk-weighted assets (RWA) measure due to the Office of the Superintendent of Financial Institutions Canada (OSFI)-prescribed scalar for inclusion of the Credit Valuation Adjustment (CVA). For fiscal 2019, the scalars for inclusion of CVA for Common Equity Tier 1 (CET1), Tier 1, and Total Capital RWA are all 100%. For fiscal 2018, the scalars were 80%, 83%, and 86%, respectively.

4

Metrics are non-GAAP financial measures. Refer to the "Return on Common Equity" and "Return on Tangible Common Equity" sections of this document for an explanation.

5

Excludes acquired credit-impaired (ACI) loans.

6

Toronto Stock Exchange closing market price.

7

Dividend yield is calculated as the dividend per common share divided by the daily average closing stock price in the relevant period. Dividend per common share is derived as follows: a) for the quarter – by annualizing the dividend per common share paid during the quarter, and b) for the full year – dividend per common share paid during the year.

8

Total shareholder return (TSR) is calculated based on share price movement and dividends reinvested over a trailing one-year period.

 

HOW WE PERFORMED

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. The Bank also utilizes non-GAAP financial measures referred to as "adjusted" results to assess each of its businesses and to measure the Bank's overall performance. To arrive at adjusted results, the Bank removes "items of note", from reported results. The items of note relate to items which management does not believe are indicative of underlying business performance. The Bank believes that adjusted results provide the reader with a better understanding of how management views the Bank's performance. The items of note are disclosed in Table 3. As explained, adjusted results differ from reported results determined in accordance with IFRS. Adjusted results, items of note, and related terms used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers.

The Bank's U.S. strategic cards portfolio comprises 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 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 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.

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 

July 31 

October 31 

October 31 

October 31 



2019

2019

2018

2019

2018

Net interest income 

$

6,175

$

6,024

$

5,756

$

23,931

$

22,239

Non-interest income 


4,165


4,475


4,380


17,134


16,653

Total revenue 


10,340


10,499


10,136


41,065


38,892

Provision for credit losses 


891


655


670


3,029


2,480

Insurance claims and related expenses 


705


712


684


2,787


2,444

Non-interest expenses  


5,543


5,374


5,366


22,020


20,195

Income before income taxes and equity in net income of an 












investment in TD Ameritrade 


3,201


3,758


3,416


13,229


13,773

Provision for income taxes  


646


813


691


2,735


3,182

Equity in net income of an investment in TD Ameritrade 


301


303


235


1,192


743

Net income – reported 


2,856


3,248


2,960


11,686


11,334

Preferred dividends 


68


62


51


252


214

Net income available to common shareholders and 












non-controlling interests in subsidiaries 

$

2,788

$

3,186

$

2,909

$

11,434

$

11,120

Attributable to:  











Common shareholders 

$

2,788

$

3,186

$

2,891

$

11,416

$

11,048

Non-controlling interests 




18


18


72



1

Certain comparative amounts have been recast to conform with the presentation adopted in the current period.

 

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 Income





(millions of Canadian dollars) 

For the three months ended  

For the twelve months ended 



October 31 

July 31 

October 31  

October 31 

October 31 


2019

2019

2018

2019

2018

Operating results – adjusted 











Net interest income 

$

6,175

$

6,024

$

5,756

$

23,931

$

22,239

Non-interest income


4,165


4,475


4,380


17,134


16,742

Total revenue 


10,340


10,499


10,136


41,065


38,981

Provision for credit losses 


891


655


670


3,029


2,480

Insurance claims and related expenses 


705


712


684


2,787


2,444

Non-interest expenses


5,463


5,298


5,313


21,085


19,943

Income before income taxes and equity in net income of an 












investment in TD Ameritrade 


3,281


3,834


3,469


14,164


14,114

Provision for income taxes 


660


824


704


2,949


2,898

Equity in net income of an investment in TD Ameritrade


325


328


283


1,288


967

Net income – adjusted 


2,946


3,338


3,048


12,503


12,183

Preferred dividends 


68


62


51


252


214

Net income available to common shareholders and 












non-controlling interests in subsidiaries – adjusted 


2,878


3,276


2,997


12,251


11,969

Attributable to: 











Non-controlling interests in subsidiaries, net of income taxes 




18


18


72

Net income available to common shareholders – adjusted 


2,878


3,276


2,979


12,233


11,897

Pre-tax adjustments of items of note 











Amortization of intangibles


(74)


(75)


(76)


(307)


(324)

Charges related to the long-term loyalty agreement with Air Canada





(607)


Charges associated with the acquisition of Greystone


(30)


(26)



(117)


Charges associated with the Scottrade transaction




(25)



(193)

Impact from U.S. tax reform






(48)

Provision for (recovery of) income taxes for items of note 











Amortization of intangibles5,10


(12)


(11)


(13)


(48)


(55)

Charges related to the long-term loyalty agreement with Air Canada





(161)


Charges associated with the acquisition of Greystone


(2)




(5)


Charges associated with the Scottrade transaction






(5)

Impact from U.S. tax reform






344

Total adjustments for items of note 


(90)


(90)


(88)


(817)


(849)

Net income available to common shareholders – reported 

$

2,788

$

3,186

$

2,891

$

11,416

$

11,048



1

Certain comparative amounts have been recast to conform with the presentation adopted in the current period.

2

Adjusted non-interest income excludes the following items of note: Adjustment to the carrying balances of certain tax credit-related investments, as explained in footnote 9 – first quarter 2018 – $(89) million. This amount was reported in the Corporate segment.

3

Adjusted non-interest expenses excludes the following items of note: Amortization of intangibles, as explained in footnote 5 – fourth quarter 2019 – $50 million, third quarter 2019 – $50 million, second quarter 2019 – $55 million, first quarter 2019 – $56 million, fourth quarter 2018 – $53 million, third quarter 2018 – $53 million, second quarter 2018 – $62 million, first quarter 2018 – $63 million, reported in the Corporate segment. Charges related to the long-term loyalty agreement with Air Canada, as explained in footnote 6 – first quarter 2019 – $607 million; this amount was reported in the Canadian Retail segment. Charges associated with the acquisition of Greystone, as explained in footnote 7 – fourth quarter 2019 – $30 million, third quarter 2019 – $26 million, second quarter 2019 – $30 million, first quarter 2019 – $31 million; this amount was reported in the Canadian Retail segment. Charges associated with the Bank's acquisition of Scottrade Bank, as explained in footnote 8 – second quarter 2018 – $16 million, first quarter 2018 – $5 million, these amounts were reported in the U.S. Retail segment.

4

Adjusted equity in net income of an investment in TD Ameritrade excludes the following items of note: Amortization of intangibles, as explained in footnote 5 – fourth quarter 2019 – $24 million, third quarter 2019 – $25 million, second quarter 2019 – $23 million, first quarter 2019 – $24 million, fourth quarter 2018 – $23 million, third quarter 2018 – $24 million, second quarter 2018 – $24 million, first quarter 2018 – $22 million, and the Bank's share of TD Ameritrade's deferred tax balances adjustment, as explained in footnote 9 – first quarter 2018 – $(41) million. The earnings impact of both of these items was reported in the Corporate segment. The Bank's share of costs associated with TD Ameritrade's acquisition of Scottrade Financial Services Inc. ("Scottrade"), as explained in footnote 8 – fourth quarter 2018 – $25 million, third quarter 2018 – $18 million, second quarter 2018 – $61 million and first quarter 2018 – $68 million. This item was reported in the U.S. Retail segment.

5

Amortization of intangibles relates to intangibles acquired as a result of asset acquisitions and business combinations, including the after tax amounts for amortization of intangibles relating to the Equity in net income of the investment in TD Ameritrade. Although the amortization of software and asset servicing rights are recorded in amortization of intangibles, they are not included for purposes of the items of note.

6

On January 10, 2019, the Bank's long-term loyalty program agreement with Air Canada became effective in conjunction with Air Canada completing its acquisition of Aimia Canada Inc., which operates the Aeroplan loyalty business (the "Transaction"). In connection with the Transaction, the Bank recognized an expense of $607 million ($446 million after tax) in the Canadian Retail segment during the first quarter of 2019.

7

On November 1, 2018, the Bank acquired Greystone Capital Management Inc., the parent company of Greystone Managed Investments Inc. ("Greystone"). The Bank incurred acquisition-related charges including compensation to employee shareholders issued in common shares in respect of the purchase price, direct transaction costs, and certain other acquisition-related costs. These amounts have been recorded as an adjustment to net income and were reported in the Canadian Retail segment.

8

On September 18, 2017, the Bank acquired Scottrade Bank and TD Ameritrade acquired Scottrade, together with the Bank's purchase of TD Ameritrade shares issued in connection with TD Ameritrade's acquisition of Scottrade (the "Scottrade transaction"). Scottrade Bank merged with TD Bank, N.A. The Bank and TD Ameritrade incurred acquisition related charges including employee severance, contract termination fees, direct transaction costs, and other one-time charges. These amounts have been recorded as an adjustment to net income and include charges associated with the Bank's acquisition of Scottrade Bank and the after tax amounts for the Bank's share of charges associated with TD Ameritrade's acquisition of Scottrade. These amounts are reported in the U.S. Retail segment.

9

The reduction of the U.S. federal corporate tax rate enacted by the U.S. Tax Act resulted in a net charge to earnings during 2018 of $392 million, comprising a net $48 million pre-tax charge related to the write-down of certain tax credit-related investments, partially offset by the favourable impact of the Bank's share of TD Ameritrade's remeasurement of its deferred income tax balances, and a net $344 million income tax expense resulting from the remeasurement of the Bank's deferred tax assets and liabilities to the lower base rate of 21% and other related tax adjustments. The earnings impact was reported in the Corporate segment.

10

The amounts reported for the three months ended January 31, 2018, and the twelve months ended October 31, 2018, exclude $31 million relating to the one-time adjustment of associated deferred tax liability balances as a result of the U.S. Tax Act. The impact of this adjustment is included in the Impact from U.S. tax reform item of note.

 


TABLE 4: RECONCILIATION OF REPORTED TO ADJUSTED EARNINGS PER SHARE (EPS)

(Canadian dollars) 


For the three months ended 

For the twelve months ended  


October 31 

July 31 

October 31 

October 31 

October 31  


2019

2019

2018

2019

2018

Basic earnings per share – reported 

$

1.54

$

1.75

$

1.58

$

6.26

$

6.02

Adjustments for items of note


0.05


0.04


0.05


0.45


0.46

Basic earnings per share – adjusted 

$

1.59

$

1.79

$

1.63

$

6.71

$

6.48












Diluted earnings per share – reported  

$

1.54

$

1.74

$

1.58

$

6.25

$

6.01

Adjustments for items of note


0.05


0.05


0.05


0.44


0.46

Diluted earnings per share – adjusted 

$

1.59

$

1.79

$

1.63

$

6.69

$

6.47

1

EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares outstanding during the period.

2

For explanations of items of note, refer to the "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

 



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 


July 31 


October 31 


October 31 


October 31 




2019


2019


2018


2019


2018


Provision for income taxes – reported 

$

646


$

813


$

691


$

2,735


$

3,182


Total adjustments for items of note


14



11



13



214



(284)


Provision for income taxes – adjusted 

$

660


$

824


$

704


$

2,949


$

2,898


Effective income tax rate – reported 


20.2

%


21.6

%


20.2

%


20.7

%


23.1

%

Effective income tax rate – adjusted2,3


20.1



21.5



20.3



20.8



20.5




1

For explanations of items of note, refer to the "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

2

The tax effect for each item of note is calculated using the statutory income tax rate of the applicable legal entity.

3

Adjusted effective income tax rate is the adjusted provision for income taxes before other taxes as a percentage of adjusted net income before taxes.

 

RETURN ON COMMON EQUITY
The Bank's methodology for allocating capital to its business segments is aligned with the common equity capital requirements under Basel III. For fiscal 2019, the capital allocated to the business segments is based on 10% CET1 Capital. Capital allocated to the business segments was based on 9% for fiscal 2018.

Adjusted return on common equity (ROE) is adjusted net income available to common shareholders as a percentage of average common equity.

Adjusted ROE is a non-GAAP financial measure and is not a defined term under IFRS. Readers are cautioned that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other issuers.









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 


July 31 


October 31 


October 31 


October 31 




2019


2019


2018


2019


2018


Average common equity 

$

81,286


$

80,160


$

72,461


$

78,638


$

70,499


Net income available to common shareholders – reported 


2,788



3,186



2,891



11,416



11,048


Items of note, net of income taxes


90



90



88



817



849


Net income available to common shareholders – adjusted 

$

2,878


$

3,276


$

2,979


$

12,233


$

11,897


Return on common equity – reported 


13.6

%


15.8

%


15.8

%


14.5

%


15.7

%

Return on common equity – adjusted 


14.0



16.2



16.3



15.6



16.9




1

For explanations of items of note, refer to the "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

 

RETURN ON TANGIBLE COMMON EQUITY
Tangible common equity (TCE) is calculated as common shareholders' equity less goodwill, imputed goodwill and intangibles on an investment in TD Ameritrade and other acquired intangible assets, net of related deferred tax liabilities. Return on tangible common equity (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 items of note, as a percentage of average TCE. Adjusted ROTCE provides a useful measure of the performance of the Bank's income producing assets, independent of whether or not they were acquired or developed internally. TCE, ROTCE, and adjusted ROTCE are each non-GAAP financial measures and are not defined terms under IFRS. Readers are cautioned that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other issuers.


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 


July 31 


October 31 


October 31 


October 31 




2019


2019


2018


2019


2018


Average common equity 

$

81,286


$

80,160


$

72,461


$

78,638


$

70,499


Average goodwill 


17,046



17,123



16,390



17,070



16,197


Average imputed goodwill and intangibles on an  
















  investment in TD Ameritrade 


4,119



4,145



4,100



4,146



4,100


Average other acquired intangibles


613



666



597



662



676


Average related deferred tax liabilities 


(267)



(272)



(219)



(260)



(240)


Average tangible common equity 


59,775



58,498



51,593



57,020



49,766


Net income available to common shareholders – reported 


2,788



3,186



2,891



11,416



11,048


Amortization of acquired intangibles, net of income taxes


62



64



63



259



269


Net income available to common shareholders after  

















adjusting for after-tax amortization of acquired intangibles 


2,850



3,250



2,954



11,675



11,317


Other items of note, net of income taxes


28



26



25



558



580


Net income available to common shareholders – adjusted 

$

2,878


$

3,276


$

2,979


$

12,233


$

11,897


Return on tangible common equity 


18.9

%


22.0

%


22.7

%


20.5

%


22.7

%

Return on tangible common equity – adjusted 


19.1



22.2



22.9



21.5



23.9


1

Excludes intangibles relating to software and asset servicing rights.

2

For explanations of items of note, refer to the "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

 

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.


TABLE 8: IMPACT OF FOREIGN CURRENCY TRANSLATION ON U.S. RETAIL SEGMENT EARNINGS

(millions of Canadian dollars, except as noted) 

For the three months ended 

For the twelve months ended 



October 31, 2019 vs. 

October 31, 2019 vs. 



October 31, 2018 

October 31, 2018 



Increase (Decrease) 

Increase (Decrease) 

U.S. Retail Bank 








Total revenue 



$

46


$

369

Non-interest expenses – reported 




26



199

Non-interest expenses – adjusted 




26



199

Net income – reported, after tax 




14



120

Net income – adjusted, after tax 




14



120

Equity in net income of an investment in TD Ameritrade – reported




3



37

Equity in net income of an investment in TD Ameritrade – adjusted




3



37

U.S. Retail segment net income – reported, after tax 




17



158

U.S. Retail segment net income – adjusted, after tax 




17



158

Earnings per share (Canadian dollars) 








Basic – reported 



$

0.01


$

0.09

Basic – adjusted 




0.01



0.09

Diluted – reported 




0.01



0.09

Diluted – adjusted 




0.01



0.09



1

Equity in net income of an investment in TD Ameritrade 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

October 31

October 31

October 31



2019

2018

2019

2018

U.S. dollar 

1.324

1.303

1.329

1.287

 

SIGNIFICANT AND SUBSEQUENT EVENTS, AND PENDING TRANSACTIONS

Bank Supports Acquisition of TD Ameritrade Holding Corporation by The Charles Schwab Corporation
On November 25, 2019, the Bank announced its support for the acquisition of TD Ameritrade Holding Corporation (TD Ameritrade), of which the Bank is a major shareholder, by The Charles Schwab Corporation (Schwab), through a definitive agreement announced by those companies. Under the terms of the transaction, all TD Ameritrade shareholders, including the Bank, would exchange each TD Ameritrade share they own for 1.0837 shares of Schwab. As a result, the Bank will exchange its approximate 43% in TD Ameritrade for an approximate 13.4% stake in Schwab, consisting of up to 9.9% voting common shares and the remainder in non-voting common shares, convertible upon transfer to a third party. TD expects to record a revaluation gain at closing.

The transaction is subject to certain closing conditions, including majority approval by the shareholders of each of TD Ameritrade and Schwab, and majority approval of TD Ameritrade's shareholders other than TD and certain other shareholders of TD Ameritrade that have entered into voting agreements.  In addition, the transaction is subject to receipt of regulatory approvals. The transaction is expected to close in the second half of calendar 2020, subject to all applicable closing conditions having been satisfied.

If the transaction closes, it is expected to have minimal capital impact on the Bank, and the Bank expects to account for its investment in Schwab using the equity method of accounting. The Bank and Schwab have entered into a new Stockholders' Agreement that will become effective upon closing, under which the Bank will have two seats on Schwab's Board of Directors, subject to the Bank meeting certain conditions. Under the agreement, the Bank will be subject to customary standstill and lockup restrictions. The Bank and Schwab have also entered into a revised and extended long-term Insured Deposit Account (IDA) agreement that will become effective upon closing and extends to 2031. Starting on July 1, 2021, IDA deposits, which were $142 billion (US$108 billion) as at October 31, 2019, can be reduced at Schwab's option by up to US$10 billion a year, with a floor of US$50 billion. The servicing fee under the revised IDA agreement will be set at 15 basis points (bps) upon closing.

Agreement for Air Canada Credit Card Loyalty Program
On January 10, 2019, the Bank's long-term loyalty program agreement (the "Loyalty Agreement") with Air Canada became effective in conjunction with Air Canada completing its acquisition of Aimia Canada Inc., which operates the Aeroplan loyalty business (the "Transaction"). Under the terms of the Loyalty Agreement, the Bank will become the primary credit card issuer for Air Canada's new loyalty program when it launches in 2020 through to 2030. TD Aeroplan cardholders will become members of Air Canada's new loyalty program and their miles will be transitioned when Air Canada's new loyalty program launches in 2020.

In connection with the Transaction, the Bank paid $622 million plus applicable sales tax to Air Canada, of which $547 million ($446 million after sales and income taxes) was recognized in non-interest expenses – other in the Canadian Retail segment, and $75 million was recognized as an intangible asset which will be amortized over the Loyalty Agreement term. In addition, the Bank prepaid $308 million plus applicable sales tax for the future purchase of loyalty points over a ten-year period. The Bank also expects to incur additional pre-tax costs of approximately $100 million over two years to build the functionality required to facilitate the new program. The Transaction reduced the Bank's CET1 ratio by approximately 13 bps.

Acquisition of Greystone
On November 1, 2018, the Bank acquired 100% of the outstanding equity of Greystone for consideration of $821 million, of which $479 million was paid in cash and $342 million was paid in the Bank's common shares. The value of 4.7 million common shares issued as consideration was based on the volume weighted-average market price of the Bank's common shares over the 10 trading day period immediately preceding the fifth business day prior to the acquisition date and was recorded based on market price at close. Common shares of $167 million issued to employee shareholders in respect of the purchase price are being held in escrow for two years post-acquisition, subject to their continued employment, and are being recorded as a compensation expense over the two-year escrow period.

The acquisition was accounted for as a business combination under the purchase method. As at November 1, 2018, the acquisition contributed $165 million of assets and $46 million of liabilities. The excess of accounting consideration over the fair value of the identifiable net assets has been allocated to customer relationship intangibles of $140 million, deferred tax liability of $37 million, and goodwill of $432 million. Goodwill is not deductible for tax purposes. The results of the acquisition have been consolidated from the acquisition date and reported in the Canadian Retail segment.

HOW OUR BUSINESSES PERFORMED

For management reporting purposes, the Bank reports its results under three key business segments: Canadian Retail, which includes the results of the Canadian personal and commercial banking, wealth, and insurance businesses; U.S. Retail, which includes the results of the U.S. personal and business banking operations, wealth management services, and the Bank's investment in TD Ameritrade; and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment.

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 the "How the Bank Reports" section of this document, the "Business Focus" section in the 2019 MD&A, and Note 29 of the Bank's Consolidated Financial Statements for the year ended October 31, 2019. For information concerning the Bank's measure of adjusted return on average common equity, which is a non-GAAP financial measure, refer to the "How We Performed" section of this document.

Provision for credit losses (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's results are reversed in the Corporate segment. The TEB adjustment for the quarter was $36 million, compared with $28 million in the fourth quarter last year, and $37 million in the prior quarter.




TABLE 9: CANADIAN RETAIL



(millions of Canadian dollars, except as noted) 



For the three months ended 



October 31 


July 31 


October 31 



2019


2019


2018


Net interest income 

$

3,173


$

3,122


$

3,022


Non-interest income 


2,960



3,024



2,830


Total revenue 


6,133



6,146



5,852


Provision for credit losses – impaired 


324



282



245


Provision for credit losses – performing 


76



34



18


Total provision for credit losses 


400



316



263


Insurance claims and related expenses 


705



712



684


Non-interest expenses – reported 


2,637



2,533



2,530


Non-interest expenses – adjusted


2,607



2,507



2,530


Provision for (recovery of) income taxes – reported 


646



695



634


Provision for (recovery of) income taxes – adjusted


648



695



634


Net income – reported 


1,745



1,890



1,741


Net income – adjusted

$

1,773


$

1,916


$

1,741












Selected volumes and ratios 










Return on common equity – reported


37.9

%


41.7

%


45.1

%

Return on common equity – adjusted1,2


38.5



42.2



45.1


Net interest margin (including on securitized assets) 


2.96



2.96



2.94


Efficiency ratio – reported 


43.0



41.2



43.2


Efficiency ratio – adjusted


42.5



40.8



43.2


Assets under administration (billions of Canadian dollars) 

$

422


$

419


$

389


Assets under management (billions of Canadian dollars) 


353



350



289


Number of Canadian retail branches 


1,091



1,097



1,098


Average number of full-time equivalent staff 


41,650



41,583



39,283


1

Adjusted non-interest expenses exclude the following items of note: Charges associated with the acquisition of Greystone in the fourth quarter 2019 – $30 million ($28 million after tax) and the third quarter 2019 – $26 million ($26 million after tax). For explanations of items of note, refer to the "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

2

Capital allocated to the business segment was based on 10% CET1 Capital in fiscal 2019 and 9% in fiscal 2018.

 

Quarterly comparison – Q4 2019 vs. Q4 2018
Canadian Retail reported net income for the quarter was $1,745 million, an increase of $4 million, compared with the fourth quarter last year. The increase in earnings reflects revenue growth, partially offset by higher PCL, non-interest expenses including charges associated with the acquisition of Greystone, and insurance claims. On an adjusted basis, net income for the quarter was $1,773 million, an increase of $32 million, or 2%. The reported and adjusted annualized ROE for the quarter was 37.9% and 38.5%, respectively, compared with 45.1% in the fourth quarter last year.

Canadian Retail revenue is derived from Canadian personal and commercial banking, wealth, and insurance businesses. Revenue for the quarter was $6,133 million, an increase of $281 million, or 5%, compared with the fourth quarter last year.

Net interest income increased $151 million, or 5%, reflecting volume growth. Average loan volumes increased $19 billion, or 5%, reflecting 4% growth in personal loans and 9% growth in business loans. Average deposit volumes increased $16 billion, or 5%, reflecting 6% growth in personal deposits, 3% growth in business deposits, and 4% growth in wealth deposits. Net interest margin was 2.96%, an increase of 2 bps, reflecting higher interest rates, partially offset by competitive pricing in term deposits and loans.

Non-interest income increased $130 million, or 5%, reflecting an increase in insurance revenues, higher fee-based revenue in the wealth business, and the acquisition of Greystone.

Assets under administration (AUA) were $422 billion as at October 31, 2019, an increase of $33 billion, or 8%, compared with the fourth quarter last year, reflecting new asset growth and increases in market value. Assets under management (AUM) were $353 billion as at October 31, 2019, an increase of $64 billion, or 22%, compared with the fourth quarter last year, reflecting the acquisition of Greystone and increases in market value.

PCL for the quarter was $400 million, an increase of $137 million, or 52%, compared with the fourth quarter last year. PCL – impaired was $324 million, an increase of $79 million, or 32%, reflecting low prior period provisions in commercial, higher insolvencies in the other personal lending and credit card portfolios, and volume growth. PCL – performing was $76 million, an increase of $58 million, reflecting credit migration across the consumer lending and commercial portfolios, including the impact of parameter updates, and volume growth. Total PCL as an annualized percentage of credit volume was 0.37%, or an increase of 12 bps.

Insurance claims and related expenses for the quarter were $705 million, an increase of $21 million, or 3%, compared with the fourth quarter last year. The increase reflects higher current year claims related to business growth, partially offset by more favourable prior years' claims development and less severe weather-related events.

Reported non-interest expenses for the quarter were $2,637 million, an increase of $107 million, or 4%, compared with the fourth quarter last year, reflecting higher spend supporting business growth including employee-related costs and charges associated with the acquisition of Greystone, partially offset by lower marketing costs. On an adjusted basis, non-interest expenses were $2,607 million, an increase of $77 million, or 3%.

The reported and adjusted efficiency ratio for the quarter was 43.0% and 42.5%, respectively, compared with 43.2% in the fourth quarter last year.

Quarterly comparison – Q4 2019 vs. Q3 2019
Canadian Retail reported net income for the quarter decreased $145 million, or 8%, compared with the prior quarter. The decrease in earnings reflects higher non-interest expenses and PCL. On an adjusted basis, net income decreased $143 million, or 7%. The reported and adjusted annualized ROE for the quarter was 37.9% and 38.5%, respectively, compared with 41.7% and 42.2%, respectively, in the prior quarter.

Revenue decreased $13 million compared with the prior quarter. Net interest income increased $51 million, or 2%, reflecting volume growth. Average loan volumes increased $7 billion, or 2%, reflecting 1% growth in personal loans and 2% growth in business loans. Average deposit volumes increased $7 billion, or 2%. Net interest margin was 2.96%, consistent with the prior quarter.

Non-interest income decreased $64 million, or 2%, reflecting a decrease in the fair value of investments supporting claims liabilities as well as a revaluation of points liabilities offset by growth in fee revenues.

AUA increased $3 billion, or 1%, compared with the prior quarter, reflecting new asset growth. AUM increased $3 billion, or 1%, reflecting increases in market value.

PCL for the quarter increased $84 million, or 27%, compared with the prior quarter. PCL – impaired increased by $42 million, or 15%, reflecting credit migration in the auto and commercial portfolios. PCL – performing increased by $42 million, reflecting credit migration in the credit card and commercial portfolios. Total PCL as an annualized percentage of credit volume was 0.37%, an increase of 8 bps.

Insurance claims and related expenses for the quarter decreased $7 million, or 1%, compared with the prior quarter.

Reported non-interest expenses increased $104 million, or 4%, compared with the prior quarter, reflecting higher spend supporting business growth including employee-related expenses, and investment in strategic initiatives. On an adjusted basis, non-interest expenses increased $100 million, or 4%.

The reported and adjusted efficiency ratio for the quarter was 43.0% and 42.5%, respectively, compared with 41.2% and 40.8%, respectively, in the prior quarter.











TABLE 10: U.S. RETAIL 










(millions of dollars, except as noted) 





For the three months ended




October 31 


July 31 


October 31 


Canadian Dollars 


2019



2019



2018


Net interest income 

$

2,232


$

2,241


$

2,145


Non-interest income


717



745



713


Total revenue – reported 


2,949



2,986



2,858


Provision for credit losses – impaired 


268



184



205


Provision for credit losses – performing 


27



71



39


Total provision for credit losses 


295



255



244


Non-interest expenses 


1,669



1,604



1,637


Provision for (recovery of) income taxes


85



134



91


U.S. Retail Bank net income 


900



993



886


Equity in net income of an investment in TD Ameritrade – reported1,2


291



294



228


Equity in net income of an investment in TD Ameritrade – adjusted1,3


291



294



253


Net income – reported 


1,191



1,287



1,114


Net income – adjusted 

$

1,191


$

1,287


$

1,139













U.S. Dollars 










Net interest income 

$

1,687


$

1,686


$

1,646


Non-interest income


543



561



547


Total revenue – reported 


2,230



2,247



2,193


Provision for credit losses – impaired 


203



138



157


Provision for credit losses – performing 


20



53



30


Total provision for credit losses 


223



191



187


Non-interest expenses 


1,261



1,208



1,256


Provision for (recovery of) income taxes


65



101



70


U.S. Retail Bank net income 


681



747



680


Equity in net income of an investment in TD Ameritrade – reported1,2


219



220



175


Equity in net income of an investment in TD Ameritrade – adjusted1,3


219



220



194


Net income – reported 


900



967



855


Net income – adjusted 

$

900


$

967


$

874













Selected volumes and ratios 










Return on common equity – reported


11.8

%


12.9

%


12.8

%

Return on common equity – adjusted3,4


11.8



12.9



13.0


Net interest margin


3.18



3.27



3.33


Efficiency ratio 


56.5



53.8



57.3


Assets under administration (billions of U.S. dollars) 

$

21


$

20


$

19


Assets under management (billions of U.S. dollars) 


44



43



52


Number of U.S. retail stores 


1,241



1,238



1,257


Average number of full-time equivalent staff 


26,513



26,590



27,015


1

The reduction of the U.S. federal corporate tax rate enacted by the U.S. Tax Act has resulted in an adjustment during 2018 to the Bank's U.S. deferred tax assets and liabilities to the lower base rate of 21% as well as an adjustment to the Bank's carrying balances of certain tax-related investments and its investment in TD Ameritrade. The earnings impact was reported in the Corporate segment. For additional details, refer to the "Non-GAAP Financial Measures − Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

2

The after-tax amounts for amortization of intangibles relating to the Equity in net income of the investment in TD Ameritrade is recorded in the Corporate segment with other acquired intangibles.

3

Adjusted equity in net income of an investment in TD Ameritrade excludes the following items of note: The Bank's share of costs associated with TD Ameritrade's acquisition of Scottrade in the fourth quarter 2018 – $25 million or US$19 million after tax. For explanations of items of note, refer to the "Non-GAAP Financial Measures − Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

4

Capital allocated to the business segment was based on 10% CET1 Capital in fiscal 2019 and 9% in fiscal 2018.

5

Net interest margin excludes the impact related to the TD Ameritrade IDA and the impact of intercompany deposits and cash collateral. In addition, the value of tax-exempt interest income is adjusted to its equivalent before-tax value.

 

Quarterly comparison – Q4 2019 vs. Q4 2018
U.S. Retail reported net income for the quarter was $1,191 million (US$900 million), an increase of $77 million (US$45 million), or 7% (5% in U.S. dollars), compared with the fourth quarter last year. On an adjusted basis, net income for the quarter increased $52 million (US$26 million), or 5% (3% in U.S. dollars). The reported and adjusted annualized ROE for the quarter was 11.8%, compared with 12.8% and 13.0%, respectively, 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 TD Ameritrade. Net income for the quarter from the U.S. Retail Bank and the Bank's investment in TD Ameritrade were $900 million (US$681 million) and $291 million (US$219 million), respectively.

The reported contribution from TD Ameritrade of US$219 million increased US$44 million, or 25%, compared with the fourth quarter last year, primarily reflecting higher asset-based revenue and charges associated with the Scottrade transaction in the same quarter last year, partially offset by higher operating expenses. Adjusted contribution from TD Ameritrade increased US$25 million, or 13%.

U.S. Retail Bank net income of US$681 million for the quarter increased US$1 million.

U.S. Retail Bank revenue is derived from personal and business banking, and wealth management. Revenue for the quarter was US$2,230 million, an increase of US$35 million, or 2%, compared with the fourth quarter last year. Net interest income increased US$41 million, or 2%, reflecting growth in loan and deposit volumes. Net interest margin was 3.18%, a 15 bps decrease, primarily reflecting lower deposit margins and balance sheet mix. Non‑interest income decreased US$4 million, or 1%.

Average loan volumes increased US$10 billion, or 7%, compared with the fourth quarter last year, due to growth of 7% in both personal and business loans. Average deposit volumes increased US$8 billion, or 3%, reflecting 4% growth in personal and 7% growth in business deposit volumes, partially offset by a decrease in sweep deposit volume from TD Ameritrade.

AUA were US$21 billion as at October 31, 2019, relatively flat, compared with the fourth quarter last year. AUM were US$44 billion as at October 31, 2019, a decrease of US$8 billion, or 16%, reflecting net fund outflows including the impact of the strategic disposition of U.S. money market funds in the first quarter of this year.

PCL for the quarter was US$223 million, an increase of US$36 million, or 19%, compared with the fourth quarter last year. PCL – impaired was US$203 million, an increase of US$46 million, or 29%, driven by higher provisions for the commercial portfolio and volume growth and seasoning in the auto and credit card portfolios. PCL – performing was US$20 million, a decrease of US$10 million. U.S. Retail PCL including only the Bank's contractual portion of credit losses in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.55%, or an increase of 5 bps.

Non-interest expenses for the quarter were US$1,261 million, which included US$52 million of restructuring charges. Non-interest expense increased US$5 million, compared with the fourth quarter last year, primarily due to the restructuring charges and business volume growth, partially offset by productivity savings and an adjustment in post-retirement benefit costs.

The efficiency ratio for the quarter was 56.5%, compared with 57.3% in the fourth quarter last year.

Quarterly comparison – Q4 2019 vs. Q3 2019
U.S. Retail net income decreased $96 million (US$67 million), or 7% (7% in U.S. dollars), compared with the prior quarter. The annualized ROE for the quarter was 11.8%, compared to 12.9%, in the prior quarter.

The contribution from TD Ameritrade was US$219 million, flat to the prior quarter, as higher asset-based revenue and higher trading volumes in the current quarter were offset by a gain on disposition of assets in the Trust business in the prior quarter.

U.S. Retail Bank net income for the quarter decreased US$66 million, or 9%, compared with the prior quarter, due to higher PCL and restructuring charges, partially offset by higher loan and deposit volumes.

Revenue for the quarter decreased US$17 million, or 1%, compared with the prior quarter. Net interest income was relatively flat, with deposit margin compression, partially offset by higher loan and deposit volumes. Net interest margin was 3.18%, a 9 bps decrease compared to the prior quarter primarily due to lower deposit margins. Non‑interest income decreased US$18 million, or 3%.

Average loan volumes increased US$3 billion, or 2%, compared with the prior quarter, due to growth in personal loans of 4%. Average deposit volumes increased US$6 billion, or 2%, reflecting 5% growth in business deposit volumes and a 3% increase in sweep deposit volume from TD Ameritrade.

AUA were US$21 billion as at October 31, 2019, relatively flat, compared with the prior quarter. AUM were US$44 billion as at October 31, 2019, relatively flat, compared with the prior quarter.

PCL for the quarter increased US$32 million, or 17%, compared with the prior quarter. PCL – impaired increased by US$65 million, or 47%, primarily reflecting seasonal trends in the auto and credit card portfolios and prior period parameter updates in the consumer lending portfolios. PCL – performing decreased by US$33 million, primarily reflecting prior quarter parameter updates in the consumer lending portfolios, partially offset by seasonal trends in the auto and credit card portfolios. U.S. Retail PCL including only the Bank's contractual portion of credit losses in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.55%, or an increase of 7 bps.

Non-interest expenses for the quarter increased US$53 million, or 4%, compared with the prior quarter, reflecting the restructuring charges and higher costs related to business volume growth, partially offset by an adjustment in post-retirement benefit costs.

The efficiency ratio for the quarter was 56.5%, compared with 53.8% in the prior quarter.











TABLE 11: WHOLESALE BANKING










(millions of Canadian dollars, except as noted) 


For the three months ended 




October 31 


July 31 


October 31 




2019


2019


2018


Net interest income (TEB) 

$

278


$

198


$

273


Non-interest income 


570



716



658


Total revenue 


848



914



931


Provision for (recovery of) credit losses – impaired 


8



12




Provision for (recovery of) credit losses – performing 


33



(11)



8


Total provision for (recovery of) credit losses 


41



1



8


Non-interest expenses 


600



594



551


Provision for (recovery of) income taxes (TEB)


47



75



86


Net income 

$

160


$

244


$

286













Selected volumes and ratios 










Trading-related revenue (TEB) 

$

411


$

500


$

484


Gross drawn (billions of Canadian dollars)


24.1



24.3



23.9


Return on common equity


8.5

%


13.4

%


18.4

%

Efficiency ratio 


70.8



65.0



59.2


Average number of full-time equivalent staff 


4,570



4,594



4,426


1

Certain comparative amounts have been recast to conform with the presentation adopted in the current period.

2      

The reduction of the U.S. federal corporate tax rate enacted by the U.S. Tax Act resulted in a one-time adjustment during 2018 to Wholesale Banking's U.S. deferred tax assets and liabilities to the lower base rate of 21%. The earnings impact was reported in the Corporate segment. For additional details, refer to the "Non-GAAP Financial Measures − Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

3

Includes gross loans and bankers' acceptances, excluding letters of credit, cash collateral, credit default swaps, and reserves for the corporate lending business.

4

Capital allocated to the business segment was based on 10% CET1 Capital in fiscal 2019 and 9% in fiscal 2018.

 

Quarterly comparison – Q4 2019 vs. Q4 2018
Wholesale Banking net income for the quarter was $160 million, a decrease of $126 million compared with the fourth quarter last year reflecting lower revenue, higher non-interest expenses, and higher PCL.

Wholesale Banking revenue is derived primarily from capital markets and corporate and investment banking services provided to corporate, government, and institutional clients. Wholesale Banking generates revenue from corporate lending, advisory, underwriting, sales, trading and research, client securitization, trade finance, cash management, prime services, and trade execution services. Revenue for the quarter was $848 million, a decrease of $83 million compared with the fourth quarter last year primarily reflecting derivative valuation charges of $96 million, as well as lower equity underwriting and advisory fees, partially offset by higher debt underwriting fees.

PCL for the quarter was $41 million, compared to $8 million in the fourth quarter last year. PCL – impaired was $8 million. PCL – performing was $33 million reflecting credit migration.

Non-interest expenses were $600 million, an increase of $49 million compared with the fourth quarter last year. The increase reflects restructuring charges of $23 million, higher securities lending fees and software costs, and the impact of foreign exchange translation, partially offset by lower variable compensation.

Quarterly comparison – Q4 2019 vs. Q3 2019
Wholesale Banking net income for the quarter decreased $84 million compared with the prior quarter largely reflecting lower revenue and higher PCL.

Revenue for the quarter decreased $66 million compared with the prior quarter primarily reflecting derivative valuation charges and lower loan fees, partially offset by higher trading-related revenue.

PCL for the quarter was $41 million, compared to $1 million in the prior quarter. PCL – impaired was $8 million. PCL – performing was $33 million reflecting credit migration.

Non-interest expenses for the quarter increased $6 million compared with the prior quarter. The increase reflects restructuring charges of $23 million, partially offset by lower variable compensation.








TABLE 12: CORPORATE 







(millions of Canadian dollars) 

For the three months ended 


October 31 

July 31 

October 31 


2019

2019

2018

Net income (loss) – reported 

$

(240)

$

(173)

$

(181)

Pre-tax adjustments for items of note







Amortization of intangibles 


74


75


76

Total pre-tax adjustments for items of note 


74


75


76

Provision for (recovery of) income taxes for items of note 


12


11


13

Net income (loss) – adjusted 

$

(178)

$

(109)

$

(118)

Decomposition of items included in net income (loss) – adjusted 







Net corporate expenses 

$

(201)

$

(156)

$

(221)

Other 


23


47


85

Non-controlling interests 




18

Net income (loss) – adjusted 

$

(178)

$

(109)

$

(118)








Selected volumes 







Average number of full-time equivalent staff 


17,316


17,277


15,864



1

For explanations of items of note, refer to the "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

 

Quarterly comparison – Q4 2019 vs. Q4 2018
Corporate segment's reported net loss for the quarter was $240 million, compared with a reported net loss of $181 million in the fourth quarter last year. The year-over-year increase in reported net loss was primarily attributable to lower contribution from other items and non-controlling interests, partially offset by lower net corporate expenses. Other items decreased primarily reflecting lower revenue from treasury and balance sheet management activities in the current quarter. Net corporate expenses decreased largely reflecting lower net pension expenses in the current quarter, partially offset by restructuring charges of $51 million. Adjusted net loss was $178 million, compared with an adjusted net loss of $118 million in the fourth quarter last year.

Quarterly comparison – Q4 2019 vs. Q3 2019
Corporate segment's reported net loss for the quarter was $240 million, compared with a reported net loss of $173 million in the prior quarter. The quarter-over-quarter increase in reported net loss was primarily attributable to lower contribution of other items and increased net corporate expenses. Net corporate expenses increased largely reflecting restructuring charges of $51 million in the current quarter. Other items decreased primarily reflecting lower revenue from treasury and balance sheet management activities this quarter. Adjusted net loss was $178 million, compared with an adjusted net loss of $109 million in the prior quarter.

CONSOLIDATED FINANCIAL STATEMENTS 










CONSOLIDATED BALANCE SHEET





(millions of Canadian dollars)  




As at 



October 31  

October 31 




2019


2018

ASSETS  



Cash and due from banks 

$

4,863

$

4,735

Interest-bearing deposits with banks 


25,583


30,720




30,446


35,455

Trading loans, securities, and other 


146,000


127,897

Non-trading financial assets at fair value through profit or loss 


6,503


4,015

Derivatives  


48,894


56,996

Financial assets designated at fair value through profit or loss 


4,040


3,618

Financial assets at fair value through other comprehensive income 


111,104


130,600




316,541


323,126

Debt securities at amortized cost, net of allowance for credit losses 


130,497


107,171

Securities purchased under reverse repurchase agreements 


165,935


127,379

Loans 





Residential mortgages  


235,640


225,191

Consumer instalment and other personal  


180,334


172,079

Credit card  


36,564


35,018

Business and government  


236,517


217,654




689,055


649,942

Allowance for loan losses  


(4,447)


(3,549)

Loans, net of allowance for loan losses  


684,608


646,393

Other 





Customers' liability under acceptances   


13,494


17,267

Investment in TD Ameritrade  


9,316


8,445

Goodwill  


16,976


16,536

Other intangibles  


2,503


2,459

Land, buildings, equipment, and other depreciable assets  


5,513


5,324

Deferred tax assets  


1,799


2,812

Amounts receivable from brokers, dealers, and clients  


20,575


26,940

Other assets  


17,087


15,596




87,263


95,379

Total assets 

$

1,415,290

$

1,334,903

LIABILITIES 





Trading deposits 

$

26,885

$

114,704

Derivatives  


50,051


48,270

Securitization liabilities at fair value 


13,058


12,618

Financial liabilities designated at fair value through profit or loss 


105,131


16




195,125


175,608

Deposits 





Personal  


503,430


477,644

Banks  


16,751


16,712

Business and government  


366,796


357,083




886,977


851,439

Other 





Acceptances   


13,494


17,269

Obligations related to securities sold short  


29,656


39,478

Obligations related to securities sold under repurchase agreements  


125,856


93,389

Securitization liabilities at amortized cost  


14,086


14,683

Amounts payable to brokers, dealers, and clients  


23,746


28,385

Insurance-related liabilities  


6,920


6,698

Other liabilities  


21,004


19,174




234,762


219,076

Subordinated notes and debentures 


10,725


8,740

Total liabilities 


1,327,589


1,254,863

EQUITY 





Shareholders' Equity 





Common shares  


21,713


21,221

Preferred shares  


5,800


5,000

Treasury shares – common  


(41)


(144)

Treasury shares – preferred  


(6)


(7)

Contributed surplus  


157


193

Retained earnings  


49,497


46,145

Accumulated other comprehensive income (loss)   


10,581


6,639




87,701


79,047

Non-controlling interests in subsidiaries  



993

Total equity 


87,701


80,040

Total liabilities and equity 

$

1,415,290

$

1,334,903

1

The amounts as at October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

 

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.


 

CONSOLIDATED STATEMENT OF INCOME










(millions of Canadian dollars, except as noted) 

For the three months ended

For the twelve months ended




October 31

October 31

October 31

October 31



2019

2018

2019

2018


Interest income










Loans 

$

8,117

$

7,519

$

31,925

$

27,790


Securities 











Interest 


1,848


1,906


7,843


6,685



Dividends 


447


375


1,548


1,234


Deposits with banks 


126


194


683


713




10,538


9,994


41,999


36,422


Interest expense 










Deposits 


3,313


3,126


13,675


10,489


Securitization liabilities 


121


155


524


586


Subordinated notes and debentures 


107


83


395


337


Other 


822


874


3,474


2,771




4,363


4,238


18,068


14,183


Net interest income 


6,175


5,756


23,931


22,239


Non-interest income 










Investment and securities services 


1,246


1,189


4,872


4,714


Credit fees 


322


311


1,289


1,210


Net securities gain (loss)  


31


34


78


111


Trading income (loss) 


237


322


1,047


1,052


Income (loss) from non-trading financial instruments at fair value through profit or loss 


6


22


121


48


Income (loss) from financial instruments designated at fair value through profit or loss 


(89)


(46)


8


(170)


Service charges 


743


698


2,885


2,716


Card services 


578


608


2,465


2,376


Insurance revenue 


1,124


1,047


4,282


4,045


Other income (loss)  


(33)


195


87


551




4,165


4,380


17,134


16,653


Total revenue 


10,340


10,136


41,065


38,892


Provision for credit losses  


891


670


3,029


2,480


Insurance claims and related expenses  


705


684


2,787


2,444


Non-interest expenses 










Salaries and employee benefits  


2,744


2,680


11,244


10,377


Occupancy, including depreciation 


475


452


1,835


1,765


Equipment, including depreciation 


318


276


1,165


1,073


Amortization of other intangibles  


211


217


800


815


Marketing and business development 


206


257


769


803


Restructuring charges (recovery) 


154



175


73


Brokerage-related and sub-advisory fees 


86


91


336


359


Professional and advisory services 


379


407


1,322


1,194


Other  


970


986


4,374


3,736




5,543


5,366


22,020


20,195


Income before income taxes and equity in net income of an investment in TD Ameritrade 


3,201


3,416


13,229


13,773


Provision for (recovery of) income taxes  


646


691


2,735


3,182


Equity in net income of an investment in TD Ameritrade 


301


235


1,192


743


Net income  


2,856


2,960


11,686


11,334


Preferred dividends 


68


51


252


214


Net income available to common shareholders and non-controlling interests 











 in subsidiaries 

$

2,788

$

2,909

$

11,434

$

11,120


Attributable to: 











Common shareholders  

$

2,788

$

2,891

$

11,416

$

11,048



Non-controlling interests in subsidiaries 



18


18


72


Earnings per share (Canadian dollars)  










Basic 

$

1.54

$

1.58

$

6.26

$

6.02


Diluted 


1.54


1.58


6.25


6.01


Dividends per common share (Canadian dollars) 


0.74


0.67


2.89


2.61


1

The amounts for the three months ended October 31, 2019, and October 31, 2018, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

2

Includes $8,751 million and $34,828 million, for the three and twelve months ended October 31, 2019, respectively, which has been calculated based on the effective interest rate method.

 

Certain comparative amounts have been recast to conform with the presentation adopted in the current period.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME1,2










(millions of Canadian dollars) 

For the three months ended 

For the twelve months ended 





October 31 

October 31 

October 31 

October 31 





2019

2018

2019

2018


Net income  

$

2,856

$

2,960

$

11,686

$

11,334


Other comprehensive income (loss), net of income taxes 










Items that will be subsequently reclassified to net income 











Net change in unrealized gains (losses) on financial assets at fair value through 












other comprehensive income 











Change in unrealized gains (losses) on debt securities at fair value through other 












comprehensive income 


(20)


(81)


110


(261)



Reclassification to earnings of net losses (gains) in respect of debt securities at fair value 












through other comprehensive income 


(23)


(16)


(31)


(22)



Reclassification to earnings of changes in allowance for credit losses on debt securities at fair 












value through other comprehensive income 


1


(1)


(1)


(1)






(42)


(98)


78


(284)



Net change in unrealized foreign currency translation gains (losses) on 












Investments in foreign operations, net of hedging activities 











Unrealized gains (losses) on investments in foreign operations 


(103)


780


(165)


1,323



Net gains (losses) on hedges of investments in foreign operations 


(1)


(184)


132


(288)






(104)


596


(33)


1,035



Net change in gains (losses) on derivatives designated as cash flow hedges 











Change in gains (losses) on derivatives designated as cash flow hedges 


834


(146)


3,459


(1,624)



Reclassification to earnings of losses (gains) on cash flow hedges 


(47)


(196)


519


(455)






787


(342)


3,978


(2,079)


Items that will not be subsequently reclassified to net income 










Actuarial gains (losses) on employee benefit plans 


(233)


259


(921)


622


Change in net unrealized gains (losses) on equity securities designated at fair value through 











other comprehensive income 


(5)


(15)


(95)


38


Change in fair value due to credit risk on financial liabilities designated at fair value through 











profit or loss


12



14







(226)


244


(1,002)


660


Total other comprehensive income (loss), net of income taxes 


415


400


3,021


(668)


Total comprehensive income (loss), net of income taxes 

$

3,271

$

3,360

$

14,707

$

10,666


Attributable to: 











Common shareholders  

$

3,203

$

3,291

$

14,437

$

10,380



Preferred shareholders  


68


51


252


214



Non-controlling interests in subsidiaries 



18


18


72


1      

The amounts for the three months ended October 31, 2019, and October 31, 2018, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

2      

The amounts are net of income tax provisions (recoveries) presented in the following table.

 

Income Tax Provisions (Recoveries) in the Consolidated Statement of Comprehensive Income

(millions of Canadian dollars)

For the three months ended 

For the twelve months ended 




October 31 

October 31 

October 31 

October 31 





2019


2018


2019


2018


Change in unrealized gains (losses) on debt securities at fair value through











other comprehensive income

$

(11)

$

(24)

$

21

$

(139)


Less: Reclassification to earnings of net losses (gains) in respect of debt securities at fair value











through other comprehensive income


4


8


(1)


13


Less: Reclassification to earnings of changes in allowance for credit losses on debt securities at











fair value through other comprehensive income






Unrealized gains (losses) on investments in foreign operations






Net gains (losses) on hedges of investments in foreign operations



(67)


48


(104)


Change in gains (losses) on derivatives designated as cash flow hedges


305


(11)


1,235


(473)


Less: Reclassification to earnings of losses (gains) on cash flow hedges


36


110


(157)


283


Actuarial gains (losses) on employee benefit plans


(80)


93


(324)


243


Change in net unrealized gains (losses) on equity securities designated at fair value











through other comprehensive income


(2)


(5)


(35)


20


Change in fair value due to credit risk on financial liabilities designated at fair value through











profit or loss


4



4



Total income taxes

$

176

$

(132)

$

1,107

$

(749)


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY1  










(millions of Canadian dollars)  

For the three months ended  

For the twelve months ended 



October 31 

October 31  

October 31 

October 31 



2019

2018

2019

2018


Common shares   










Balance at beginning of period  

$

21,722

$

21,099

$

21,221

$

20,931


Proceeds from shares issued on exercise of stock options  


27


28


124


152


Shares issued as a result of dividend reinvestment plan  


68


94


357


366


Shares issued in connection with acquisitions  




366



Purchase of shares for cancellation and other  


(104)



(355)


(228)


Balance at end of period  


21,713


21,221


21,713


21,221


Preferred shares   










Balance at beginning of period  


5,800


4,850


5,000


4,750


Issue of shares  



400


800


750


Redemption of shares  



(250)



(500)


Balance at end of period  


5,800


5,000


5,800


5,000


Treasury shares – common   










Balance at beginning of period  


(44)


(168)


(144)


(176)


Purchase of shares  


(2,254)


(2,134)


(9,782)


(8,295)


Sale of shares  


2,257


2,158


9,885


8,327


Balance at end of period  


(41)


(144)


(41)


(144)


Treasury shares – preferred   










Balance at beginning of period  


(4)


(3)


(7)


(7)


Purchase of shares  


(40)


(26)


(151)


(129)


Sale of shares  


38


22


152


129


Balance at end of period  


(6)


(7)


(6)


(7)


Contributed surplus 










Balance at beginning of period  


157


195


193


214


Net premium (discount) on sale of treasury shares  


3



(22)


(2)


Issuance of stock options, net of options exercised  


(2)


(1)


(8)


(12)


Other  


(1)


(1)


(6)


(7)


Balance at end of period  


157


193


157


193


Retained earnings 










Balance at beginning of period  


48,818


44,223


46,145


40,489


Impact on adoption of IFRS 152  



n/a


(41)


n/a 


Impact on adoption of IFRS 94  





53


Net income attributable to shareholders   


2,856


2,942


11,668


11,262


Common dividends  


(1,338)


(1,223)


(5,262)


(4,786)


Preferred dividends  


(68)


(51)


(252)


(214)


Share issue expenses and others  



(6)


(9)


(10)


Net premium on repurchase of common shares and redemption of preferred shares, and other  


(538)



(1,880)


(1,273)


Actuarial gains (losses) on employee benefit plans  


(233)


259


(921)


622


Realized gains (losses) on equity securities designated at fair value through other comprehensive income  



1


49


2


Balance at end of period  


49,497


46,145


49,497


46,145


Accumulated other comprehensive income (loss) 










Net unrealized gain (loss) on debt securities at fair value through other comprehensive income: 










Balance at beginning of period  


365


343


245


510


Impact on adoption of IFRS 9  





19


Other comprehensive income (loss)  


(43)


(97)


79


(283)


Allowance for credit losses  


1


(1)


(1)


(1)


Balance at end of period   


323


245


323


245


Net unrealized gain (loss) on equity securities designated at fair value through other comprehensive income: 










Balance at beginning of period  


(35)


70


55


113


Impact on adoption of IFRS 9  





(96)


Other comprehensive income (loss)  


(5)


(14)


(46)


40


Reclassification of loss (gain) to retained earnings  



(1)


(49)


(2)


Balance at end of period   


(40)


55


(40)


55


Change in fair value due to credit risk on financial liabilities designated at fair value through  











profit or loss:  










Balance at beginning of period  


2





Other comprehensive income (loss)  


12



14



Balance at end of period   


14



14



Net unrealized foreign currency translation gain (loss) on investments in foreign operations, net of hedging activities:  










Balance at beginning of period  


8,897


8,230


8,826


7,791


Other comprehensive income (loss)  


(104)


596


(33)


1,035


Balance at end of period   


8,793


8,826


8,793


8,826


Net gain (loss) on derivatives designated as cash flow hedges:   










Balance at beginning of period  


704


(2,145)


(2,487)


(408)


Other comprehensive income (loss)  


787


(342)


3,978


(2,079)


Balance at end of period   


1,491


(2,487)


1,491


(2,487)


Total accumulated other comprehensive income 


10,581


6,639


10,581


6,639


Total shareholders' equity 


87,701


79,047


87,701


79,047


Non-controlling interests in subsidiaries 










Balance at beginning of period  



993


993


983


Net income attributable to non-controlling interests in subsidiaries  



18


18


72


Redemption of non-controlling interests in subsidiaries  




(1,000)



Other  



(18)


(11)


(62)


Balance at end of period  



993



993


Total equity   

$

87,701

$

80,040

$

87,701

$

80,040













1 

The amounts for the three months ended October 31, 2019, and October 31, 2018, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

2

IFRS 15, Revenue from Contracts with Customers (IFRS 15).

3    

Not applicable.

4

IFRS 9, Financial Instruments (IFRS 9).

 

CONSOLIDATED STATEMENT OF CASH FLOWS1  










(millions of Canadian dollars)  

For the three months ended 

For the twelve months ended 




October 31 

October 31 

October 31 

October 31 




2019

2018

2019

2018


Cash flows from (used in) operating activities 










Net income before income taxes, including equity in net income of an investment in TD Ameritrade  

$

3,502

$

3,651

$

14,421

$

14,516


Adjustments to determine net cash flows from (used in) operating activities  











Provision for credit losses   


891


670


3,029


2,480



Depreciation   


166


149


605


576



Amortization of other intangibles   


211


217


800


815



Net securities losses (gains)  


(31)


(34)


(78)


(111)



Equity in net income of an investment in TD Ameritrade  


(301)


(235)


(1,192)


(743)



Deferred taxes   


(80)


(21)


(33)


385


Changes in operating assets and liabilities  











Interest receivable and payable   


33


56


(26)


(104)



Securities sold under repurchase agreements  


2,648


(1,220)


32,467


4,798



Securities purchased under reverse repurchase agreements  


(3,291)


1,640


(38,556)


7,050



Securities sold short  


(5,643)


124


(9,822)


3,996



Trading loans and securities  


(3,839)


(3,836)


(18,103)


(24,065)



Loans net of securitization and sales  


(10,069)


(11,727)


(41,693)


(45,620)



Deposits  


5,740


19,976


(52,281)


53,379



Derivatives  


143


(4,125)


9,883


(3,745)



Non-trading financial assets at fair value through profit or loss  


(470)


(150)


(2,397)


5,257



Financial assets and liabilities designated at fair value through profit or loss  


9,335


(379)


104,693


(460)



Securitization liabilities  


216


(13)


(157)


(1,532)



Current taxes  


(83)


121


(771)


(780)



Brokers, dealers and clients amounts receivable and payable  


2,474


1,011


1,726


(1,435)



Other  


(755)


(4,029)


(2,244)


(8,964)


Net cash from (used in) operating activities  


797


1,846


271


5,693


Cash flows from (used in) financing activities 










Issuance of subordinated notes and debentures  



1,750


1,749


1,750


Redemption or repurchase of subordinated notes and debentures   


106


(31)


24


(2,468)


Common shares issued  


23


24


105


128


Preferred shares issued  



394


791


740


Repurchase of common shares  


(642)



(2,235)


(1,501)


Redemption of preferred shares  



(250)



(500)


Redemption of non-controlling interests in subsidiaries  




(1,000)



Sale of treasury shares  


2,298


2,180


10,015


8,454


Purchase of treasury shares  


(2,294)


(2,160)


(9,933)


(8,424)


Dividends paid  


(1,338)


(1,180)


(5,157)


(4,634)


Distributions to non-controlling interests in subsidiaries  



(18)


(11)


(72)


Net cash from (used in) financing activities  


(1,847)


709


(5,652)


(6,527)


Cash flows from (used in) investing activities 










Interest-bearing deposits with banks  


9,114


3,858


5,137


20,465


Activities in financial assets at fair value through other comprehensive income  











Purchases  


(7,606)


(8,091)


(24,898)


(20,269)



Proceeds from maturities  


9,623


7,667


37,835


30,101



Proceeds from sales  


3,805


900


10,158


2,731


Activities in debt securities at amortized cost  











Purchases  


(23,811)


(12,161)


(51,202)


(51,663)



Proceeds from maturities  


9,712


4,357


28,392


20,101



Proceeds from sales  


285


342


1,418


670


Net purchases of land, buildings, equipment, and other depreciable assets  


(216)


(261)


(794)


(587)


Net cash acquired from (paid for) divestitures, acquisitions, and the purchase of TD Ameritrade shares   




(540)



Net cash from (used in) investing activities  


906


(3,389)


5,506


1,549


Effect of exchange rate changes on cash and due from banks  


(5)


28


3


49


Net increase (decrease) in cash and due from banks 


(149)


(806)


128


764


Cash and due from banks at beginning of period  


5,012


5,541


4,735


3,971


Cash and due from banks at end of period 

$

4,863

$

4,735

$

4,863

$

4,735


Supplementary disclosure of cash flows from operating activities 










Amount of income taxes paid (refunded) during the period  

$

791

$

504

$

3,589

$

3,535


Amount of interest paid during the period  


4,314


4,025


17,958


13,888


Amount of interest received during the period  


10,075


9,462


40,315


34,789


Amount of dividends received during the period  


485


345


1,584


1,202


1

The amounts for the three months ended October 31, 2019, and October 31, 2018, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

 

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.

Appendix A – Segmented Information
For management reporting purposes, the Bank reports its results under three key business segments: Canadian Retail, which includes the results of the Canadian personal and commercial banking businesses, Canadian credit cards, TD Auto Finance Canada and Canadian wealth and insurance businesses; 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 TD Ameritrade; and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment.

Results for these segments for the three and twelve months ended October 31 are presented in the following tables.

Results by Business Segment1,2,3

















(millions of Canadian dollars)





For the three months ended 



Canadian Retail  

U.S. Retail 

Wholesale Banking

Corporate

Total 



Oct. 31 

Oct. 31  

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 




2019


2018


2019


2018


2019


2018


2019


2018


2019


2018

Net interest income (loss) 

$

3,173

$

3,022

$

2,232

$

2,145

$

278

$

273

$

492

$

316

$

6,175

$

5,756

Non-interest income (loss) 


2,960


2,830


717


713


570


658


(82)


179


4,165


4,380

Total revenue


6,133


5,852


2,949


2,858


848


931


410


495


10,340


10,136

Provision for (recovery of) credit losses 


400


263


295


244


41


8


155


155


891


670

Insurance claims and related expenses 


705


684








705


684

Non-interest expenses  


2,637


2,530


1,669


1,637


600


551


637


648


5,543


5,366

Income (loss) before income taxes  


2,391


2,375


985


977


207


372


(382)


(308)


3,201


3,416

Provision for (recovery of) income taxes  


646


634


85


91


47


86


(132)


(120)


646


691

Equity in net income of an investment in 






















TD Ameritrade 




291


228




10


7


301


235

Net income (loss)  

$

1,745

$

1,741

$

1,191

$

1,114

$

160

$

286

$

(240)

$

(181)

$

2,856

$

2,960





























For the twelve months ended 



Oct. 31 

Oct. 31  

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31 

Oct. 31  

Oct. 31 

Oct. 31 




2019


2018


2019


2018


2019


2018


2019


2018


2019


2018

Net interest income (loss) 

$

12,349

$

11,576

$

8,951

$

8,176

$

911

$

1,150

$

1,720

$

1,337

$

23,931

$

22,239

Non-interest income (loss) 


11,877


11,137


2,840


2,768


2,320


2,367


97


381


17,134


16,653

Total revenue


24,226


22,713


11,791


10,944


3,231


3,517


1,817


1,718


41,065


38,892

Provision for (recovery of) credit losses 


1,306


998


1,082


917


44


3


597


562


3,029


2,480

Insurance claims and related expenses 


2,787


2,444








2,787


2,444

Non-interest expenses  


10,735


9,473


6,411


6,100


2,393


2,125


2,481


2,497


22,020


20,195

Income (loss) before income taxes  


9,398


9,798


4,298


3,927


794


1,389


(1,261)


(1,341)


13,229


13,773

Provision for (recovery of) income taxes  


2,535


2,615


471


432


186


335


(457)


(200)


2,735


3,182

Equity in net income of an investment in 






















TD Ameritrade 




1,154


693




38


50


1,192


743

Net income (loss)  

$

6,863

$

7,183

$

4,981

$

4,188

$

608

$

1,054

$

(766)

$

(1,091)

$

11,686

$

11,334










































As at 




Oct. 31


Oct. 31


Oct. 31 


Oct. 31 


Oct. 31 


Oct. 31


Oct. 31


Oct. 31 


Oct. 31 


Oct. 31 




2019


2018


2019


2018


2019


2018


2019


2018


2019


2018

Total assets

$

452,163

$

433,960

$

436,086

$

417,292

$

458,420

$

425,909

$

68,621

$

57,742

$

1,415,290

$

1,334,903



1

Certain comparative amounts have been recast to conform with the presentation adopted in current period.

2

The amounts for the three months ended October 31, 2019, and October 31, 2018, have been derived from unaudited financial statements. The amounts for the twelve months ended October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

3

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.

4

Net interest income within Wholesale Banking is calculated on a TEB. The TEB adjustment reflected in Wholesale Banking is reversed in the Corporate segment.

5

The impact from certain treasury and balance sheet management activities relating to the U.S. Retail segment is recorded in the Corporate segment.

6

Total assets as at October 31, 2019 and October 31, 2018, have been derived from the audited financial statements.

 

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:

AST Trust Company (Canada)
P.O. Box 700, Station B

Montréal, Québec H3B 3K3

1-800-387-0825 (Canada and U.S. only)

or 416-682-3860

Facsimile: 1-888-249-6189

inquiries@astfinancial.com or www.astfinancial.com/ca-en

 

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
P.O. Box 505000

Louisville, KY 40233

or

Computershare

462 South 4th Street, Suite 1600

Louisville, KY 40202

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 2019 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 2019 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 2019 Consolidated Financial Statements and MD&A documents on the TD website at www.td.com/investor/.

General Information
Contact Corporate & Public Affairs: 416-982-8578

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

Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on December 5, 2019. 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/qr_2019.jsp on December 5, 2019, by approximately 12 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/qr_2019.jsp. Replay of the teleconference will be available from 3:30 p.m. ET on December 5, 2019, until 11:59 p.m. ET on Thursday, January 2, 2020, by calling 905-694-9451 or 1-800-408-3053 (toll free). The passcode is 3336790#.

Annual Meeting
Thursday, April 2, 2020
Design Exchange
Toronto, Ontario

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 fifth largest bank in North America by branches and serves over 26 million customers in three key businesses operating in a number of locations in financial centres around the globe: Canadian Retail, including TD Canada Trust, TD Auto Finance Canada, TD Wealth (Canada), TD Direct Investing, and TD Insurance; U.S. Retail, including TD Bank, America's Most Convenient Bank®, TD Auto Finance U.S., TD Wealth (U.S.), and an investment in TD Ameritrade; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with more than 13 million active online and mobile customers. TD had $1.4 trillion in assets on October 31, 2019. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.

SOURCE TD Bank Group

View original content: http://www.newswire.ca/en/releases/archive/December2019/05/c8804.html

Gillian Manning, Head of Investor Relations, 416-308-6014; Julie Bellissimo, Manager, Media Relations, 416-965-6050Copyright CNW Group 2019

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