TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 1
TD Bank Group Reports Second Quarter 2024 Results
Report to Shareholders
Three and six months ended April 30, 2024
The financial information in this document is reported in Canadian dollars and is based on the Bank’s unaudited Interim Consolidated Financial Statements and
related Notes prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB),
unless otherwise noted. Certain comparative amounts have been revised to conform with the presentation adopted in the current period.
Reported results conform with generally accepted accounting principles (GAAP), in accordance with IFRS. Adjusted measures are non-GAAP financial
measures. For additional information about the Bank’s use of non-GAAP financial measures, refer to “Significant Events” and “Non-GAAP and Other Financial
Measures” in the “How We Performed” section of this document.
SECOND QUARTER FINANCIAL HIGHLIGHTS, compared with the second quarter last year:
●
Reported diluted earnings per share were $1.35, compared with $1.69.
●
Adjusted diluted earnings per share were $2.04, compared with $1.91.
●
Reported net income was $2,564 million, compared with $3,306 million.
●
Adjusted net income was $3,789 million, compared with $3,707 million.
YEAR-TO-DATE FINANCIAL HIGHLIGHTS, six months ended April 30, 2024, compared with the corresponding period last year:
●
Reported diluted earnings per share were $2.89, compared with $2.52.
●
Adjusted diluted earnings per share were $4.04, compared with $4.14.
●
Reported net income was $5,388 million, compared with $4,887 million.
●
Adjusted net income was $7,426 million, compared with $7,861 million.
SECOND QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The second quarter reported earnings figures included the following items of note:
●
Amortization of acquired intangibles of $72 million ($62 million after-tax or 4 cents per share), compared with $79 million ($67 million after-tax or
3 cents per share) in the second quarter last year.
●
Acquisition and integration charges related to the Schwab transaction of $21 million ($16 million after-tax or 1 cent per share), compared with
$30 million ($26 million after-tax or 1 cent per share) in the second quarter last year.
●
Restructuring charges of $165 million ($122 million after-tax or 7 cents per share).
●
Acquisition and integration charges related to the Cowen acquisition of $102 million ($80 million after-tax or 4 cents per share), compared with
$73 million ($63 million after-tax or 4 cents per share) in the second quarter last year.
●
Impact from the terminated FHN acquisition-related capital hedging strategy of $64 million ($48 million after-tax or 3 cents per share), compared with
$134 million ($101 million after-tax or 6 cents per share) in the second quarter last year.
●
Civil matter provision/Litigation settlement of $274 million ($205 million after-tax or 11 cents per share), compared with $39 million ($28 million after-
tax or 2 cents per share) in the second quarter last year.
●
FDIC special assessment of $103 million ($77 million after-tax or 4 cents per share).
●
Provision for investigations related to the Bank’s AML program of $615 million ($615 million after-tax or 35 cents per share).
TORONTO
, May 23, 2024 – TD Bank Group (“TD” or the “Bank”) today announced its financial results for the second quarter ended April 30, 2024. Reported
earnings were $2.6 billion, down 22% compared with the second quarter last year, and adjusted earnings were $3.8 billion, up 2%.
“TD delivered strong second quarter results, with earnings of $3.8 billion and solid momentum across our franchise. We delivered significant positive operating
leverage while continuing to invest in our business, including our risk and control infrastructure,” said Bharat Masrani, Group President and Chief Executive Officer,
TD Bank Group.
Canadian Personal and Commercial Banking delivered a strong quarter driven by continued volume growth and positive operating leverage
Canadian Personal and Commercial Banking net income was $1,739 million, an increase of 7% compared to the second quarter last year. The increase reflects
revenue growth, partially offset by higher provisions for credit losses and non-interest expenses. Revenue was $4,839 million, an increase of 10%, driven by
volume growth and margin expansion.
Canadian Personal and Commercial Banking continued to build momentum, delivering another strong quarter for New to Canada account openings. TD increased
its support for international students with an agreement with HDFC, India’s leading private sector bank, to help attract new customers with a simplified banking
experience. The Bank also established a new collaboration with ApplyBoard, a Canadian educational organization that helps international students prepare their
finances to study in Canada. In addition, TD Auto Finance was ranked #1 in Dealer Satisfaction with Non-Prime and Prime Credit Non-Captive Automotive
Financing Lenders, according to the J.D. Power 2024 Canada Dealer Financing Satisfaction Study
1
.
The U.S. Retail Bank delivered operating momentum with sequential earnings and loan growth in a challenging environment
U.S. Retail reported net income was $580 million (US$433 million), a decrease of 59% (58% in U.S. dollars) compared with the second quarter last year. On an
adjusted basis, net income was $1,272 million, a decline of 16% (17% in U.S. dollars). TD Bank’s investment in The Charles Schwab Corporation (“Schwab”)
contributed $183 million in earnings, a decrease of 27% (26% in U.S. dollars) compared with the second quarter last year.
The U.S. Retail Bank, which excludes the Bank’s investment in Schwab, reported net income of $397 million (US$297 million), a decrease of 66% (65% in U.S.
dollars) from the second quarter last year, primarily reflecting provisions for investigations related to the Bank’s anti-money laundering program and the Federal
Deposit Insurance Corporation (FDIC) Special Assessment, partially offset by acquisition and integration-related charges for the terminated First Horizon
1
which measure Canadian auto dealers’ satisfaction with their auto finance providers. Visit jdpower.com/awards for more details.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 2
transaction in the second quarter last year. On an adjusted basis net income was $1,089 million (US$803 million), a decrease of 14% (15% in U.S. dollars) from
the second quarter last year, primarily reflecting higher PCL and lower revenue.
The U.S. Retail Bank continued to deliver loan growth while maintaining its through-the-cycle underwriting standards, with total average loan balances up 7%
compared with the second quarter last year and up 1% from last quarter. Excluding sweep deposits, total personal and business deposit average balances were
down 1% year-over-year, reflecting competitive market conditions, while quarter-over-quarter, personal and business deposit average balances were flat. Overall,
the U.S. Retail Bank delivered balance sheet stability in a challenging environment.
During the quarter, TD Bank, America’s Most Convenient Bank® (TD AMCB) launched TD Complete Checking and TD Early Pay, offering customers more flexible
banking options, including earlier access to eligible direct deposits. TD AMCB surpassed five million active mobile customers while continuing to deliver new
features and capabilities that enhance the customer experience. TD AMCB was ranked 9
th
America’s Best Employers for Diversity 2024, leading
its peers as the highest ranked financial institution.
Wealth Management and Insurance results reflect strong business momentum
Wealth Management and Insurance net income was $621 million, an increase of 19% compared with the second quarter last year, as positive top-line momentum
was partially offset by higher insurance service expenses. This quarter’s revenue growth of 11% reflects insurance premium growth, and higher fee-based and
transaction revenue in the Wealth Management business.
Wealth Management and Insurance continued to invest in client-centric innovation this quarter. TD Direct Investing completed its migration of most active traders
to the new TD Active Trader platform and TD Wealth Advice continued to gain market share as it grows its advisor network
2
. TD Asset Management launched
seven new actively managed fixed income ETFs, showcasing the value of its proprietary independent credit research capabilities, and offering investors the
potential to earn a high rate of interest income. In TD Insurance, Small Business Insurance expanded its national reach to new customer segments including
business professionals, healthcare, retail, small manufacturing, and hospitality.
Wholesale Banking delivered record revenue reflecting broad-based growth across the business
Wholesale Banking reported net income for the quarter was $361 million, an increase of $211 million compared with the second quarter last year, reflecting higher
revenues, partially offset by higher non-interest expenses. On an adjusted basis, net income was $441 million, an increase of $228 million, or 107%. Revenue for
the quarter was $1,940 million, an increase of $523 million, or 37%, compared with the second quarter last year, reflecting higher trading-related revenue,
underwriting fees, and lending revenue.
On April 1, TD Securities and TD Cowen achieved an important milestone with the implementation of a unified Investment Banking, Capital Markets and Research
platform, integrating coverage models and streamlining delivery of capabilities for clients.
Enhancements to TD’s anti-money laundering (AML) program
The Bank has been cooperating with U.S. regulators and authorities in good faith for many months and is working diligently to bring these investigations to
resolution so that investors can have more clarity. A comprehensive overhaul of TD's U.S. AML program is well underway, and will strengthen our program
globally.
Capital
TD’s Common Equity Tier 1 Capital ratio was 13.4%.
Conclusion
“Our businesses in Canada, the United States and across the globe are well-positioned to continue to meet the needs of our nearly 28 million customers and
clients. I would like to thank our 95,000 TD bankers for everything they do to deliver for all of our stakeholders,” added Masrani.
The foregoing contains forward-looking statements. Please refer to the “Caution Regarding Forward-Looking Statements” on page 4.
2
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 3
ENHANCED DISCLOSURE TASK FORCE
The Enhanced Disclosure Task Force (EDTF) was established by the Financial Stability Board in 2012 to identify fundamental disclosure principles,
recommendations and leading practices to enhance risk disclosures of banks. The index below includes the recommendations (as published by the EDTF) and
lists the location of the related EDTF disclosures presented in the second quarter 2024 Report to Shareholders (RTS), Supplemental Financial Information (SFI),
or Supplemental Regulatory Disclosures (SRD). Information on TD’s website, SFI, and SRD is not and should not be considered incorporated herein by reference
into the second quarter 2024 RTS, Management’s Discussion and Analysis, or the Interim Consolidated Financial Statements. Certain disclosure references have
been made to the Bank’s 2023 Annual Report.
Type of
Risk
Topic
EDTF Disclosure
Page
RTS
Second
Quarter
2024
SFI
Second
Quarter
2024
SRD
Second
Quarter
2024
Annual Report
2023
General
1
Present all related risk information together in any particular report.
Refer to below for location of disclosures
2
The bank’s risk terminology and risk measures and present key parameter
values used.
83-88, 92, 97,
99-101, 112-114
3
Describe and discuss top and emerging risks.
76-82
4
Outline plans to meet each new key regulatory ratio once applicable rules
are finalized.
28, 41
72, 109
Risk
Governance
and Risk
Management
and
Business
Model
5
Summarize the bank’s risk management organization, processes, and key
functions.
84-87
6
Description of the bank’s risk culture and procedures applied to support the
culture.
83-84
7
Description of key risks that arise from the bank’s business models and
activities.
71, 83, 88-116
8
Description of stress testing within the bank’s risk governance and capital
frameworks.
70, 87, 95, 112
Capital
Adequacy
and Risk
Weighted
Assets
9
Pillar 1 capital requirements and the impact for global systemically important
banks.
26-28, 80
1-3, 6
67-69, 73,
219
10
Composition of capital and reconciliation of accounting balance sheet to the
regulatory balance sheet.
1-3, 5
67
11
Flow statement of the movements in regulatory capital.
4
12
Discussion of capital planning within a more general discussion of
management’s strategic planning.
68-70, 112
13
Analysis of how risk-weighted asset (RWA) relate to business activities and
related risks.
9-13
70-71
14
Analysis of capital requirements for each method used for calculating RWA.
13
89-92, 94-95
15
Tabulate credit risk in the banking book for Basel asset classes and major
portfolios.
35-52, 60-64
16
Flow statement reconciling the movements of RWA by risk type.
17-18
17
Discussion of Basel III back-testing requirements.
78
91, 95, 99
Liquidity
18
The bank’s management of liquidity needs and liquidity reserves.
33-35, 37-38
101-103,
105-106
Funding
19
Encumbered and unencumbered assets in a table by balance sheet
category.
36
104, 214
20
Tabulate consolidated total assets, liabilities and off-balance sheet
commitments by remaining contractual maturity at the balance sheet date.
41-43
109-111
21
Discussion of the bank’s funding sources and the bank’s funding strategy.
36-41
106-109
Market Risk
22
Linkage of market risk measures for trading and non-trading portfolio and
balance sheet.
30
93
23
Breakdown of significant trading and non-trading market risk factors.
30, 32
93, 96-97
24
Significant market risk measurement model limitations and validation
procedures.
31
94-97, 99
25
Primary risk management techniques beyond reported risk measures and
parameters.
31
94-97
Credit Risk
26
Provide information that facilitates users’ understanding of the bank’s credit
risk profile, including any significant credit risk concentrations.
23-26, 61-69
21-36
1-5, 13, 17,
19-78
54-66, 88-92,
171-178, 187,
190-191,
217-218
27
Description of the bank’s policies for identifying impaired loans.
69
62, 147-148,
154, 177
28
Reconciliation of the opening and closing balances of impaired loans in the
period and the allowance for loan losses.
24, 64-68
25, 29
60, 174-176
29
Analysis of the bank’s counterparty credit risks that arise from derivative
transactions.
53-54, 66-69
91, 159,
181-183, 187,
190-191
30
Discussion of credit risk mitigation, including collateral held for all sources of
credit risk.
91, 151, 159
Other Risks
31
Description of ‘other risk’ types based on management’s classifications and
discuss how each one is identified, governed, measured, and managed.
97-100, 112-116
32
Discuss publicly known risk events related to other risks.
78
81-82, 212-213,
221
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 4
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
4
Caution Regarding Forward-Looking Statements
45
Changes in Internal Control over Financial Reporting
5
Financial Highlights
46
Glossary
6
Significant Events
6
How We Performed
10
Financial Results Overview
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
14
How Our Businesses Performed
49
Interim Consolidated Balance Sheet
21
Quarterly Results
50
Interim Consolidated Statement of Income
22
Balance Sheet Review
51
Interim Consolidated Statement of Comprehensive Income
23
Credit Portfolio Quality
52
Interim Consolidated Statement of Changes in Equity
26
Capital Position
53
Interim Consolidated Statement of Cash Flows
29
Managing Risk
54
Notes to Interim Consolidated Financial Statements
44
Securitization and Off-Balance Sheet Arrangements
44
Accounting Policies and Estimates
81
SHAREHOLDER AND INVESTOR INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE
This MD&A is presented to enable readers to assess material changes in the financial condition and operating results of TD Bank Group (“TD” or the “Bank”) for
the three and six months ended April 30, 2024, compared with the corresponding periods shown. This MD&A should be read in conjunction with the Bank’s
unaudited Interim Consolidated Financial Statements and related Notes included in this Report to Shareholders and with the 2023 Consolidated Financial
Statements and related Notes and 2023 MD&A. This MD&A is dated May 22, 2024. Unless otherwise indicated, all amounts are expressed in Canadian dollars
and have been primarily derived from the Bank’s 2023 Consolidated Financial Statements and related Notes or Interim Consolidated Financial Statements and
related Notes, prepared in accordance with IFRS as issued by the IASB. Note that certain comparative amounts have been revised to conform with the
presentation adopted in the current period. Additional information relating to the Bank, including the Bank’s 2023 Annual Information Form, is available on the
Bank’s website at http://www.td.com as well as on SEDAR+ at http://www.sedarplus.ca and on the SEC’s website at http://www.sec.gov (EDGAR filers section).
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 (“2023 MD&A”) in the Bank’s 2023 Annual Report under the heading “Economic Summary and Outlook”, under the headings
“Key Priorities for 2024” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale
Banking segments, and under the heading “2023 Accomplishments and Focus for 2024” for the Corporate segment, and in other statements regarding the Bank’s objectives and priorities
for 2024 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
can be identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “outlook”, “plan”, “possible”, “potential”, “predict”, “project”, “should”,
“target”, “will”, and “would” and similar expressions or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.
By their very nature, these forward-looking statements require the Bank to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in light of
the uncertainty related to the physical, financial, economic, political, and regulatory environments, such risks and uncertainties – many of which are beyond the Bank’s control and the
effects of which can be difficult to predict – may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Risk factors that could cause,
individually or in the aggregate, such differences include: strategic, credit, market (including equity, commodity, foreign exchange, interest rate, and credit spreads), operational (including
technology, cyber security, and infrastructure), model, insurance, liquidity, capital adequacy, legal, regulatory compliance and conduct, reputational, environmental and social, and other
risks. Examples of such risk factors include general business and economic conditions in the regions in which the Bank operat es; geopolitical risk; inflation, rising rates and recession;
regulatory oversight and compliance risk; the ability of the Bank to execute on long-term strategies, shorter-term key strategic priorities, including the successful completion of acquisitions
and dispositions and integration of acquisitions, the ability of the Bank to achieve its financial or strategic objectives with respect to its investments, business retention plans, and other
strategic plans; technology and cyber security risk (including cyber-attacks, data security breaches or technology failures) on the Bank’s technologies, systems and networks, those of the
Bank’s customers (including their own devices), and third parties providing services to the Bank; model risk; fraud activity; insider risk; the failure of third parties to comply with their
obligations to the Bank or its affiliates, including relating to the care and control of information, and other risks arising from the Bank’s use of third parties; the impact of new and changes to,
or application of, current laws, rules and regulations, including without limitation tax laws, capital guidelines and liquidity regulatory guidance; increased competition from incumbents and
new entrants (including Fintechs and big technology competitors); shifts in consumer attitudes and disruptive technology; environmental and social risk (including climate change);
exposure related to significant litigation and regulatory matters; ability of the Bank to attract, develop, and retain key talent; changes to the Bank’s credit ratings; changes in foreign
exchange rates, interest rates, credit spreads and equity prices; the interconnectivity of Financial Institutions including existing and potential international debt crises; 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; the economic, financial, and other impacts of pandemics; 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 2023 MD&A, as may be updated in subsequently filed quarterly reports to shareholders and news
releases (as applicable) related to any events or transactions discussed under the heading “Significant Events” in the relevant MD&A, which applicable releases may be found on
www.td.com. All such factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, should be considered carefully when making
decisions with respect to the Bank. The Bank cautions readers not to place undue reliance on the Bank’s forward-looking statements.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2023 MD&A under the heading “Economic Summary and Outlook”,
under the headings “Key Priorities for 2024” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and
Insurance, and Wholesale Banking segments, and under the heading “2023 Accomplishments and Focus for 2024” for the Corporate segment, each as may be updated in subsequently
filed quarterly reports to shareholders.
Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s
shareholders and analysts in understanding the Bank’s financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates
presented, and may not be appropriate for other purposes. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to
time by or on its behalf, except as required under applicable law.
This document was reviewed by the Bank’s Audit Committee and was approved by the Bank’s Board of Directors, on the Audit Committee’s recommendation, prior to its release.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 5
TABLE 1: FINANCIAL HIGHLIGHTS
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Results of operations
Total revenue – reported
1
$
13,819
$
13,714
$
12,397
$
27,533
$
24,598
Total revenue – adjusted
1,2
13,883
13,771
12,570
27,654
25,647
Provision for (recovery of) credit losses
1,071
1,001
599
2,072
1,289
Insurance service expenses (ISE)
1
1,248
1,366
1,118
2,614
2,282
Non-interest expenses – reported
1
8,401
8,030
6,756
16,431
14,868
Non-interest expenses – adjusted
1,2
7,084
7,125
6,462
14,209
12,799
Net income – reported
1
2,564
2,824
3,306
5,388
4,887
Net income – adjusted
1,2
3,789
3,637
3,707
7,426
7,861
Financial position
(billions of Canadian dollars)
Total loans net of allowance for loan losses
$
928.1
$
904.3
$
849.6
$
928.1
$
849.6
Total assets
1,966.7
1,910.9
1,924.8
1,966.7
1,924.8
Total deposits
1,203.8
1,181.3
1,189.4
1,203.8
1,189.4
Total equity
112.0
112.4
116.2
112.0
116.2
Total risk-weighted assets
3
602.8
579.4
549.4
602.8
549.4
Financial ratios
Return on common equity (ROE) – reported
1,4
9.5
%
10.9
%
12.4
%
10.2
%
9.1
%
Return on common equity – adjusted
1,2
14.5
14.1
14.0
14.3
15.0
Return on tangible common equity (ROTCE)
1,2,4
13.0
14.9
16.5
13.9
12.3
Return on tangible common equity – adjusted
1,2
19.2
18.7
18.3
18.9
19.7
Efficiency ratio – reported
1,4
60.8
58.6
54.5
59.7
60.4
Efficiency ratio – adjusted, net of ISE
1,2,4,5
56.1
57.4
56.4
56.7
54.8
Provision for (recovery of) credit losses as a % of net
average loans and acceptances
0.47
0.44
0.28
0.45
0.30
Common share information – reported
(Canadian dollars)
Per share earnings
1
Basic
$
1.35
$
1.55
$
1.69
$
2.90
$
2.52
Diluted
1.35
1.55
1.69
2.89
2.52
Dividends per share
1.02
1.02
0.96
2.04
1.92
Book value per share
4
57.69
57.34
57.08
57.69
57.08
Closing share price
6
81.67
81.67
82.07
81.67
82.07
Shares outstanding (millions)
Average basic
1,762.8
1,776.7
1,828.3
1,769.8
1,824.4
Average diluted
1,764.1
1,778.2
1,830.3
1,771.2
1,826.6
End of period
1,759.3
1,772.1
1,838.5
1,759.3
1,838.5
Market capitalization (billions of Canadian dollars)
$
143.7
$
144.7
$
150.9
$
143.7
$
150.9
Dividend yield
4
5.1
%
4.9
%
4.5
%
5.0
%
4.4
%
Dividend payout ratio
4
75.6
65.7
56.7
70.3
76.2
Price-earnings ratio
1,4
13.8
13.1
10.4
13.8
10.4
Total shareholder return (1 year)
4
4.5
(6.9)
(7.5)
4.5
(7.5)
Common share information – adjusted
(Canadian dollars)
1,2
Per share earnings
1
Basic
$
2.04
$
2.01
$
1.91
$
4.05
$
4.15
Diluted
2.04
2.00
1.91
4.04
4.14
Dividend payout ratio
49.9
%
50.7
%
50.2
%
50.3
%
46.2
%
Price-earnings ratio
1
10.5
10.6
9.8
10.5
9.8
Capital ratios
3
Common Equity Tier 1 Capital ratio
13.4
%
13.9
%
15.3
%
13.4
%
15.3
%
Tier 1 Capital ratio
15.1
15.7
17.3
15.1
17.3
Total Capital ratio
17.1
17.6
19.7
17.1
19.7
Leverage ratio
4.3
4.4
4.6
4.3
4.6
TLAC ratio
30.6
30.8
34.2
30.6
34.2
TLAC Leverage ratio
8.7
8.6
9.0
8.7
9.0
1
Insurance Contracts
quarter 2024 Interim Consolidated Financial Statements for further details.
2
accordance with IFRS as the “reported” results. The Bank also utilizes non-GAAP financial measures such as “adjusted” results and non-GAAP ratios to assess each of its businesses
and to measure overall Bank performance. To arrive at adjusted results, the Bank adjusts reported results for “items of note”. Refer to “Significant Events” and “How We Performed”
sections of this document for further explanation, a list of the items of note, and a reconciliation of adjusted to reported results. Non-GAAP financial measures and ratios used in this
document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers.
3
(CAR), Leverage Requirements (LR), and Total Loss Absorbing Capacity (TLAC) guidelines. Refer to the “Capital Position” section of this document for further details.
4
5
Q2 2024: $12,635 million, Q1 2024: $12,405 million, Q2 2023: $11, 452 million, 2024 YTD: $25,040 million, 2023 YTD: $23,365 million. Effective the first quarter of 2024, the composition
of this non-GAAP ratio and the comparative amounts have been revised.
6
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 6
SIGNIFICANT EVENTS
a) Provision for Investigations Related to the Bank’s AML Program
In the second quarter of 2024, the Bank recorded an initial provision of $615 million (US$450 million) in connection with discussions with one of its U.S. regulators,
related to previously disclosed regulatory and law enforcement investigations of the Bank’s U.S.
Bank Secrecy Act
For further details, refer to Note 19 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements.
b)
Restructuring Charges
The Bank continued to undertake certain measures in the second quarter of 2024 to reduce its cost base and achieve greater efficiency. In connection with these
measures, the Bank incurred $165 million of restructuring charges which primarily relate to employee severance and other personnel-related costs and real estate
optimization. Next quarter, we expect to incur additional restructuring charges of approximately $50 million, and to conclude our restructuring program.
c) Federal Deposit Insurance Corporation Special Assessment
On November 16, 2023, the FDIC announced a final rule that implements a special assessment to recover the losses to the Deposit Insurance Fund arising from
the protection of uninsured depositors during the U.S. bank failures in the spring of 2023. The special assessment resulted in the recognition of $411 million
(US$300 million) pre-tax in non-interest expenses in the first quarter of the Bank’s fiscal 2024.
On February 23, 2024, the FDIC notified all institutions subject to the special assessment that its estimate of total losses has increased compared to the amount
communicated with the final rule in November 2023. Accordingly, the Bank recognized an additional expense for the special assessment of $103 million
(US$75 million)
in the second quarter of the Bank’s fiscal 2024. The final amount of the Bank’s special assessment may be further updated as the FDIC
determines the actual losses to the Deposit Insurance Fund. The FDIC plans to provide institutions subject to the special assessment with an updated estimate
with its first quarter 2024 special assessment invoice, to be released in June 2024.
HOW WE PERFORMED
CORPORATE OVERVIEW
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (“TD” or the “Bank”). TD is the sixth largest bank in North America by
assets and serves more than 27.5 million customers in four key businesses operating in a number of locations in financial centres around the globe: Canadian
Personal and Commercial Banking, including TD Canada Trust and TD Auto Finance Canada; U.S. Retail, including TD Bank, America’s Most Convenient Bank
®
,
TD Auto Finance U.S., TD Wealth (U.S.), and an investment in The Charles Schwab Corporation; Wealth Management and Insurance, including TD Wealth
(Canada), TD Direct Investing, and TD Insurance; and Wholesale Banking, including TD Securities and TD Cowen. TD also ranks among the world’s leading
online financial services firms, with more than 17 million active online and mobile customers. TD had $1.97 trillion in assets on April 30, 2024. The Toronto-
Dominion Bank trades under the symbol “TD” on the Toronto and New York Stock Exchanges.
HOW THE BANK REPORTS
The Bank prepares its Interim Consolidated Financial Statements in accordance with IFRS and refers to results prepared in accordance with IFRS as “reported”
results.
Non-GAAP and Other Financial Measures
In addition to reported results, the Bank also presents certain financial measures, including non-GAAP financial measures that are historical, non-GAAP ratios,
supplementary financial measures and capital management measures, to assess its results. Non-GAAP financial measures, such as “adjusted” results, are utilized
to assess the Bank’s businesses and to measure the Bank’s overall performance. To arrive at adjusted results, the Bank adjusts for “items of note” from reported
results. Items of note are items which management does not believe are indicative of underlying business performance and are disclosed in Table 3. Non-GAAP
ratios include a non-GAAP financial measure as one or more of its components. Examples of non-GAAP ratios include adjusted basic and diluted earnings per
share (EPS), adjusted dividend payout ratio, adjusted efficiency ratio, net of ISE, and adjusted effective income tax rate. The Bank believes that non-GAAP
financial measures and non-GAAP ratios provide the reader with a better understanding of how management views the Bank’s performance. Non-GAAP financial
measures and non-GAAP ratios used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other
issuers. Supplementary financial measures depict the Bank’s financial performance and position, and capital management measures depict the Bank’s capital
position, and both are explained in this document where they first appear.
U.S. Strategic Cards
The Bank’s U.S. strategic cards portfolio is comprised of agreements with certain U.S. retailers pursuant to which TD is the U.S. issuer of private label and co-
branded consumer credit cards to their U.S. customers. Under the terms of the individual agreements, the Bank and the retailers share in the profits generated by
the relevant portfolios after credit losses. Under IFRS, TD is required to present the gross amount of revenue and PCL related to these portfolios in the Bank’s
Interim Consolidated Statement of Income. At the segment level, the retailer program partners’ share of revenues and credit losses is presented in the Corporate
segment, with an offsetting amount (representing the partners’ net share) recorded in Non-interest expenses, resulting in no impact to Corporate’s reported net
income (loss). The net income (loss) included in the U.S. Retail segment includes only the portion of revenue and credit losses attributable to TD under the
agreements.
Investment in The Charles Schwab Corporation and IDA Agreement
On October 6, 2020, the Bank acquired an approximately 13.5% stake in The Charles Schwab Corporation (“Schwab”) following the completion of Schwab’s
acquisition of TD Ameritrade Holding Corporation (“TD Ameritrade”) of which the Bank was a major shareholder (the “Schwab transaction”). On August 1, 2022,
the Bank sold 28.4 million non-voting common shares of Schwab, at a price of US$66.53 per share for proceeds of $2.5 billion (US$1.9 billion), which reduced the
Bank’s ownership interest in Schwab to approximately 12.0%.
The Bank accounts for its investment in Schwab using the equity method. The U.S. Retail segment reflects the Bank’s share of net income from its investment
in Schwab. The Corporate segment net income (loss) includes amounts for amortization of acquired intangibles, the acquisition and integration charges related to
the Schwab transaction, and the Bank’s share of restructuring and other charges incurred by Schwab. The Bank’s share of Schwab’s earnings available to
common shareholders is reported with a one-month lag. For further details, refer to Note 7 of the Bank’s second quarter 2024 Interim Consolidated Financial
Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 7
On November 25, 2019, the Bank and Schwab signed an insured deposit account agreement (the “2019 Schwab IDA Agreement”), with an initial expiration
date of July 1, 2031. Under the 2019 Schwab IDA Agreement, starting July 1, 2021, Schwab had the option to reduce the deposits by up to US$10 billion per year
(subject to certain limitations and adjustments), with a floor of US$50 billion. In addition, Schwab requested some further operational flexibility to allow for the
sweep deposit balances to fluctuate over time, under certain conditions and subject to certain limitations.
On May 4, 2023, the Bank and Schwab entered into an amended insured deposit account agreement (the “2023 Schwab IDA Agreement”), which replaced the
2019 Schwab IDA Agreement. Pursuant to the 2023 Schwab IDA Agreement, the Bank continues to make sweep deposit accounts available to clients of Schwab.
Schwab designates a portion of the deposits with the Bank as fixed-rate obligation amounts (FROA). Remaining deposits over FROA are designated as floating-
rate obligations. In comparison to the 2019 Schwab IDA Agreement, the 2023 Schwab IDA Agreement extends the initial expiration date by three years to
July 1, 2034 and provides for lower deposit balances in its first six years, followed by higher balances in the later years. Specifically, until September 2025, the
aggregate FROA will serve as the floor. Thereafter, the floor will be set at US$60 billion. In addition, Schwab has the option to buy down up to $6.8 billion
(US$5 billion) of FROA by paying the Bank certain fees in accordance with the 2023 Schwab IDA Agreement, subject to certain limits. Refer to the “Related Party
Transactions” section in the 2023 MD&A for further details.
During the first quarter of 2024, Schwab exercised its option to buy down the remaining $0.7 billion (US$0.5 billion) of the US$5 billion FROA buydown
allowance and paid $32 million (US$23 million) in termination fees to the Bank in accordance with the 2023 Schwab IDA Agreement. By the end of the first quarter
of 2024, Schwab had completed its buy down of the full US$5 billion FROA buydown allowance and had paid a total of $337 million (US$250 million) in termination
fees to the Bank. The fees were intended to compensate the Bank for losses incurred from discontinuing certain hedging relationships and for lost revenues. The
net impact was recorded in net interest income.
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 six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Net interest income
$
7,465
$
7,488
$
7,428
$
14,953
$
15,161
Non-interest income
1
6,354
6,226
4,969
12,580
9,437
Total revenue
1
13,819
13,714
12,397
27,533
24,598
Provision for (recovery of) credit losses
1,071
1,001
599
2,072
1,289
Insurance service expenses
1
1,248
1,366
1,118
2,614
2,282
Non-interest expenses
1
8,401
8,030
6,756
16,431
14,868
Income before income taxes and share of net income from
investment in Schwab
1
3,099
3,317
3,924
6,416
6,159
Provision for (recovery of) income taxes
1
729
634
859
1,363
1,798
Share of net income from investment in Schwab
194
141
241
335
526
Net income – reported
1
2,564
2,824
3,306
5,388
4,887
Preferred dividends and distributions on other equity instruments
190
74
210
264
293
Net income available to common shareholders
1
$
2,374
$
2,750
$
3,096
$
5,124
$
4,594
1
Consolidated Financial Statements for further details.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 8
The following table provides a reconciliation between the Bank’s adjusted and reported results. For further details refer to the “Significant Events” or “How We
Performed” sections.
TABLE 3: NON-GAAP FINANCIAL MEASURES – Reconciliation of Adjusted to Reported Net Income
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Operating results – adjusted
Net interest income
1
$
7,529
$
7,545
$
7,610
$
15,074
$
15,472
Non-interest income
1,2,3
6,354
6,226
4,960
12,580
10,175
Total revenue
2
13,883
13,771
12,570
27,654
25,647
Provision for (recovery of) credit losses
1,071
1,001
599
2,072
1,289
Insurance service expenses
2
1,248
1,366
1,118
2,614
2,282
Non-interest expenses
2,4
7,084
7,125
6,462
14,209
12,799
Income before income taxes and share of net income from
investment in Schwab
4,480
4,279
4,391
8,759
9,277
Provision for income taxes
920
872
967
1,792
2,027
Share of net income from investment in Schwab
5
229
230
283
459
611
Net income – adjusted
2
3,789
3,637
3,707
7,426
7,861
Preferred dividends and distributions on other equity instruments
190
74
210
264
293
Net income available to common shareholders – adjusted
3,599
3,563
3,497
7,162
7,568
Pre-tax adjustments for items of note
Amortization of acquired intangibles
6
(72)
(94)
(79)
(166)
(133)
Acquisition and integration charges related to the Schwab transaction
4,5
(21)
(32)
(30)
(53)
(64)
Share of restructuring and other charges from investment in Schwab
5
–
(49)
–
(49)
–
Restructuring charges
4
(165)
(291)
–
(456)
–
Acquisition and integration-related charges
4
(102)
(117)
(73)
(219)
(94)
Charges related to the terminated First Horizon (FHN) acquisition
4
–
–
(154)
–
(260)
Impact from the terminated FHN acquisition-related
capital hedging strategy
1
(64)
(57)
(134)
(121)
(1,010)
Civil matter provision/Litigation settlement
4
(274)
–
(39)
(274)
(1,642)
FDIC special assessment
4
(103)
(411)
–
(514)
–
Provision for investigations related to the Bank’s AML program
4
(615)
–
–
(615)
–
Less: Impact of income taxes
Amortization of acquired intangibles
(10)
(15)
(12)
(25)
(20)
Acquisition and integration charges related to the Schwab transaction
(5)
(6)
(4)
(11)
(10)
Restructuring charges
(43)
(78)
–
(121)
–
Acquisition and integration-related charges
(22)
(24)
(10)
(46)
(15)
Charges related to the terminated FHN acquisition
–
–
(38)
–
(64)
Impact from the terminated FHN acquisition-related
capital hedging strategy
(16)
(14)
(33)
(30)
(249)
Civil matter provision/Litigation settlement
(69)
–
(11)
(69)
(456)
FDIC special assessment
(26)
(101)
–
(127)
–
Canada Recovery Dividend (CRD) and federal tax rate
increase for fiscal 2022
7
–
–
–
–
585
Total adjustments for items of note
(1,225)
(813)
(401)
(2,038)
(2,974)
Net income available to common shareholders – reported
$
2,374
$
2,750
$
3,096
$
5,124
$
4,594
1
to-market gains (losses) on interest rate swaps recorded in non-interest income – Q2 2023: ($263) million, Q1 2023: ($998) million, ii) basis adjustment amortization related to de-
designated fair value hedge accounting relationships, recorded in net interest income – Q2 2023: $129 million, Q1 2023: $122 million, and iii) interest income (expense) recognized on the
interest rate swaps, reclassified from non-interest income to net interest income with no impact to total adjusted net income – Q2 2023: $311 million, Q1 2023: $251 million. After the
termination of the merger agreement, the residual impact of the strategy is reversed through net interest income – Q2 2024: ($64) million, Q1 2024: ($57) million.
2
Consolidated Financial Statements for further details.
3
i. Stanford litigation settlement – Q2 2023: $39 million. This reflects the foreign exchange loss and is reported in the Corporate segment.
4
i. Amortization of acquired intangibles – Q2 2024: $42 million, Q1 2024: $63 million, Q2 2023: $49 million, Q1 2023: $24 million, reported in the Corporate segment;
ii. The Bank’s own integration and acquisition costs related to the Schwab transaction – Q2 2024: $16 million, Q1 2024: $23 million, Q2 2023: $18 million, Q1 2023: $21 million , reported
in the Corporate segment;
iii. Restructuring charges – Q2 2024: $165 million, Q1 2024: $291 million, reported in the Corporate segment;
iv. Acquisition and integration-related charges – Q2 2024: $102 million, Q1 2024: $117 million, Q2 2023: $73 million, Q1 2023: $21 million, reported in the Wholesale Banking segment;
v. Charges related to the terminated FHN acquisition – Q2 2023: $154 million, Q1 2023: $106 million, reported in the U.S. Retail segment;
vi. Civil matter provision/Litigation settlement – Q2 2024: $274 million in respect of a civil matter, Q1 2023: $1,603 million in respect of the Stanford litigation settlement, reported in the
Corporate segment;
vii. FDIC special assessment – Q2 2024: $103 million, Q1 2024: $411 million, reported in the U.S. Retail segment; and
viii. Provision for investigations related to the Bank’s AML program – Q2 2024: $615 million, reported in the U.S. Retail segment.
5
segment:
i. Amortization of Schwab-related acquired intangibles – Q2 2024: $30 million, Q1 2024: $31 million, Q2 2023: $30 million, Q1 2023: $30 million;
ii. The Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade – Q2 2024: $5 million, Q1 2024: $9 million, Q2 2023: $12 million,
Q1 2023: $13 million;
iii. The Bank’s share of restructuring charges incurred by Schwab – Q1 2024: $27 million; and
iv. The Bank’s share of the FDIC special assessment charge incurred by Schwab – Q1 2024: $22 million.
6
Amortization of acquired intangibles relates to intangibles acquired as a result of asset acquisitions and business combinations, including the after-tax amounts for amortization of
acquired intangibles relating to the Share of net income from investment in Schwab, reported in the Corporate segment. Refer to footnotes 4 and 5 for amounts.
7
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 9
TABLE 4: RECONCILIATION OF REPORTED TO ADJUSTED EARNINGS PER SHARE
1
(Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Basic earnings per share – reported
2
$
1.35
$
1.55
$
1.69
$
2.90
$
2.52
Adjustments for items of note
0.69
0.45
0.22
1.15
1.63
Basic earnings per share – adjusted
2
$
2.04
$
2.01
$
1.91
$
4.05
$
4.15
Diluted earnings per share – reported
2
$
1.35
$
1.55
$
1.69
$
2.89
$
2.52
Adjustments for items of note
0.69
0.45
0.22
1.15
1.63
Diluted earnings per share – adjusted
2
$
2.04
$
2.00
$
1.91
$
4.04
$
4.14
1
rounding.
2
Consolidated Financial Statements for further details.
TABLE 5: AMORTIZATION OF INTANGIBLES, NET OF INCOME TAXES
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Schwab
1
$
30
$
31
$
30
$
61
$
60
Wholesale Banking related intangibles
27
42
27
69
34
Other
5
6
10
11
19
Included as items of note
62
79
67
141
113
Software and asset servicing rights
104
96
92
200
182
Amortization of intangibles, net of income taxes
$
166
$
175
$
159
$
341
$
295
1
Return on Common Equity
The consolidated Bank ROE is calculated as reported net income available to common shareholders as a percentage of average common equity. The
consolidated Bank adjusted ROE is calculated as adjusted net income available to common shareholders as a percentage of average common equity. Adjusted
ROE is a non-GAAP financial ratio and can be utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated as the segment net income attributable to common shareholders as a percentage of average allocated capital. The
Bank’s methodology for allocating capital to its business segments is largely aligned with the common equity capital requirements under Basel III. Capital allocated
to the business segments was increased to 11.5% Common Equity Tier 1 (CET1) Capital effective the first quarter of 2024, compared with 11% in fiscal 2023.
TABLE 6: RETURN ON COMMON EQUITY
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Average common equity
$
101,137
$
100,269
$
102,800
$
100,573
$
101,750
Net income available to common shareholders – reported
1
2,374
2,750
3,096
5,124
4,594
Items of note, net of income taxes
1,225
813
401
2,038
2,974
Net income available to common shareholders – adjusted
1
$
3,599
$
3,563
$
3,497
$
7,162
$
7,568
Return on common equity – reported
1
9.5
%
10.9
%
12.4
%
10.2
%
9.1
%
Return on common equity – adjusted
1
14.5
14.1
14.0
14.3
15.0
1
Consolidated Financial Statements for further details.
Return on Tangible Common Equity
Tangible common equity (TCE) is calculated as common shareholders’ equity less goodwill, imputed goodwill and intangibles on the investments in Schwab and
other acquired intangible assets, net of related deferred tax liabilities. ROTCE is calculated as reported net income available to common shareholders after
adjusting for the after-tax amortization of acquired intangibles, which are treated as an item of note, as a percentage of average TCE. Adjusted ROTCE is
calculated using reported net income available to common shareholders, adjusted for all items of note, as a percentage of average TCE. TCE, ROTCE, and
adjusted ROTCE can be utilized in assessing the Bank’s use of equity. TCE is a non-GAAP financial measure, and ROTCE and adjusted ROTCE are non-GAAP
ratios.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 10
TABLE 7: RETURN ON TANGIBLE COMMON EQUITY
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Average common equity
$
101,137
$
100,269
$
102,800
$
100,573
$
101,750
Average goodwill
18,380
18,208
17,835
18,322
17,713
Average imputed goodwill and intangibles on
investments in Schwab
6,051
6,056
6,142
6,062
6,163
Average other acquired intangibles
1
574
615
583
595
525
Average related deferred tax liabilities
(228)
(231)
(210)
(230)
(195)
Average tangible common equity
76,360
75,621
78,450
75,824
77,544
Net income available to common shareholders – reported
2
2,374
2,750
3,096
5,124
4,594
Amortization of acquired intangibles, net of income taxes
62
79
67
141
113
Net income available to common shareholders adjusted for
amortization of acquired intangibles, net of income taxes
2
2,436
2,829
3,163
5,265
4,707
Other items of note, net of income taxes
1,163
734
334
1,897
2,861
Net income available to common shareholders – adjusted
2
$
3,599
$
3,563
$
3,497
$
7,162
$
7,568
Return on tangible common equity
2
13.0
%
14.9
%
16.5
%
13.9
%
12.3
%
Return on tangible common equity – adjusted
2
19.2
18.7
18.3
18.9
19.7
1
2
Consolidated Financial Statements for further details.
IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
The following table reflects the estimated impact of foreign currency translation on key U.S. Retail segment income statement items. The impact is calculated as
the difference in translated earnings using the average U.S. to Canadian dollars exchange rates in the periods noted.
TABLE 8: IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30, 2024 vs.
April 30, 2024 vs.
April 30, 2023
April 30, 2023
Increase (Decrease)
Increase (Decrease)
U.S. Retail Bank
Total revenue – reported
$
8
$
17
Total revenue – adjusted
1
8
17
Non-interest expenses – reported
6
12
Non-interest expenses – adjusted
1
4
9
Net income – reported, after-tax
1
3
Net income – adjusted, after-tax
1
2
5
Share of net income from investment in Schwab
2
1
1
U.S. Retail segment net income – reported, after-tax
2
4
U.S. Retail segment net income – adjusted, after-tax
1
3
6
Earnings per share
(Canadian dollars)
Basic – reported
$
–
$
–
Basic – adjusted
1
–
–
Diluted – reported
–
–
Diluted – adjusted
1
–
–
Average foreign exchange rate (equivalent of CAD $1.00)
For the three months ended
For the six months ended
April 30
April 30
April 30
April 30
2024
2023
2024
2023
U.S. dollar
$
0.737
$
0.739
$
0.738
$
0.740
1
document.
2
FINANCIAL RESULTS OVERVIEW
Performance Summary
Outlined below is an overview of the Bank’s performance for the second quarter of 2024. Shareholder performance indicators help guide and benchmark the
Bank’s accomplishments. For the purposes of this analysis, the Bank utilizes adjusted earnings, which excludes items of note from the reported results that are
prepared in accordance with IFRS. Reported and adjusted results and items of note are explained in “Non-GAAP and Other Financial Measures” in the “How We
Performed” section of this document.
●
●
●
3
average of 7.2%.
Net Income
Quarterly comparison – Q2 2024 vs. Q2 2023
Reported net income for the quarter was $2,564 million, a decrease of $742 million, or 22%, compared with the second quarter last year, primarily reflecting the
impact of the provision for investigations related to the Bank’s AML program, higher non-interest expenses, higher PCL, impact of a civil matter provision, and
restructuring charges, partially offset by higher revenues. On an adjusted basis, net income for the quarter was $3,789 million, an increase of $82 million, or 2%.
3
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 11
By segment, the decrease in reported net income reflects decreases in U.S. Retail of $826 million and in the Corporate segment of $338 million, partially offset
by increases in Wholesale Banking of $211 million, in Canadian Personal and Commercial Banking of $114 million, and in Wealth Management and Insurance of
$97 million.
Quarterly comparison – Q2 2024 vs. Q1 2024
Reported net income for the quarter decreased $260 million, or 9%, compared with the prior quarter, primarily reflecting the impact of the provision for
investigations related to the Bank’s AML program and the impact of a civil matter provision, partially offset by a lower FDIC special assessment, lower restructuring
charges, lower insurance service expenses and higher revenues. Adjusted net income for the quarter increased $152 million, or 4%.
By segment, the decrease in reported net income reflects decreases in U.S. Retail of $327 million, in the Corporate segment of $109 million, and in Canadian
Personal and Commercial Banking of $46 million, partially offset by increases in Wholesale Banking of $156 million and in Wealth Management and Insurance of
$66 million.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Reported net income of $5,388 million increased $501 million, or 10%, compared with the same period last year. The increase reflects higher revenues and the
prior period impacts of the Stanford litigation settlement, the terminated FHN acquisition-related capital hedging strategy and the provision for income taxes in
connection with the CRD and increase in the Canadian federal tax rate for fiscal 2022, partially offset by higher non-interest expenses, the impact of the provision
for investigations related to the Bank’s AML program, higher PCL, and FDIC special assessment. Adjusted net income was $7,426 million, a decrease of
$435 million, or 6%.
By segment, the increase in reported net income reflects increases in the Corporate segment of $1,651 million, in Canadian Personal and Commercial Banking
of $170 million, in Wealth Management and Insurance of $98 million, and in Wholesale Banking of $85 million, partially offset by a decrease in U.S. Retail of
$1,503 million.
Net Interest Income
Quarterly comparison – Q2 2024 vs. Q2 2023
Reported net interest income for the quarter was $7,465 million, an increase of $37 million compared with the second quarter last year, primarily reflecting higher
volumes and margins in Canadian Personal and Commercial Banking, partially offset by lower net interest income in Wholesale Banking. On an adjusted basis,
net interest income was $7,529 million, a decrease of $81 million, or 1%.
By segment, the increase in reported net interest income reflects increases in Canadian Personal and Commercial Banking of $435 million, in the Corporate
segment of $58 million, and in Wealth Management and Insurance of $46 million, partially offset by decreases in Wholesale Banking of $309 million and in
U.S. Retail of $193 million.
Quarterly comparison – Q2 2024 vs. Q1 2024
Reported net interest income for the quarter decreased $23 million, compared with the prior quarter, primarily reflecting fewer days in the second quarter, partially
offset by higher volumes and margins in Canadian Personal and Commercial Banking. On an adjusted basis, net interest income decreased $16 million.
By segment, the decrease in reported net interest income reflects decreases in U.S. Retail of $58 million, in Canadian Personal and Commercial Banking of
$21 million, and in Wholesale Banking of $9 million, partially offset by increases in the Corporate segment of $46 million and in Wealth Management and Insurance
of $19 million.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Reported net interest income was $14,953 million, a decrease of $208 million, or 1%, compared with the same period last year, reflecting lower net interest income
in Wholesale Banking and lower volumes and margins in U.S. Retail, partially offset by higher volumes and margins in Canadian Personal and Commercial
Banking, impact from the terminated FHN acquisition-related capital hedging strategy, and higher deposit margins in Wealth Management. On an adjusted basis,
net interest income was $15,074 million, a decrease of $398 million, or 3%.
By segment, the decrease in reported net interest income reflects decreases in Wholesale Banking of $636 million and in U.S. Retail of $461 million, partially
offset by increases in Canadian Personal and Commercial Banking of $729 million, in the Corporate segment of $112 million, and in Wealth Management and
Insurance of $48 million.
Non-Interest Income
Quarterly comparison – Q2 2024 vs. Q2 2023
Reported non-interest income for the quarter was $6,354 million, an increase of $1,385 million, or 28%. For both reported and adjusted non-interest income, the
increase primarily reflected higher trading-related revenue, underwriting fees, and lending fees in Wholesale Banking, higher insurance premiums, higher fee-
based revenue commensurate with market growth and transaction revenue in Wealth Management, and higher revenue from treasury and balance sheet
management activities.
By segment, the increase in reported non-interest income reflects increases in Wholesale Banking of $832 million, in Wealth Management and Insurance of
$267 million, in the Corporate segment of $203 million, and in U.S. Retail of $83 million. Canadian Personal and Commercial Banking non-interest income was flat
compared with the second quarter last year.
Quarterly comparison – Q2 2024 vs. Q1 2024
Non-interest income for the quarter increased $128 million, or 2%, compared with the prior quarter, primarily reflecting higher underwriting and advisory fees, and
the net change in fair value of loan underwriting commitments in Wholesale Banking.
By segment, the increase in non-interest income reflects increases in Wholesale Banking of $169 million, in the Corporate segment of $21 million, and in U.S.
Retail of $2 million, partially offset by decreases in Wealth Management and Insurance of $40 million and in Canadian Personal and Commercial Banking of
$24 million.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Reported non-interest income was $12,580 million, an increase of $3,143 million, or 33%, compared with the same period last year, primarily reflecting higher
trading-related revenue, underwriting fees, lending fees, and equity commissions in Wholesale Banking, the prior period impact of the terminated FHN acquisition-
related capital hedging strategy, higher insurance premiums, higher fee-based revenue commensurate with market growth in Wealth Management, and higher
revenue from treasury and balance sheet management activities. Adjusted non-interest income was $12,580 million, an increase of $2,405 million, or 24%.
By segment, the increase in reported non-interest income reflects increases in Wholesale Banking of $1,594 million, in the Corporate segment of $936 million, in
Wealth Management and Insurance of $485 million, in U.S. Retail of $127 million, and in Canadian Personal and Commercial Banking of $1 million.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 12
Provision for Credit Losses
Quarterly comparison – Q2 2024 vs. Q2 2023
PCL for the quarter was $1,071 million, an increase of $472 million compared with the second quarter last year. PCL – impaired was $870 million, an increase of
$319 million, or 58%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was $201 million, an increase of
$153 million. The performing provisions this quarter largely reflect current credit conditions including some credit migration, and volume growth. Total PCL for the
quarter as an annualized percentage of credit volume was 0.47%.
By segment, PCL was higher by $220 million in Canadian Personal and Commercial Banking, by $190 million in U.S. Retail, by $43 million in Wholesale
Banking, by $20 million in the Corporate segment, and lower by $1 million in Wealth Management and Insurance.
Quarterly comparison – Q2 2024 vs. Q1 2024
PCL for the quarter was $1,071 million, an increase of $70 million compared with the prior quarter. PCL – impaired was $870 million, a decrease of $64 million,
largely reflecting lower provisions in the U.S. commercial lending portfolios, and seasonal trends in the U.S. credit card and auto portfolios, partially offset by credit
migration in the Canadian commercial lending portfolios. PCL – performing was $201 million, an increase of $134 million. The performing provisions this quarter
largely reflect current credit conditions including some credit migration, and volume growth. Total PCL for the quarter as an annualized percentage of credit volume
was 0.47%.
By segment, PCL was higher by $45 million in Wholesale Banking, by $44 million in Canadian Personal and Commercial Banking, and lower by $14 million in
the Corporate segment, and by $5 million in U.S. Retail.
Year-to-date comparison – Q2 2024 vs. Q2 2023
PCL was $2,072 million, an increase of $783 million compared with the same period last year. PCL – impaired was $1,804 million, an increase of $700 million,
reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was $268 million, an increase of $83 million. The current year
performing build reflects volume growth and credit conditions including some credit migration. Total PCL as an annualized percentage of credit volume was 0.45%.
By segment, PCL was higher in U.S. Retail by $375 million, in Canadian Personal and Commercial Banking by $316 million, in the Corporate segment by
$72 million, in Wholesale Banking by $21 million, and lower in Wealth Management and Insurance by $1 million.
TABLE 9: PROVISION FOR CREDIT LOSSES
1
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Provision for (recovery of) credit losses – Stage 3 (impaired)
Canadian Personal and Commercial Banking
$
397
$
364
$
234
$
761
$
454
U.S. Retail
311
377
186
688
398
Wealth Management and Insurance
–
–
1
–
1
Wholesale Banking
(1)
5
5
4
6
Corporate
2
163
188
125
351
245
Total provision for (recovery of) credit losses – Stage 3
870
934
551
1,804
1,104
Provision for (recovery of) credit losses – Stage 1
and Stage 2 (performing)
Canadian Personal and Commercial Banking
70
59
13
129
120
U.S. Retail
69
8
4
77
(8)
Wealth Management and Insurance
–
–
–
–
–
Wholesale Banking
56
5
7
61
38
Corporate
2
6
(5)
24
1
35
Total provision for (recovery of) credit losses – Stage 1
and Stage 2
201
67
48
268
185
Total provision for (recovery of) credit losses
$
1,071
$
1,001
$
599
$
2,072
$
1,289
-
1
2
Insurance Service Expenses
Quarterly comparison – Q2 2024 vs. Q2 2023
Insurance service expenses for the quarter were $1,248 million, an increase of $130 million, or 12%, compared with the second quarter last year, reflecting
business growth, increased claims severity, and less favourable prior years’ claims development.
Quarterly comparison – Q2 2024 vs. Q1 2024
Insurance service expenses for the quarter decreased $118 million, or 9%, compared with the prior quarter, reflecting seasonally lower claims, and more
favourable prior years’ claims development.
Yearto-date comparison – Q2 2024 vs. Q2 2023
Insurance service expenses were $2,614 million, an increase of $332 million, or 15%, compared with the same period last year, reflecting business growth,
increased claims severity, and less favourable prior years’ claims development.
Non-Interest Expenses and Efficiency Ratio
Quarterly comparison – Q2 2024 vs. Q2 2023
Reported non-interest expenses were $8,401 million, an increase of $1,645 million, or 24%, compared with the second quarter last year, primarily reflecting the
impact of the provision for investigations related to the Bank’s AML program, higher employee-related expenses, including TD Cowen, the impact of a civil matter
provision, restructuring charges, investments in our risk and control infrastructure, and FDIC special assessment. On an adjusted basis, non-interest expenses
were $7,084 million, an increase of $622 million, or 10%.
By segment, the increase in reported non-interest expenses reflects increases in the Corporate segment of $711 million, in U.S. Retail of $575 million, in
Wholesale Banking of $241 million, in Wealth Management and Insurance of $64 million, and in Canadian Personal and Commercial Banking of $54 million.
The Bank’s reported efficiency ratio was 60.8%, compared to 54.5% in the second quarter last year. The Bank’s adjusted efficiency ratio, net of ISE was 56.1%,
compared with 56.4% in the second quarter last year.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 13
Quarterly comparison – Q2 2024 vs. Q1 2024
Reported non-interest expenses increased $371 million, or 5%, compared with the prior quarter, primarily reflecting the impact of the provision for investigations
related to the Bank’s AML program, partially offset by a lower FDIC special assessment. Adjusted non-interest expenses decreased $41 million, or 1%.
By segment, the increase in reported non-interest expenses reflects increases in the Corporate segment of $301 million and in U.S. Retail of $187 million,
partially offset by decreases in Wholesale Banking of $70 million, in Canadian Personal and Commercial Banking of $27 million, and in Wealth Management and
Insurance of $20 million.
The Bank’s reported efficiency ratio was 60.8%, compared with 58.6% in the prior quarter. The Bank’s adjusted efficiency ratio, net of ISE was 56.1%,
compared with 57.4% in the prior quarter.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Reported non-interest expenses of $16,431 million increased $1,563 million, or 11%, compared with the same period last year, primarily reflecting higher
employee-related expenses, including TD Cowen, the impact of the provision for investigations related to the Bank’s AML program, FDIC special assessment,
restructuring charges, and investments in our risk and control infrastructure, partially offset by the prior period impact of the Stanford litigation settlement. On an
adjusted basis, non-interest expenses were $14,209 million, an increase of $1,410 million, or 11%.
By segment, the increase in reported non-interest expenses reflects increases in U.S. Retail of $945 million, in Wholesale Banking of $858 million, in Canadian
Personal and Commercial Banking of $175 million, and in Wealth Management and Insurance of $102 million, partially offset by a decrease in the Corporate
segment of $517 million.
The Bank’s reported efficiency ratio was 59.7%, compared with 60.4% in the same period last year. The Bank’s adjusted efficiency ratio, net of ISE was 56.7%,
compared with 54.8% in the same period last year.
Income Taxes
The Bank’s effective income tax rate on a reported basis was 23.5% for the current quarter, compared with 21.9% in the second quarter last year and 19.1% in the
prior quarter. The year-over-year and quarter-over-quarter increases primarily reflect the non-deductible provision for the investigations related to the Bank’s AML
program, partially offset by earnings mix.
To allow for an after-tax calculation of adjusted income, the adjusted provision for income taxes is calculated by adjusting the taxes for each item of note using
the statutory income tax rate of the applicable legal entity. The adjusted effective income tax rate is calculated as the adjusted provision for income taxes as a
percentage of adjusted net income before taxes. The Bank’s adjusted effective income tax rate was 20.5% for the current quarter, compared with 22.0% in the
second quarter last year and 20.4% in the prior quarter. The year-over-year and quarter-over-quarter changes primarily reflect earnings mix.
TABLE 10: INCOME TAXES – Reconciliation of Reported to Adjusted Provision for Income Taxes
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Income taxes at Canadian statutory income
tax rate
$
861
27.8
%
$
920
27.7
%
$
1,089
27.8
%
$
1,780
27.8
%
$
1,709
27.8
%
Increase (decrease) resulting from:
Dividends received
(3)
(0.1)
(19)
(0.6)
(26)
(0.7)
(11)
(0.2)
(53)
(0.9)
Rate differentials on international operations
1
(124)
(4.0)
(271)
(8.2)
(217)
(5.5)
(395)
(6.2)
(444)
(7.2)
Other
(5)
(0.2)
4
0.2
13
0.3
(11)
(0.2)
586
9.5
Provision for income taxes and effective
income tax rate – reported
2
$
729
23.5
%
$
634
19.1
%
$
859
21.9
%
$
1,363
21.2
%
$
1,798
29.2
%
Total adjustments for items of note
191
238
108
429
229
Provision for income taxes and effective
income tax rate – adjusted
2
$
920
20.5
%
$
872
20.4
%
$
967
22.0
%
$
1,792
20.5
%
$
2,027
21.8
%
1
2
Consolidated Financial Statements for further details.
Canadian Tax Measures
On November 30, 2023, Parliament introduced Bill C-59, which advances certain tax measures introduced in the Canadian Federal budget presented on March
28, 2023. Bill C-59 denies the dividend received deduction in respect of dividends received by certain financial institutions on shares that are mark-to-market
property, subject to a minor carve out for dividends on certain preferred shares, as well as imposes a 2% tax on the net value of share repurchases by public
corporations in Canada. The legislation, which is not yet substantively enacted, proposes that these measures be effective beginning January 1, 2024.
International Tax Reform – Pillar Two Global Minimum Tax
The Organisation for Economic Co-operation and Development published Pillar Two model rules as part of its efforts toward international tax reform. The Pillar
Two model rules provide for the implementation of a 15% global minimum tax for large multinational enterprises, which is to be applied on a jurisdiction-by-
jurisdiction basis. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Bank operates. On May 2, 2024, the
Government of Canada introduced Bill C-69, which includes the
Global Minimum Tax Act
addressing the Pillar Two model rules. The rules will be effective for the
Bank in Canada and other jurisdictions for the fiscal year beginning on November 1, 2024. The Bank is assessing its potential exposure to Pillar Two income
taxes.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 14
ECONOMIC SUMMARY AND OUTLOOK
The global economy continued to outperform expectations to start calendar 2024, despite geopolitical risks. Inflation has generally continued to cool across the
G-7, and central banks are expected to start lowering interest rates soon. However, the pace of decline is expected to be gradual with central bankers vigilant on
inflation risks. In addition, the evolution of geopolitical risks maintains a degree of uncertainty on both the economic outlook and the inflation trajectory.
U.S. domestic demand started the year on a solid path. Real GDP growth downshifted in the first calendar quarter of 2024 from a very rapid pace in the second
half of 2023, but this was due in large part to a drag from net exports. Domestic demand turned in a sturdy performance of 2.8% growth on a quarter-over-quarter
annualized basis, reflecting both consumer spending and business investment. Both advanced by almost 3% in inflation-adjusted terms. However, government
spending cooled to a greater extent.
Based on the April 2024 data, the U.S. job market was still tight with the unemployment rate historically low at 3.9%. Even so, the labour market is showing
signs of cooling, including a deceleration in job openings and wage growth. TD Economics expects this trend to continue. This would help halt a recent upturn in
inflation that prompted the Federal Reserve to signal that interest rates will need to remain higher for longer.
TD Economics expects the U.S. Federal Reserve will lower interest rates from the current restrictive level of 5.25-5.50% to 5.00-5.25% by the end of calendar
2024. This means that interest rates are still expected to weigh on demand through the year.
In contrast, Canada’s economy slowed notably in calendar 2023, with real GDP growth of only 1.1% in real terms. TD Economics expects economic growth to
pick up in the first quarter to above 2%, but that pace is not expected to be sustained through the remainder of 2024. Job growth has slowed below labour force
growth, pushing the unemployment rate higher to 6.1% in April. TD Economics expects the unemployment rate to continue to rise in the months ahead,
contributing to prolonged weakness in consumer spending. As a result, TD Economics expects that economic growth is likely to remain modest through 2024.
Canadian inflation has cooled in recent months, and the Bank of Canada is widely expected to cut interest rates in June or July of 2024. Thereafter, TD
Economics expects the Bank of Canada to lower interest rates gradually. As a result of interest rates declining more in Canada in comparison to the U.S., there is
downside risk to the Canadian dollar, which TD Economics expects will hover in the 70 to 72 U.S. cent range over the next few quarters.
HOW OUR BUSINESSES PERFORMED
For management reporting purposes, the Bank’s business operations and activities are organized around the following four key business segments: Canadian
Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking. The Bank’s other activities are grouped into the
Corporate segment.
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 We Performed” section of this document, the “Business Focus” section in the Bank’s 2023 MD&A, and Note 28 of
the Bank’s Consolidated Financial Statements for the year ended October 31, 2023. Effective the first quarter of 2024, certain asset management businesses
which were previously reported in the U.S. Retail segment are now reported in the Wealth Management and Insurance segment. Comparative period information
has been adjusted to reflect the new alignment.
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 certain dividends, is adjusted to its equivalent pre-tax value. Using TEB allows the Bank to measure income from all securities and loans
consistently and makes for a more meaningful comparison of net interest income with similar institutions. The TEB increase to net interest income and provision for
income taxes reflected in Wholesale Banking results is reversed in the Corporate segment. The TEB adjustment for the quarter was $4 million, compared with
$29 million in the prior quarter and $40 million in the second quarter last year.
Share of net income from investment in Schwab is reported in the U.S. Retail segment. Amounts for amortization of acquired intangibles, the acquisition and
integration charges related to the Schwab transaction, and the Bank’s share of restructuring and other charges incurred by Schwab are recorded in the Corporate
segment.
TABLE 11: CANADIAN PERSONAL AND COMMERCIAL BANKING
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Net interest income
$
3,812
$
3,833
$
3,377
$
7,645
$
6,916
Non-interest income
1,027
1,051
1,027
2,078
2,077
Total revenue
4,839
4,884
4,404
9,723
8,993
Provision for (recovery of) credit losses – impaired
397
364
234
761
454
Provision for (recovery of) credit losses – performing
70
59
13
129
120
Total provision for (recovery of) credit losses
467
423
247
890
574
Non-interest expenses
1,957
1,984
1,903
3,941
3,766
Provision for (recovery of) income taxes
676
692
629
1,368
1,299
Net income
$
1,739
$
1,785
$
1,625
$
3,524
$
3,354
Selected volumes and ratios
Return on common equity
1
32.9
%
34.6
%
37.4
%
33.8
%
38.6
%
Net interest margin (including on securitized assets)
2
2.84
2.84
2.74
2.84
2.77
Efficiency ratio
40.4
40.6
43.2
40.5
41.9
Number of Canadian retail branches
1,062
1,062
1,060
1,062
1,060
Average number of full-time equivalent staff
29,053
29,271
28,797
29,163
28,800
1
2
GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the “How We Performed” section and the Glossary of this document for additional information about
these metrics.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 15
Quarterly comparison – Q2 2024 vs. Q2 2023
Canadian Personal and Commercial Banking net income for the quarter was $1,739 million, an increase of $114 million, or 7%, compared with the second quarter
last year, reflecting higher revenue, partially offset by higher PCL and non-interest expenses. The annualized ROE for the quarter was 32.9%, compared with
37.4% in the second quarter last year.
Revenue for the quarter was $4,839 million, an increase of $435 million, or 10%, compared with the second quarter last year. Net interest income was
$3,812 million, an increase of $435 million, or 13%, compared with the second quarter last year, primarily reflecting volume growth and higher margins. Average
loan volumes increased $37 billion, or 7%, reflecting 7% growth in personal loans and 7% growth in business loans. Average deposit volumes increased
$16 billion, or 4%, reflecting 6% growth in personal deposits, partially offset by 1% decline in business deposits. Net interest margin was 2.84%, an increase of
10 basis points (bps), primarily due to higher margins on deposits, partially offset by lower margins on loans and changes to balance sheet mix. Non-interest
income was $1,027 million, flat compared with the second quarter last year.
PCL for the quarter was $467 million, an increase of $220 million compared with the second quarter last year. PCL – impaired was $397 million, an increase of
$163 million, or 70%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was $70 million, an increase of $57 million.
The performing provisions this quarter largely reflect credit conditions, including credit migration in the commercial and consumer lending portfolios, and volume
growth. Total PCL as an annualized percentage of credit volume was 0.34%, an increase of 15 bps compared with the second quarter last year.
Non-interest expenses for the quarter were $1,957 million, an increase of $54 million, or 3%, compared with the second quarter last year, reflecting higher
spend supporting business growth, including higher employee-related expenses and technology costs, partially offset by higher non-credit provisions in the second
quarter last year.
The efficiency ratio for the quarter was 40.4%, compared with 43.2% in the second quarter last year.
Quarterly comparison – Q2 2024 vs. Q1 2024
Canadian Personal and Commercial Banking net income for the quarter was $1,739 million, a decrease of $46 million, or 3%, compared with the prior quarter,
reflecting lower revenue and higher PCL, partially offset by lower non-interest expenses. The annualized ROE for the quarter was 32.9%, compared with 34.6% in
the prior quarter.
Revenue decreased $45 million, or 1%, compared with the prior quarter. Net interest income decreased $21 million, or 1%, reflecting fewer days in the second
quarter, partially offset by volume growth. Average loan volumes increased $5 billion, or 1%, reflecting 1% growth in personal loans and 2% growth in business
loans. Average deposit volumes were relatively flat compared with the prior quarter, reflecting 1% growth in personal deposits, offset by 1% decline in business
deposits. Net interest margin was 2.84%, flat compared with the prior quarter. Non-interest income decreased $24 million, or 2%, compared with the prior quarter,
reflecting lower fee revenue.
PCL for the quarter was $467 million, an increase of $44 million compared with the prior quarter. PCL – impaired was $397 million, an increase of $33 million, or
9%, largely reflecting credit migration in the commercial lending portfolio. PCL – performing was $70 million, an increase of $11 million. The performing provisions
this quarter largely reflect credit conditions, including credit migration in the commercial and consumer lending portfolios, and volume growth. Total PCL as an
annualized percentage of credit volume was 0.34%, an increase of 4 bps compared with the prior quarter.
Non-interest expenses decreased $27 million, or 1% compared with the prior quarter, primarily reflecting lower technology costs and employee-related
expenses
.
The efficiency ratio was 40.4%, compared with 40.6%, in the prior quarter.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Canadian Personal and Commercial Banking net income for the six months ended April 30, 2024, was $3,524 million, an increase of $170 million, or 5%,
compared with the same period last year, reflecting higher revenue, partially offset by higher PCL and non-interest expenses. The annualized ROE for the period
was 33.8%, compared with 38.6%, in the same period last year.
Revenue for the period was $9,723 million, an increase of $730 million, or 8%, compared with the same period last year. Net interest income was
$7,645 million, an increase of $729 million, or 11% compared with the same period last year, reflecting volume growth and higher margins. Average loan volumes
increased $37 billion, or 7%, reflecting 7% growth in personal loans and 8% growth in business loans. Average deposit volumes increased $15 billion, or 3%,
reflecting 6% growth in personal deposits, partially offset by a 2% decline in business deposits. Net interest margin was 2.84%, an increase of 7 bps, primarily due
to higher margins on deposits, partially offset by lower margins on loans and changes to balance sheet mix.
Non-interest income was $2,078 million, relatively flat
compared with the same period last year.
PCL was $890 million, an increase of $316 million compared with the same period last year. PCL – impaired was $761 million, an increase of $307 million, or
68%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was $129 million, an increase of $9 million. The current year
performing provisions largely reflect current credit conditions, including credit migration, and volume growth. Total PCL as an annualized percentage of credit
volume was 0.32%, an increase of 10 bps compared with the same period last year.
Non-interest expenses were $3,941 million, an increase of $175 million, or 5%, compared with the same period last year, reflecting higher spend supporting
business growth, including higher employee-related expenses and technology costs.
The efficiency ratio was 40.5%, compared with 41.9%, for the same period last year.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 16
TABLE 12: U.S. RETAIL
(millions of dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
Canadian Dollars
2024
2024
2023
2024
2023
Net interest income
$
$
$
$
$
Non-interest income
Total revenue
Provision for (recovery of) credit losses – impaired
Provision for (recovery of) credit losses – performing
(8)
Total provision for (recovery of) credit losses
Non-interest expenses – reported
Non-interest expenses – adjusted
1,2
Provision for (recovery of) income taxes – reported
(5)
Provision for (recovery of) income taxes – adjusted
1
U.S. Retail Bank net income – reported
U.S. Retail Bank net income – adjusted
1
Share of net income from investment in Schwab
3,4
Net income – reported
$
$
$
$
$
Net income – adjusted
1
U.S. Dollars
Net interest income
$
$
$
$
$
Non-interest income
Total revenue
Provision for (recovery of) credit losses – impaired
Provision for (recovery of) credit losses – performing
(6)
Total provision for (recovery of) credit losses
Non-interest expenses – reported
Non-interest expenses – adjusted
1,2
Provision for (recovery of) income taxes – reported
(3)
Provision for (recovery of) income taxes – adjusted
1
U.S. Retail Bank net income – reported
U.S. Retail Bank net income – adjusted
1
Share of net income from investment in Schwab
3,4
Net income – reported
$
$
$
$
$
Net income – adjusted
1
Selected volumes and ratios
Return on common equity – reported
5
%
%
%
%
%
Return on common equity – adjusted
1,5
Net interest margin
1,6
Efficiency ratio – reported
Efficiency ratio – adjusted
1
Assets under administration (billions of U.S. dollars)
7
$
$
$
$
$
Assets under management (billions of U.S. dollars)
7,8
Number of U.S. retail stores
Average number of full-time equivalent staff
1
document.
2
i. Charges related to the terminated First Horizon acquisition – Q2 2023: $154 million or US$113 million ($116 million or US$85 million after-tax), Q1 2023: $106 million or
US$78 million ($80 million or US$59 million after-tax);
ii. FDIC special assessment – Q2 2024: $103 million or US$75 million ($77 million or US$56 million after-tax), Q1 202 4: $411 million or US$300 million ($310 million or US$226 million
after-tax); and
iii. Provision for investigations related to the Bank’s AML program – Q2 2024: $615 million or US$450 million (before and after tax).
3
The Bank’s share of Schwab’s earnings is reported with a one-month lag. Refer to Note 7 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements for further details.
4
The after-tax amounts for amortization of acquired intangibles, the Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade, the Bank’s
share of Schwab’s restructuring charges, and the Bank’s share of Schwab’s FDIC special assessment charge are recorded in the Corporate segment.
5
Capital allocated to the business segment was increased to 11.5% CET1 Capital effective the first quarter of 2024, compared with 11% in the prior year.
6
Net interest margin is calculated by dividing U.S. Retail segment’s net interest income by average interest -earning assets. For the U.S. Retail segment, this calculation excludes the
impact related to sweep deposits arrangements, intercompany deposits, and cash collateral. The value of tax-exempt interest income is adjusted to its equivalent before-tax value. For
investment securities, the adjustment to fair value is included in the calculation of average interest-earning assets. Management believes this calculation better reflects segment
performance. Net interest income and average interest-earning assets used in the calculation are non-GAAP financial measures.
7
For additional information about this metric, refer to the Glossary of this document.
8
Refer to “How Our Businesses Performed” section regarding alignment of certain asset management businesses from the U.S. Retail segment to the Wealth Management and Insurance
segment.
Quarterly comparison – Q2 2024 vs. Q2 2023
U.S. Retail reported net income for the quarter was $580 million (US$433 million), a decrease of $826 million (US$607 million), or 59% (58% in U.S. dollars),
compared with the second quarter last year. On an adjusted basis, net income for the quarter was $1,272 million (US$939 million), a decrease of $250 million
(US$186 million), or 16% (17% in U.S. dollars). The reported and adjusted annualized ROE for the quarter were 5.4% and 11.7%, respectively, compared with
14.1% and 15.3%, respectively, in the second quarter last year.
U.S. Retail net income includes contributions from the U.S. Retail Bank and the Bank’s investment in Schwab. Reported net income for the quarter from the
Bank’s investment in Schwab was $183 million (US$136 million), a decrease of $67 million (US$49 million), or 27% (26% in U.S. dollars).
U.S. Retail Bank reported net income was $397 million (US$297 million), a decrease of $759 million (US$558 million), or 66% (65% in U.S. dollars), compared
with the second quarter last year, primarily reflecting higher non-interest expenses, higher PCL, and lower net interest income. U.S. Retail Bank adjusted net
income was $1,089 million (US$803 million), a decrease of $183 million (US$137 million), or 14% (15% in U.S. dollars), compared with the second quarter last
year, reflecting higher PCL and lower net interest income.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 17
Revenue for the quarter was US$2,540 million, a decrease of US$88 million, or 3%, compared with the second quarter last year. Net interest income of
US$2,094 million, decreased US$147 million, or 7%, driven by lower deposit margins and volumes, partially offset by higher loan volumes. Net interest margin of
2.99%, decreased 26 bps, due to lower deposit margins reflecting higher deposit costs and lower margins on loans. Non-interest income of US$446 million
increased US$59 million, or 15%, compared with the second quarter last year, primarily reflecting fee income growth from increased customer activity and losses
from the disposition of certain investments in the prior year.
Average loan volumes increased US$13 billion, or 7%, compared with the second quarter last year. Personal loans increased 10%, reflecting strong mortgage
and auto originations and lower prepayments in the higher rate environment. Business loans increased 5%, reflecting good originations from new customer growth
and slower payment rates. Average deposit volumes decreased US$21 billion, or 6%, reflecting an 18% decrease in sweep deposits, a 2% decrease in business
deposits, partially offset by a 1% increase in personal deposit volumes. Excluding sweep deposits, average deposits decreased 1%.
Assets under administration (AUA) were US$40 billion as at April 30, 2024, an increase of US$1 billion, or 3%, compared with the second quarter last year,
reflecting net asset growth. Assets under Management (AUM) were US$7 billion as at April 30, 2024, flat compared with the second quarter last year.
PCL for the quarter was US$280 million, an increase of US$140 million compared with the second quarter last year. PCL – impaired was US$229 million, an
increase of US$92 million, or 67%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was US$51 million, an increase
of US$48 million. The performing provisions this quarter reflect credit conditions and volume growth, and are largely recorded in the auto and commercial lending
portfolios. U.S. Retail PCL including only the Bank’s share of PCL in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.60%,
an increase of 27 bps, compared with the second quarter last year.
Reported non-interest expenses for the quarter were US$1,909 million, an increase of US$416 million, or 28%, compared with the second quarter last year,
reflecting the impact of the provision for investigations related to the Bank’s AML program, and FDIC special assessment, partially offset by acquisition and
integration-related charges for the terminated First Horizon transaction in the second quarter last year. On an adjusted basis, non-interest expenses were relatively
flat, reflecting higher employee-related expenses, partially offset by productivity initiatives.
The reported and adjusted efficiency ratios for the quarter were 75.2% and 54.5%, respectively, compared with 56.8% and 52.5%, respectively, in the second
quarter last year.
Quarterly comparison – Q2 2024 vs. Q1 2024
U.S. Retail reported net income of $580 million (US$433 million), a decrease of $327 million (US$237 million), or 36% (35% in U.S. dollars), compared with the
prior quarter. On an adjusted basis, net income for the quarter was $1,272 million (US$939 million), an increase of $55 million (US$43 million), or 5% (5% in
U.S. dollars). The reported and adjusted annualized ROE for the quarter were 5.4% and 11.7%, respectively, compared with 8.5% and 11.3%, respectively, in the
prior quarter.
The contribution from Schwab of $183 million (US$136 million) decreased $11 million (US$8 million), or 6% (6% in U.S. dollars).
U.S. Retail Bank reported net income was $397 million (US$297 million), a decrease of $316 million (US$229 million), or 44% (44% in U.S. dollars), compared
with the prior quarter, primarily reflecting higher non-interest expenses and lower net interest income. U.S. Retail Bank adjusted net income was $1,089 million
(US$803 million), an increase of $66 million (US$51 million), or 6% (7% in U.S. dollars), primarily reflecting lower non-interest expenses, partially offset by lower
net interest income.
Revenue for the quarter was US$2,540 million, a decrease of US$47 million, or 2%, compared with the prior quarter. Net interest income of US$2,094 million
decreased US$47 million, or 2%, primarily reflecting the effect of fewer days in the quarter, and lower deposit margins and volumes. Net interest margin of 2.99%
decreased 4 bps quarter-over-quarter due to balance sheet mix and higher funding costs. Non-interest income of US$446 million was flat compared to the prior
quarter.
Average loan volumes increased US$2 billion, or 1%, compared with the prior quarter. Personal loans were relatively flat. Business loans increased 1%,
reflecting good originations from new customer growth and slower payment rates. Average deposit volumes decreased US$5 billion, or 1%, compared with the
prior quarter, reflecting a 5% decrease in sweep deposits and a 2% decrease in business deposits, partially offset by a 2% increase in personal deposit volume.
AUA were US$40 billion
as at April 30, 2024, flat compared with the prior quarter. AUM were US$7 billion, flat compared with the prior quarter.
PCL for the quarter was US$280 million, a decrease of US$5 million compared with the prior quarter. PCL – impaired was US$229 million, a decrease of
US$50 million, or 18%, reflecting lower provisions in the commercial lending portfolios, and seasonal trends in credit card and auto portfolios. PCL – performing
was US$51 million, an increase of US$45 million. The performing provisions this quarter reflect credit conditions and volume growth, and are largely recorded in
the auto and commercial lending portfolios. U.S. Retail PCL including only the Bank’s share of PCL in the U.S. strategic cards portfolio, as an annualized
percentage of credit volume was 0.60%, a decrease of 1 basis point, compared with the prior quarter.
Reported non-interest expenses for the quarter were US$1,909 million, an increase of US$130 million, or 7%, compared to the prior quarter, primarily reflecting
the impact of the provision for investigations related to the Bank’s AML program
and additional FDIC special assessment, partially offset by the initial FDIC special
assessment in the prior quarter, and lower operating expenses. On an adjusted basis, non-interest expenses decreased US$95 million, or 6%, due to seasonality
of expenses and the impact of productivity initiatives.
The reported and adjusted efficiency ratios for the quarter were 75.2% and 54.5%, respectively, compared with 68.8% and 57.2%, respectively, in the prior
quarter.
Year-to-date comparison – Q2 2024 vs. Q2 2023
U.S. Retail reported net income for the six months ended April 30, 2024, was $1,487 million (US$1,103 million), a decrease of $1,503 million (US$1,110 million), or
50% (50% in U.S. dollars), compared with the same period last year. On an adjusted basis, net income for the period was $2,489 million (US$1,835 million), a
decrease of $697 million (US$522 million), or 22% (22% in U.S. dollars). The reported and adjusted annualized ROE for the period were 6.9% and 11.5%,
respectively, compared with 14.8% and 15.8%, respectively, in the same period last year.
The contribution from Schwab of $377 million (US$280 million), decreased $174 million (US$127 million), or 32% (31% in U.S. dollars).
U.S. Retail Bank reported net income for the period was $1,110 million (US$823 million), a decrease of $1,329 million (US$983 million), or 54% (54% in U.S.
dollars), compared with the same period last year, reflecting higher non-interest expenses, higher PCL, and lower net interest income. U.S. Retail Bank adjusted
net income was $2,112 million (US$1,555 million), a decrease of $523 million (US$395 million), or 20% (20% in U.S. dollars), primarily reflecting higher PCL,
higher non-interest expenses, and lower net interest income.
Revenue for the period was US$5,127 million, a decrease of US$264 million, or 5%, compared with the same period last year. Net interest income of
US$4,235 million decreased US$354 million, or 8%, primarily reflecting lower deposit margins and volumes, partially offset by higher loan volumes. Net interest
margin of 3.01%, decreased 26 bps, due to lower deposit margins reflecting higher deposit costs and lower margins on loans. Non-interest income of
US$892 million increased US$90 million, or 11%, primarily reflecting fee income growth from increased customer activity and higher valuation on certain
investments in the prior year.
Average loan volumes increased US$15 billion, or 8%, compared with the same period last year. Personal loans increased 10%, reflecting good originations
and slower payment rates across portfolios. Business loans increased 6%, reflecting good originations from new customer growth, and slower payment rates.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 18
Average deposit volumes decreased US$27 billion, or 8%, reflecting a 20% decrease in sweep deposits and a 3% decrease in business deposits. Personal
deposit volumes were flat. Excluding sweep deposits, average deposits decreased 1%.
PCL was US$565 million, an increase of US$276 million compared with the same period last year. PCL – impaired was US$508 million, an increase of
US$213 million, or 72%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was a build of US$57 million, compared
with a recovery of US$6 million in the prior year. The current year performing provisions largely reflect current conditions, including credit migration, and volume
growth. U.S. Retail PCL including only the Bank’s share of PCL in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.60%, an
increase of 27 bps, compared with the same period last year.
Reported non-interest expenses for the period were US$3,688 million, an increase of US$683 million, or 23%, compared with the same period last year,
reflecting the impact of the provision for investigations related to the Bank’s AML program, FDIC special assessment, and higher operating expenses, partially
offset by acquisition and integration-related charges for the terminated First Horizon transaction in the same period last year. On an adjusted basis, non-interest
expenses increased US$49 million, or 2%, reflecting higher employee-related expenses.
The reported and adjusted efficiency ratios for the quarter were 71.9% and 55.8%, respectively, compared with 55.7% and 52.2%, respectively, for the same
period last year.
THE CHARLES SCHWAB CORPORATION
Refer to Note 7, Investment in Associates and Joint Ventures of the Bank’s second quarter 2024 Interim Consolidated Financial Statements for further information
on Schwab.
TABLE 13: WEALTH MANAGEMENT AND INSURANCE
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Net interest income
$
304
$
285
$
258
$
589
$
541
Non-interest income
1
2,810
2,850
2,543
5,660
5,175
Total revenue
3,114
3,135
2,801
6,249
5,716
Provision for (recovery of) credit losses – impaired
–
–
1
–
1
Provision for (recovery of) credit losses – performing
–
–
–
–
–
Total provision for (recovery of) credit losses
–
–
1
–
1
Insurance service expenses
1
1,248
1,366
1,118
2,614
2,282
Non-interest expenses
1
1,027
1,047
963
2,074
1,972
Provision for (recovery of) income taxes
218
167
195
385
383
Net income
$
621
$
555
$
524
$
1,176
$
1,078
Selected volumes and ratios
Return on common equity
1,2
40.8
%
37.5
%
38.0
%
39.2
%
38.6
%
Efficiency ratio
1
33.0
33.4
34.4
33.2
34.5
Efficiency ratio, net of ISE
1,3
55.0
59.2
57.2
57.1
57.4
Assets under administration (billions of Canadian dollars)
4
$
596
$
576
$
549
$
596
$
549
Assets under management (billions of Canadian dollars)
489
479
460
489
460
Average number of full-time equivalent staff
15,163
15,386
16,454
15,276
16,426
1
Consolidated Financial Statements for further details.
2
3
Q2 2023: $1,683 million, 2024 YTD: $3,635 million, 2023 YTD: $3,434 million. Total revenue, net of ISE is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial
Measures” in the “How We Performed” section and the Glossary of this document for additional information about this metric.
4
Quarterly comparison – Q2 2024 vs. Q2 2023
Wealth Management and Insurance net income for the quarter was $621 million, an increase of $97 million, or 19%, compared with the second quarter last year,
reflecting higher revenue, partially offset by higher insurance service expenses and non-interest expenses. The annualized ROE for the quarter was 40.8%,
compared with 38.0% in the second quarter last year.
Revenue for the quarter was $3,114 million, an increase of $313 million, or 11%, compared with the second quarter last year. Non-interest income was
$2,810 million, an increase of $267 million, or 10%, reflecting higher insurance premiums, fee-based revenue commensurate with market growth and transaction
revenue. Net interest income was $304 million, an increase of $46 million, or 18%, compared with the second quarter last year, reflecting higher deposit margins.
AUA were $596 billion as at April 30, 2024, an increase of $47 billion, or 9%, compared with the second quarter last year, reflecting market appreciation and net
asset growth. AUM were $489 billion as at April 30, 2024, an increase of $29 billion, or 6%, compared with the second quarter last year, primarily reflecting market
appreciation.
Insurance service expenses for the quarter were $1,248 million, an increase of $130 million, or 12%, compared with the second quarter last year, reflecting
business growth, increased claims severity and less favourable prior years’ claims development.
Non-interest expenses for the quarter were $1,027 million, an increase of $64 million, or 7%, compared with the second quarter last year, reflecting higher
variable compensation commensurate with higher revenues, and technology costs.
The efficiency ratio for the quarter was 33.0%, compared with 34.4% in the second quarter last year. The efficiency ratio, net of ISE for the quarter was 55.0%,
compared with 57.2% in the second quarter last year.
Quarterly comparison – Q2 2024 vs. Q1 2024
Wealth Management and Insurance net income for the quarter was $621 million, an increase of $66 million, or 12%, compared with the prior quarter, primarily
reflecting higher earnings in the wealth management business. The annualized ROE for the quarter was 40.8%, compared with 37.5% in the prior quarter.
Revenue decreased $21 million, or 1%, compared with the prior quarter. Non-interest income decreased $40 million, or 1%, reflecting lower revenue in the
insurance business, partially offset by higher fee-based and transaction revenue in the wealth management business. Net interest income increased $19 million, or
7%, reflecting higher deposit margins.
AUA increased $20 billion, or 3%, compared with the prior quarter, reflecting market appreciation and net asset growth. AUM increased $10 billion, or 2%,
compared with prior quarter, primarily reflecting market appreciation.
Insurance service expenses for the quarter decreased $118 million, or 9%, compared with the prior quarter, reflecting seasonally lower claims and more
favourable prior years’ claims development.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 19
Non-interest expenses decreased $20 million, or 2%, compared with the prior quarter, reflecting lower employee-related expenses.
The efficiency ratio for the quarter was 33.0%, compared with 33.4% in the prior quarter. The efficiency ratio, net of ISE for the quarter was 55.0%, compared
with 59.2% in the prior quarter.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Wealth Management and Insurance net income for the six months ended April 30, 2024, was $1,176 million, an increase of $98 million, or 9%, compared with the
same period last year, reflecting higher revenues, partially offset by higher insurance service expenses and non-interest expenses. The annualized ROE for the
period was 39.2%, compared with 38.6%, in the same period last year.
Revenue for the period was $6,249 million, an increase of $533 million, or 9%, compared with same period last year. Non-interest income increased
$485 million, or 9%, reflecting higher insurance premiums, and fee-based revenue commensurate with market growth. Net interest income increased $48 million,
or 9%, reflecting higher investment income in the insurance business, and higher deposit margins, partially offset by lower deposit volumes in the wealth
management business.
Insurance service expenses were $2,614 million, an increase of $332 million, or 15%, compared with the same period last year, reflecting business growth,
increased claims severity and less favourable prior years’ claims development.
Non-interest expenses were $2,074 million, an increase of $102 million, or 5%, compared with the same period last year, reflecting higher variable
compensation commensurate with higher revenues, and technology costs.
The efficiency ratio for the period was 33.2%, compared with 34.5% for the same period last year. The efficiency ratio, net of ISE for the period was 57.1%,
compared with 57.4% in the same period last year.
TABLE 14: WHOLESALE BANKING
1
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Net interest income (TEB)
$
189
$
198
$
498
$
387
$
1,023
Non-interest income
1,751
1,582
919
3,333
1,739
Total revenue
1,940
1,780
1,417
3,720
2,762
Provision for (recovery of) credit losses – impaired
(1)
5
5
4
6
Provision for (recovery of) credit losses – performing
56
5
7
61
38
Total provision for (recovery of) credit losses
55
10
12
65
44
Non-interest expenses – reported
1,430
1,500
1,189
2,930
2,072
Non-interest expenses – adjusted
2,3
1,328
1,383
1,116
2,711
1,978
Provision for (recovery of) income taxes (TEB) – reported
94
65
66
159
165
Provision for (recovery of) income taxes (TEB) – adjusted
2
116
89
76
205
180
Net income – reported
$
361
$
205
$
150
$
566
$
481
Net income – adjusted
2
441
298
213
739
560
Selected volumes and ratios
Trading-related revenue (TEB)
4
$
693
$
730
$
482
$
1,423
$
1,144
Average gross lending portfolio (billions of Canadian dollars)
5
96.3
96.2
95.2
96.3
96.1
Return on common equity – reported
6
9.2
%
5.3
%
4.5
%
7.3
%
7.0
%
Return on common equity – adjusted
2,6
11.3
7.6
6.4
9.5
8.2
Efficiency ratio – reported
73.7
84.3
83.9
78.8
75.0
Efficiency ratio – adjusted
2
68.5
77.7
78.8
72.9
71.6
Average number of full-time equivalent staff
7,077
7,100
6,510
7,089
5,937
1
2
document.
3
$117 million ($93 million after-tax), Q2 2023: $73 million ($63 million after -tax), Q1 2023: $21 million ($16 million after-tax).
4
$784 million, Q2 2023: $197 million, Q1 2023: $401 million). Trading-related revenue (TEB) is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the
“How We Performed” section and the Glossary of this document for additional information about this metric.
5
6
Quarterly comparison – Q2 2024 vs. Q2 2023
Wholesale Banking reported net income for the quarter was $361 million, an increase of $211 million, compared with the second quarter last year, primarily
reflecting higher revenues, partially offset by higher non-interest expenses. On an adjusted basis, net income was $441 million, an increase of $228 million.
Revenue for the quarter, including TD Cowen, was $1,940 million, an increase of $523 million, or 37%, compared with the second quarter last year. Higher
revenue primarily reflects higher trading-related revenue, underwriting fees, and lending revenue.
PCL for the quarter was $55 million, an increase of $43 million compared with the second quarter last year. PCL – impaired was a recovery of $1 million. PCL –
performing was $56 million, an increase of $49 million compared to the prior year, reflecting a higher build in the current quarter largely related to credit migration
across various industries.
Reported non-interest expenses for the quarter, including TD Cowen, were $1,430 million, an increase of $241 million, or 20%, compared with the second
quarter last year, primarily reflecting higher variable compensation commensurate with higher revenues, TD Cowen and the associated acquisition and integration-
related costs. On an adjusted basis, non-interest expenses were $1,328 million, an increase of $212 million, or 19%.
Quarterly comparison – Q2 2024 vs. Q1 2024
Wholesale Banking reported net income for the quarter was $361 million, an increase of $156 million, or 76%, compared with the prior quarter, primarily reflecting
higher revenues, and lower non-interest expenses, partially offset by higher PCL. On an adjusted basis, net income was $441 million, an increase of $143 million,
or 48%.
Revenue for the quarter increased $160 million, or 9%, compared with the prior quarter. Higher revenue primarily reflects higher underwriting and advisory fees,
and the net change in fair value of loan underwriting commitments.
PCL for the quarter was $55 million, an increase of $45 million compared with the prior quarter. PCL – impaired was a recovery of $1 million. PCL – performing
was $56 million, an increase of $51 million compared to the prior quarter, reflecting a higher build in the current quarter largely related to credit migration across
various industries.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 20
Reported non-interest expenses for the quarter decreased $70 million, or 5%, compared with the prior quarter, primarily reflecting a provision of $102 million
taken in connection with the U.S. record keeping matter recorded in the prior period, partially offset by higher variable compensation commensurate with higher
revenues. On an adjusted basis, non-interest expenses decreased $55 million or 4%.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Wholesale Banking reported net income for the six months ended April 30, 2024 was $566 million, an increase of $85 million, or 18%, compared with the same
period last year, reflecting higher revenues, partially offset by higher non-interest expenses. On an adjusted basis, net income was $739 million, an increase of
$179 million, or 32%.
Revenue, including TD Cowen, was $3,720 million, an increase of $958 million, or 35%, compared with the same period last year. Higher revenue primarily
reflects higher trading-related revenue, underwriting fees, lending revenue largely from syndicated and leveraged finance, and equity commissions.
PCL was $65 million, an increase of $21 million compared with the same period last year. PCL – impaired was $4 million. PCL – performing was $61 million, an
increase of $23 million compared to the prior year. The current year performing provisions largely reflect credit migration across various industries.
Reported non-interest expenses were $2,930 million, an increase of $858 million, or 41%, compared with the same period last year, reflecting TD Cowen and
the associated acquisition and integration-related costs, higher variable compensation commensurate with higher revenues, as well as a provision taken in
connection with the U.S. record keeping matter. On an adjusted basis, non-interest expenses were $2,711 million, an increase of $733 million or 37%.
TABLE 15: CORPORATE
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Net income (loss) – reported
$
(737)
$
(628)
$
(399)
$
(1,365)
$
(3,016)
Adjustments for items of note
Amortization of acquired intangibles
72
94
79
166
133
Acquisition and integration charges related to the Schwab transaction
21
32
30
53
64
Share of restructuring and other charges from investment in Schwab
–
49
–
49
–
Restructuring charges
165
291
–
456
–
Impact from the terminated FHN acquisition-related capital hedging strategy
64
57
134
121
1,010
Civil matter provision/Litigation settlement
274
–
39
274
1,642
Less: impact of income taxes
CRD and federal tax rate increase for fiscal 2022
–
–
–
–
(585)
Other items of note
143
113
60
256
735
Net income (loss) – adjusted
1
$
(284)
$
(218)
$
(177)
$
(502)
$
(317)
Decomposition of items included in net income (loss) – adjusted
Net corporate expenses
2
$
(411)
$
(254)
$
(191)
$
(665)
$
(382)
Other
127
36
14
163
65
Net income (loss) – adjusted
1
$
(284)
$
(218)
$
(177)
$
(502)
$
(317)
Selected volumes
Average number of full-time equivalent staff
23,270
23,437
22,656
23,354
22,244
1
document.
2
Quarterly comparison – Q2 2024 vs. Q2 2023
Corporate segment’s reported net loss for the quarter was $737 million, compared with a reported net loss of $399 million in the second quarter last year. The
higher net loss primarily reflects the impacts of a civil matter provision, higher risk and control expenses and restructuring charges, partially offset by higher
revenue from treasury and balance sheet activities in the current quarter. Net corporate expenses increased $220 million compared to the prior year, primarily
reflecting investments in our risk and control infrastructure. The adjusted net loss for the quarter was $284 million, compared with an adjusted net loss of $177
million in the second quarter last year.
Quarterly comparison – Q2 2024 vs. Q1 2024
Corporate segment’s reported net loss for the quarter was $737 million, compared with a reported net loss of $628 million in the prior quarter. The higher net loss
reflects higher risk and control expenses and the impact of a civil matter provision, partially offset by lower restructuring charges and higher revenue from treasury
and balance sheet management activities. Net corporate expenses increased $157 million compared to the prior quarter, primarily reflecting investments in our risk
and control infrastructure. The adjusted net loss for the quarter was $284 million, compared with an adjusted net loss of $218 million in the prior quarter.
Year-to-date comparison – Q2 2024 vs. Q2 2023
Corporate segment’s reported net loss for the six months ended April 30, 2024 was $1,365 million, compared with a reported net loss of $3,016 million in the same
period last year. The lower net loss primarily reflects the prior period impacts of the Stanford litigation settlement, the terminated FHN acquisition-related capital
hedging strategy and provision for income taxes in connection with the CRD and increase in the Canadian federal tax rate for fiscal 2022, partially offset by
restructuring charges and risk and control expenses in the current period. The adjusted net loss for the six months ended April 30, 2024 was $502 million,
compared with an adjusted net loss of $317 million in the same period last year.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 21
QUARTERLY RESULTS
The following table provides summary information related to the Bank’s eight most recently completed quarters.
TABLE 16: QUARTERLY RESULTS
(millions of Canadian dollars, except as noted)
For the three months ended
2024
2023
2022
Apr. 30
Jan. 31
Oct. 31
Jul. 31
Apr. 30
Jan. 31
Oct. 31
Jul. 31
Net interest income
$
7,465
$
7,488
$
7,494
$
7,289
$
7,428
$
7,733
$
7,630
$
7,044
Non-interest income
1
6,354
6,226
5,684
5,625
4,969
4,468
7,933
3,881
Total revenue
1
13,819
13,714
13,178
12,914
12,397
12,201
15,563
10,925
Provision for (recovery of) credit losses
1,071
1,001
878
766
599
690
617
351
Insurance service expenses
1
1,248
1,366
1,346
1,386
1,118
1,164
723
829
Non-interest expenses
1
8,401
8,030
7,628
7,359
6,756
8,112
6,545
6,096
Provision for (recovery of) income taxes
1
729
634
616
704
859
939
1,297
703
Share of net income from investment in Schwab
194
141
156
182
241
285
290
268
Net income – reported
1
2,564
2,824
2,866
2,881
3,306
1,581
6,671
3,214
Pre-tax adjustments for items of note
2
Amortization of acquired intangibles
72
94
92
88
79
54
57
58
Acquisition and integration charges related to the
Schwab transaction
21
32
31
54
30
34
18
23
Share of restructuring and other charges from
investment in Schwab
–
49
35
–
–
–
–
–
Restructuring charges
165
291
363
–
–
–
–
–
Acquisition and integration-related charges
102
117
197
143
73
21
18
–
Charges related to the terminated FHN acquisition
–
–
–
84
154
106
67
29
Payment related to the termination of the
FHN transaction
3
–
–
–
306
–
–
–
–
Impact from the terminated FHN acquisition-related
capital hedging strategy
64
57
64
177
134
876
(2,319)
678
Impact of retroactive tax legislation on payment card
clearing services
4
–
–
–
57
–
–
–
–
Civil matter provision/Litigation settlement
274
–
–
–
39
1,603
–
–
FDIC special assessment
103
411
–
–
–
–
–
–
Provision for investigations related to the
Bank’s AML program
615
–
–
–
–
–
–
–
Gain on sale of Schwab shares
4
–
–
–
–
–
–
(997)
–
Total pre-tax adjustments for items of note
1,416
1,051
782
909
509
2,694
(3,156)
788
Less: Impact of income taxes
2,5
191
238
163
141
108
121
(550)
189
Net income – adjusted
1,2
3,789
3,637
3,485
3,649
3,707
4,154
4,065
3,813
Preferred dividends and distributions on other
equity instruments
190
74
196
74
210
83
107
43
Net income available to common
shareholders – adjusted
1,2
$
3,599
$
3,563
$
3,289
$
3,575
$
3,497
$
4,071
$
3,958
$
3,770
(Canadian dollars, except as noted)
Basic earnings per share
1
Reported
$
1.35
$
1.55
$
1.48
$
1.53
$
1.69
$
0.82
$
3.62
$
1.76
Adjusted
2
2.04
2.01
1.82
1.95
1.91
2.24
2.18
2.09
Diluted earnings per share
1
Reported
1.35
1.55
1.48
1.53
1.69
0.82
3.62
1.75
Adjusted
2
2.04
2.00
1.82
1.95
1.91
2.23
2.18
2.09
Return on common equity – reported
9.5
%
10.9
%
10.5
%
10.8
%
12.4
%
5.9
%
26.5
%
13.5
%
Return on common equity – adjusted
1,2
14.5
14.1
12.9
13.8
14.0
16.1
16.0
16.1
(billions of Canadian dollars, except as noted)
Average total assets
$
1,938
$
1,934
$
1,910
$
1,898
$
1,944
$
1,931
$
1,893
$
1,811
Average interest-earning assets
6
1,754
1,729
1,715
1,716
1,728
1,715
1,677
1,609
Net interest margin – reported
1.73
%
1.72
%
1.73
%
1.69
%
1.76
%
1.79
%
1.81
%
1.74
%
Net interest margin – adjusted
2
1.75
1.74
1.75
1.70
1.81
1.82
1.80
1.73
1
2
Performed” section of this document as well as footnotes 3 and 4.
3
4
i. The Bank sold 28.4 million non-voting common shares of Schwab and recognized a gain on the sale. The amount is reported in the Corporate segment.
ii. Impact of retroactive tax legislation on payment card clearing services, reported in the Corporate segment.
5
6
Performed” section and the Glossary of this document for additional information about these metrics.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 22
BALANCE SHEET REVIEW
TABLE 17: SELECTED INTERIM CONSOLIDATED BALANCE SHEET ITEMS
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Assets
Cash and Interest-bearing deposits with banks
$
93,973
$
105,069
Trading loans, securities, and other
166,346
152,090
Non-trading financial assets at fair value through profit or loss
5,646
7,340
Derivatives
82,190
87,382
Financial assets designated at fair value through profit or loss
5,925
5,818
Financial assets at fair value through other comprehensive income
75,246
69,865
Debt securities at amortized cost, net of allowance for credit losses
293,594
308,016
Securities purchased under reverse repurchase agreements
205,722
204,333
Loans, net of allowance for loan losses
928,124
895,947
Investment in Schwab
9,866
8,907
Other
1
100,036
110,372
Total assets
1
$
1,966,668
$
1,955,139
Liabilities
Trading deposits
$
31,221
$
30,980
Derivatives
69,742
71,640
Financial liabilities designated at fair value through profit or loss
188,105
192,130
Deposits
1,203,771
1,198,190
Obligations related to securities sold under repurchase agreements
192,239
166,854
Subordinated notes and debentures
11,318
9,620
Other
1
158,290
173,654
Total liabilities
1
1,854,686
1,843,068
Total equity
1
111,982
112,071
Total liabilities and equity
1
$
1,966,668
$
1,955,139
1
details.
Total assets
appreciation in the Canadian dollar decreased total assets by $7 billion.
The increase in total assets reflects an increase in loans, net of allowances for loan losses of $32 billion, trading loans, securities, and other of $14 billion, financial
assets at fair value through other comprehensive income (FVOCI) of $5 billion, securities purchased under reverse repurchase agreements of $2 billion and
investment in Schwab of $1 billion. The increase was partially offset by a decrease in debt securities at amortized cost (DSAC), net of allowance for credit losses
of $14 billion, cash and interest-bearing deposits with banks of $11 billion, other assets of $10 billion, derivative assets of $5 billion and non-trading financial assets
at fair value through profit or loss of $2 billion.
Cash and interest-bearing deposits with banks
decreased $11 billion primarily reflecting cash management activities.
Trading loans, securities, and other
increased $14 billion primarily in equity securities and commodities held for trading, partially offset by government securities
held for trading and the impact of foreign exchange translation.
Non-trading financial assets at fair value through profit or loss
decreased $2 billion reflecting maturities and sales.
Derivative
assets
decreased $5 billion primarily reflecting changes in mark-to-market values of foreign exchange and interest rate contracts.
Financial assets at fair value through other comprehensive income
sales.
Debt securities at amortized cost, net of allowance for credit losses
exchange translation, partially offset by new investments.
Securities purchased under reverse repurchase agreements
increased $2 billion
primarily
reflecting an increase in volume, partially offset by the impact of
foreign exchange translation.
Loans, net of allowance for loan losses
secured lending, partially offset by the impact of foreign exchange translation.
Investment in Schwab
increased $1 billion primarily reflecting the impact of the Bank’s share of Schwab’s other comprehensive income.
Other
receivable from brokers, dealers, and clients due to higher volumes of pending trades.
Total liabilities
appreciation in the Canadian dollar decreased total liabilities by $7 billion.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 23
The increase in total liabilities reflects an increase in obligations related to securities sold under repurchase agreements of $25 billion, deposits of $6 billion, and
subordinated notes and debentures of $2 billion. The increase was partially offset by a decrease in other liabilities of $15 billion, financial liabilities designated at
fair value through profit or loss of $4 billion and derivative liabilities of $2 billion.
Derivative
liabilities
decreased $2 billion primarily reflecting changes in mark-to-market values of foreign exchange and interest rate contracts.
Financial liabilities designated at fair value through profit or loss
partially offset by new issuances.
Deposits
increased $6 billion primarily reflecting volume increase in business and government and personal deposits, partially offset by the impact of foreign
exchange translation.
Obligations related to securities sold under repurchase agreements
increased $25 billion reflecting an increase in volume, partially offset by the impact of
foreign exchange translation.
Subordinated notes and debentures
increased $2 billion reflecting a new issuance.
Other
volume increase in securitization liabilities at fair value.
Equity
was $112 billion as at April 30, 2024 and October 31, 2023, reflecting an increase in accumulated other comprehensive income, offset by lower retained
earnings. The increase in accumulated other comprehensive income is primarily driven by gains on cash flow hedges and the Bank’s share of the other
comprehensive income from investment in Schwab, partially offset by the impact of foreign exchange translation. The retained earnings decreased primarily from
dividends paid and the premium on the repurchase of common shares, partially offset by net income.
CREDIT PORTFOLIO QUALITY
Quarterly comparison – Q2 2024 vs. Q2 2023
Gross impaired loans excluding acquired credit-impaired (ACI) loans were $3,895 million as at April 30, 2024, an increase of $1,236 million, or 46%, compared
with the second quarter last year. Canadian Personal and Commercial Banking gross impaired loans increased $541 million, or 47%, compared with the second
quarter last year, reflecting formations outpacing resolutions in the commercial and consumer lending portfolios. U.S. Retail gross impaired loans increased
$714 million, or 49%, compared with the second quarter last year, reflecting formations outpacing resolutions in the commercial and consumer lending portfolios,
and the impact of foreign exchange. Wholesale gross impaired loans decreased $19 million, compared with the second quarter last year, reflecting resolutions
outpacing formations. Net impaired loans were $2,744 million as at April 30, 2024, an increase of $941 million, or 52%, compared with the second quarter last
year.
The allowance for credit losses of $8,550 million as at April 30, 2024 was comprised of Stage 3 allowance for impaired loans of $1,162 million, Stage 2
allowance of $4,483 million and Stage 1 allowance of $2,902 million, and the allowance for debt securities of $3 million. The Stage 1 and 2 allowances are for
performing loans and off-balance sheet instruments.
The Stage 3 allowance for loan losses increased $300 million, or 35%, reflective of credit migration in the Canadian Personal and Commercial Banking,
U.S. Retail, and Corporate segments, and the impact of foreign exchange. The Stage 1 and Stage 2 allowance for loan losses increased $603 million, or 9%,
reflecting credit conditions, including credit migration, volume growth, and the impact of foreign exchange. The allowance change included an increase of
$77 million attributable to the retailer program partners’ share of the U.S. strategic cards portfolio.
The allowance for debt securities was $3 million, consistent with the second quarter last year.
Forward-looking information, including macroeconomic variables deemed to be predictive of expected credit losses (ECLs) based on the Bank’s experience, is
used to determine ECL scenarios and associated probability weights to determine the probability-weighted ECLs. Each quarter, all base forecast macroeconomic
variables are refreshed, resulting in new upside and downside macroeconomic scenarios. The probability weightings assigned to each ECL scenario are also
reviewed each quarter and updated as required, as part of the Bank’s ECL governance process. As a result of periodic reviews and quarterly updates, the
allowance for credit losses may be revised to reflect updates in loss estimates based on the Bank’s recent loss experience and its forward-looking views. The Bank
periodically reviews the methodology and has performed certain additional quantitative and qualitative portfolio and loan level assessments of significant increase
in credit risk. Refer to Note 3 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements for further details on forward-looking information.
The probability-weighted allowance for credit losses reflects the Bank’s forward-looking views. To the extent that certain anticipated effects cannot be fully
incorporated into quantitative models, management continues to exercise expert credit judgment in determining the amount of ECLs. The allowance for credit
losses will be updated in future quarters as additional information becomes available. Refer to Note 3 of the Bank’s second quarter 2024 Interim Consolidated
Financial Statements for additional details.
The Bank calculates allowances for ECLs on debt securities measured at amortized cost and FVOCI. The Bank has $365 billion in such debt securities, all of
which are performing (Stage 1 and 2) and none are impaired (Stage 3). The allowance for credit losses on DSAC and debt securities at FVOCI was $2 million and
$1 million, respectively.
Quarterly comparison – Q2 2024 vs. Q1 2024
Gross impaired loans increased $186 million, or 5%, compared with the prior quarter. Impaired loans net of allowance increased $218 million, or 9%, compared
with the prior quarter.
The allowance for credit losses of $8,550 million as at April 30, 2024 was comprised of Stage 3 allowance for impaired loans of $1,162 million, Stage 2
allowance of $4,483 million and Stage 1 allowance of $2,902 million, and the allowance for debt securities of $3 million. The Stage 1 and 2 allowances are for
performing loans and off-balance sheet instruments. The Stage 3 allowance for loan losses decreased $25 million, or 2%, compared with the prior quarter. The
Stage 1 and Stage 2 allowance for loan losses increased $307 million, compared with the prior quarter, primarily reflecting current credit conditions, including
credit migration, the impact of foreign exchange, and volume growth.
The allowance for debt securities was $3 million, consistent with the prior quarter.
For further details on loans, impaired loans, allowance for credit losses, and on the Bank’s use of forward-looking information and macroeconomic variables in
determining its allowance for credit losses, refer to Note 6 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 24
TABLE 18: CHANGES IN GROSS IMPAIRED LOANS AND ACCEPTANCES
1,2,3
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
Personal, Business, and Government Loans
Impaired loans as at beginning of period
$
3,709
$
3,299
$
2,591
$
3,299
$
2,503
Classified as impaired during the period
1,937
2,005
1,259
3,942
2,609
Transferred to performing during the period
(261)
(315)
(204)
(576)
(444)
Net repayments
(465)
(308)
(334)
(773)
(695)
Disposals of loans
–
(10)
–
(10)
–
Amounts written off
(1,080)
(917)
(679)
(1,997)
(1,304)
Exchange and other movements
55
(45)
26
10
(10)
Impaired loans as at end of period
$
3,895
$
3,709
$
2,659
$
3,895
$
2,659
1
2
3
TABLE 19: ALLOWANCE FOR CREDIT LOSSES
(millions of Canadian dollars, except as noted)
As at
April 30
January 31
April 30
2024
2024
2023
Allowance for loan losses for on-balance sheet loans
Stage 1 allowance for loan losses
$
2,479
$
2,396
$
2,551
Stage 2 allowance for loan losses
3,915
3,686
3,234
Stage 3 allowance for loan losses
1,151
1,183
859
Total allowance for loan losses for on-balance sheet loans
1
7,545
7,265
6,644
Allowance for off-balance sheet instruments
Stage 1 allowance for loan losses
423
424
465
Stage 2 allowance for loan losses
568
572
532
Stage 3 allowance for loan losses
11
4
3
Total allowance for off-balance sheet instruments
1,002
1,000
1,000
Allowance for loan losses
8,547
8,265
7,644
Allowance for debt securities
3
3
3
Allowance for credit losses
$
8,550
$
8,268
$
7,647
Impaired loans, net of allowance
2
$
2,744
$
2,526
$
1,803
Net impaired loans as a percentage of net loans
2
0.29
%
0.28
%
0.21
%
Total allowance for credit losses as a percentage of gross loans and acceptances
0.91
0.89
0.87
Provision for (recovery of) credit losses as a percentage of net average loans and acceptances
0.47
0.44
0.28
1
2
Real Estate Secured Lending
Retail real estate secured lending includes mortgages and lines of credit to North American consumers to satisfy financing needs including home purchases and
refinancing. While the Bank retains first lien on the majority of properties held as security, there is a small portion of loans with second liens, but most of these are
behind a TD mortgage that is in first position. In Canada, credit policies are designed so that the combined exposure of all uninsured facilities on one property does
not exceed 80% of the collateral value at origination. Lending at a higher loan-to-value ratio is permitted by legislation but requires default insurance. This
insurance is contractual coverage for the life of eligible facilities and protects the Bank’s real estate secured lending portfolio against potential losses caused by
borrowers’ default. The Bank may also purchase default insurance on lower loan-to-value ratio loans. The insurance is provided by either government-backed
entities or approved private mortgage insurers. In the U.S., for residential mortgage originations, mortgage insurance is usually obtained from either government-
backed entities or approved private mortgage insurers when the loan-to-value exceeds 80% of the collateral value at origination.
The Bank regularly performs stress tests on its real estate lending portfolio as part of its overall stress testing program. This is done with a view to determine the
extent to which the portfolio would be vulnerable to a severe downturn in economic conditions. The effect of severe changes in house prices, interest rates, and
unemployment levels are among the factors considered when assessing the impact on credit losses and the Bank’s overall profitability. A variety of portfolio
segments, including dwelling type and geographical regions, are examined during the exercise to determine whether specific vulnerabilities exist.
TABLE 20: CANADIAN REAL ESTATE SECURED LENDING
1,2
(millions of Canadian dollars)
As at
Amortizing
Non-amortizing
Total
Residential
Home equity
Total amortizing real
Home equity
mortgages
lines of credit
estate secured lending
lines of credit
April 30, 2024
Total
$
268,732
$
87,295
$
356,027
$
31,940
$
387,967
October 31, 2023
Total
$
263,733
$
86,943
$
350,676
$
30,675
$
381,351
1
2
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 25
TABLE 21: REAL ESTATE SECURED LENDING
1,2
(millions of Canadian dollars, except as noted)
As at
Residential mortgages
Home equity lines of credit
Total
Insured
3
Uninsured
Insured
3
Uninsured
Insured
3
Uninsured
April 30, 2024
Canada
Atlantic provinces
$
2,514
0.9
%
$
4,642
1.7
%
$
170
0.1
%
$
2,039
1.7
%
$
2,684
0.7
%
$
6,681
1.7
%
British Columbia
4
8,532
3.2
47,093
17.6
859
0.7
22,029
18.5
9,391
2.4
69,122
17.8
Ontario
4
22,363
8.4
122,615
45.6
2,938
2.5
65,170
54.6
25,301
6.6
187,785
48.4
Prairies
4
18,312
6.8
21,086
7.8
1,634
1.4
12,031
10.1
19,946
5.1
33,117
8.5
Québec
7,042
2.6
14,533
5.4
550
0.5
11,815
9.9
7,592
2.0
26,348
6.8
Total Canada
58,763
21.9
%
209,969
78.1
%
6,151
5.2
%
113,084
94.8
%
64,914
16.8
%
323,053
83.2
%
United States
1,480
55,820
–
10,818
1,480
66,638
Total
$
60,243
$
265,789
$
6,151
$
123,902
$
66,394
$
389,691
October 31, 2023
Canada
Atlantic provinces
$
2,561
1.0
%
$
4,557
1.7
%
$
181
0.2
%
$
1,938
1.6
%
$
2,742
0.7
%
$
6,495
1.7
%
British Columbia
4
8,642
3.3
46,003
17.4
920
0.8
21,642
18.4
9,562
2.5
67,645
17.7
Ontario
4
22,559
8.6
118,882
45.1
3,126
2.7
64,095
54.4
25,685
6.8
182,977
48.1
Prairies
4
18,621
7.1
20,385
7.7
1,746
1.5
11,956
10.2
20,367
5.3
32,341
8.5
Québec
7,221
2.7
14,302
5.4
590
0.5
11,424
9.7
7,811
2.0
25,726
6.7
Total Canada
59,604
22.7
%
204,129
77.3
%
6,563
5.7
%
111,055
94.3
%
66,167
17.3
%
315,184
82.7
%
United States
1,439
55,169
–
10,591
1,439
65,760
Total
$
61,043
$
259,298
$
6,563
$
121,646
$
67,606
$
380,944
1
2
3
caused by borrower default. It is provided by either government-backed entities or other approved private mortgage insurers.
4
The following table provides a summary of the period over which the Bank’s residential mortgages would be fully repaid based on the amount of the most recent
payment received. All figures are calculated based on current customer payment amounts, including voluntary payments larger than the original contractual
amounts and/or other voluntary prepayments. The most recent customer payment amount may exceed the original contractual amount due.
Balances with a remaining amortization longer than 30 years primarily reflect Canadian variable rate mortgages where interest rate increases relative to current
customer payment levels have resulted in a longer current amortization period. At renewal, the amortization period for Canadian mortgages reverts to the
remaining contractual amortization, which may require increased payments.
TABLE 22: RESIDENTIAL MORTGAGES BY REMAINING AMORTIZATION
1,2,3
As at
<=5
>5 – 10
>10 – 15
>15 – 20
>20 – 25
>25 – 30
>30 – 35
>35
years
years
years
years
years
years
years
years
Total
April 30, 2024
Canada
0.8
%
2.7
%
5.9
%
14.7
%
31.7
%
26.3
%
1.4
%
16.5
%
100.0
%
United States
4.3
1.2
3.4
7.6
11.6
70.6
0.8
0.5
100.0
Total
1.4
%
2.4
%
5.5
%
13.5
%
28.1
%
34.2
%
1.3
%
13.6
%
100.0
%
October 31, 2023
Canada
0.8
%
2.7
%
5.7
%
14.1
%
31.5
%
24.6
%
1.4
%
19.2
%
100.0
%
United States
5.3
1.4
3.8
7.8
10.6
69.5
1.1
0.5
100.0
Total
1.6
%
2.5
%
5.3
%
13.0
%
27.8
%
32.6
%
1.4
%
15.8
%
100.0
%
1
2
3
cover the interest based on the rates in effect at April 30, 2024 and October 31, 2023, respectively.
TABLE 23: UNINSURED AVERAGE LOAN-TO-VALUE – Newly Originated and Newly Acquired
1,2,3
For the three months ended
Residential
Home equity
Residential
Home equity
mortgages
lines of credit
4,5
Total
mortgages
lines of credit
4,5
Total
April 30, 2024
October 31, 2023
Canada
Atlantic provinces
70
%
67
%
69
%
69
%
67
%
68
%
British Columbia
6
67
61
64
65
59
63
Ontario
6
68
61
64
66
60
63
Prairies
6
73
69
71
72
69
71
Québec
69
68
69
69
67
68
Total Canada
68
63
66
67
62
65
United States
72
60
67
75
63
72
Total
69
%
62
%
66
%
68
%
62
%
66
%
1
2
3
4
5
6
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 26
Sovereign Risk
The table below provides a summary of the Bank’s direct credit exposures outside of Canada and the U.S. (Europe excludes United Kingdom).
TABLE 24: Total Net Exposure by Region and Counterparty
(millions of Canadian dollars)
As at
Loans and commitments
1
Derivatives, repos, and securities lending
2
Trading and investment portfolio
3
Total
Corporate
Sovereign
Financial
Total
Corporate
Sovereign
Financial
Total
Corporate
Sovereign
Financial
Total
Exposure
4
April 30, 2024
Region
Europe
$
8,383
$
7
$
5,438
$
13,828
$
3,877
$
1,887
$
8,628
$
14,392
$
1,018
$
24,766
$
2,568
$
28,352
$
56,572
United Kingdom
8,952
2,759
2,485
14,196
3,119
435
13,487
17,041
945
934
267
2,146
33,383
Asia
245
26
2,368
2,639
447
680
2,323
3,450
197
10,749
1,178
12,124
18,213
Other
5
204
–
525
729
221
1,018
3,061
4,300
147
502
3,057
3,706
8,735
Total
$
17,784
$
2,792
$
10,816
$
31,392
$
7,664
$
4,020
$
27,499
$
39,183
$
2,307
$
36,951
$
7,070
$
46,328
$
116,903
October 31, 2023
Region
Europe
$
7,577
$
7
$
5,324
$
12,908
$
3,763
$
1,945
$
6,736
$
12,444
$
777
$
25,015
$
2,001
$
27,793
$
53,145
United Kingdom
8,928
7,965
2,131
19,024
2,759
490
13,431
16,680
491
596
257
1,344
37,048
Asia
254
20
2,167
2,441
262
706
2,640
3,608
325
10,728
830
11,883
17,932
Other
5
233
8
517
758
233
720
2,883
3,836
209
1,205
3,443
4,857
9,451
Total
$
16,992
$
8,000
$
10,139
$
35,131
$
7,017
$
3,861
$
25,690
$
36,568
$
1,802
$
37,544
$
6,531
$
45,877
$
117,576
1
2
Association master netting agreement.
3
4
5
CAPITAL POSITION
REGULATORY CAPITAL
Capital requirements of the Basel Committee on Banking Supervision (BCBS) are commonly referred to as Basel III. Under Basel III, Total Capital consists of three
components, namely CET1, Additional Tier 1, and Tier 2 Capital. Risk sensitive regulatory capital ratios are calculated by dividing CET1, Tier 1, and Total Capital
by risk-weighted assets (RWA), inclusive of any minimum requirements outlined under the regulatory floor. In 2015, Basel III introduced a non-risk sensitive
leverage ratio to act as a supplementary measure to the risk-sensitive capital requirements. The leverage ratio is calculated by dividing Tier 1 Capital by leverage
exposure which is primarily comprised of on-balance sheet assets with adjustments made to derivative and securities financing transaction exposures, and credit
equivalent amounts of off-balance sheet exposures. TD manages its regulatory capital in accordance with OSFI’s implementation of the Basel III Capital
Framework.
OSFI’s Capital Requirements under Basel III
OSFI’s CAR and LR guidelines detail how the Basel III capital rules apply to Canadian banks.
The Domestic Stability Buffer (DSB) level was increased to 3.5% as of November 1, 2023. The 50 bps increase from the previous level of 3% reflects OSFI’s view
of appropriate actions to enhance the resilience of Canada’s largest banks against vulnerabilities. The current DSB range is 0 to 4% and the DSB level may
change in response to developments in Canada’s financial system and the broader economic environment.
On February 1, 2023, OSFI implemented revised capital rules that incorporate the Basel III reforms with adjustments to make them suitable for domestic
implementation. These revised rules include revisions to the calculation of credit risk and operational risk requirements, and revisions to the LR Guideline to
include a requirement for domestic systemically important banks (D-SIBs) to hold a leverage ratio buffer of 0.50% in addition to the regulatory minimum
requirement of 3.0%. This buffer will also apply to the TLAC leverage ratio.
On November 1, 2023, the Bank implemented OSFI’s Parental Stand-Alone (Solo) Total Loss Absorbing Capacity (TLAC) Framework for D-SIBs, which
establishes a risk-based measure intended to ensure a non-viable D-SIB has sufficient loss absorbing capacity on a stand-alone, legal entity basis to support its
resolution. The Bank is compliant with the requirements set out in this new framework.
The table below summarizes OSFI’s current regulatory minimum capital targets for the Bank as at April 30, 2024.
REGULATORY CAPITAL AND TLAC TARGET RATIOS
Capital
Pillar 1
Pillar 1 & 2
Conservation
D-SIB / G-SIB
Regulatory
Regulatory
Minimum
Buffer
Surcharge
1
Target
2
DSB
Target
CET1
4.5
%
2.5
%
1.0
%
8.0
%
3.5
%
11.5
%
Tier 1
6.0
2.5
1.0
9.5
3.5
13.0
Total Capital
8.0
2.5
1.0
11.5
3.5
15.0
Leverage
3.0
n/a
3
0.5
3.5
n/a
3.5
TLAC
18.0
2.5
1.0
21.5
3.5
25.0
TLAC Leverage
6.75
n/a
0.50
7.25
n/a
7.25
1
additional common equity requirement for risk weighted capital. The G-SIB surcharge may increase above 1% if the Bank’s G-SIB score increases above certain thresholds to a maximum
of 4.5%. OSFI’s Leverage Requirements Guideline includes a requirement for D-SIBs to hold a leverage ratio buffer set at 50% of a D-SIB’s higher loss absorbency risk -weighted
requirements, effectively 0.50%. This buffer also applies to the TLAC Leverage ratio.
2
3
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 27
The following table provides details of the Bank’s regulatory capital position.
TABLE 25: CAPITAL STRUCTURE AND RATIOS – Basel III
(millions of Canadian dollars, except as noted)
As at
April 30
October 31
April 30
2024
2023
2023
Common Equity Tier 1 Capital
Common shares plus related contributed surplus
$
25,410
$
25,522
$
25,912
Retained earnings
71,904
73,044
74,849
Accumulated other comprehensive income
4,166
2,750
4,108
Common Equity Tier 1 Capital before regulatory adjustments
101,480
101,316
104,869
Common Equity Tier 1 Capital regulatory adjustments
Goodwill (net of related tax liability)
(18,470)
(18,424)
(18,016)
Intangibles (net of related tax liability)
(2,759)
(2,606)
(2,496)
Deferred tax assets excluding those arising from temporary differences
(180)
(207)
(96)
Cash flow hedge reserve
4,878
5,571
3,678
Shortfall of provisions to expected losses
–
–
–
Gains and losses due to changes in own credit risk on fair valued liabilities
(181)
(379)
(294)
Defined benefit pension fund net assets (net of related tax liability)
(676)
(908)
(1,129)
Investment in own shares
(8)
(21)
(18)
Non-significant investments in the capital of banking, financial, and insurance entities, net of eligible
short positions (amount above 10% threshold)
(3,202)
(1,976)
(2,135)
Significant investments in the common stock of banking, financial, and insurance entities
that are outside the scope of regulatory consolidation, net of eligible short positions
(amount above 10% threshold)
–
–
–
Equity investments in funds subject to the fall-back approach
(51)
(49)
(35)
Other deductions or regulatory adjustments to CET1 as determined by OSFI
10
–
–
Total regulatory adjustments to Common Equity Tier 1 Capital
(20,639)
(18,999)
(20,541)
Common Equity Tier 1 Capital
80,841
82,317
84,328
Additional Tier 1 Capital instruments
Directly issued qualifying Additional Tier 1 instruments plus stock surplus
10,502
10,791
11,245
Additional Tier 1 Capital instruments before regulatory adjustments
10,502
10,791
11,245
Additional Tier 1 Capital instruments regulatory adjustments
Non-significant investments in the capital of banking, financial, and insurance entities, net of eligible
short positions (amount above 10% threshold)
(5)
(6)
(112)
Significant investments in the capital of banking, financial, and insurance entities that are outside
the scope of regulatory consolidation, net of eligible short positions
(350)
(350)
(350)
Total regulatory adjustments to Additional Tier 1 Capital
(355)
(356)
(462)
Additional Tier 1 Capital
10,147
10,435
10,783
Tier 1 Capital
90,988
92,752
95,111
Tier 2 Capital instruments and provisions
Directly issued qualifying Tier 2 instruments plus related stock surplus
11,120
9,424
11,166
Collective allowances
1,485
1,964
2,143
Tier 2 Capital before regulatory adjustments
12,605
11,388
13,309
Tier 2 regulatory adjustments
Investments in own Tier 2 instruments
–
–
–
Non-significant investments in the capital of banking, financial, and insurance entities, net of eligible
short positions (amount above 10% threshold)
1
(316)
(196)
(232)
Non-significant investments in the other TLAC-eligible instruments issued by G-SIBs and Canadian
D-SIBs, where the institution does not own more than 10% of the issued common share capital
of the entity: amount previously designated for the 5% threshold but that no longer meets the
conditions
(144)
(136)
(68)
Significant investments in the capital of banking, financial, and insurance entities that are outside
the scope of regulatory consolidation, net of eligible short positions
(160)
(160)
(160)
Total regulatory adjustments to Tier 2 Capital
(620)
(492)
(460)
Tier 2 Capital
11,985
10,896
12,849
Total Capital
$
102,973
$
103,648
$
107,960
Risk-weighted assets
$
602,825
$
571,161
$
549,398
Capital Ratios and Multiples
Common Equity Tier 1 Capital (as percentage of risk-weighted assets)
13.4
%
14.4
%
15.3
%
Tier 1 Capital (as percentage of risk-weighted assets)
15.1
16.2
17.3
Total Capital (as percentage of risk-weighted assets)
17.1
18.1
19.7
Leverage ratio
2
4.3
4.4
4.6
1
10% of the issued common share capital of the entity.
2
The impact to CET1 capital upon adoption of IFRS 17 is immaterial to the Bank.
As at April 30, 2024, the Bank’s CET1, Tier 1, and Total Capital ratios were 13.4%, 15.1%, and 17.1%, respectively. The decrease in the Bank’s CET1 Capital ratio
from 14.4% as at October 31, 2023, was primarily attributable to RWA growth across various segments, common shares repurchased for cancellation, and the
impact of the regulatory changes related to the Fundamental Review of the Trading Book and Negatively amortizing mortgages. CET1 was also impacted by the
FDIC special assessment booked in the fiscal year, items related to the provision for investigations related to the Bank’s AML program, and the impact of a civil
matter provision. The impact of the foregoing items was partially offset by organic growth, and the issuance of common shares pursuant to the Bank’s dividend
reinvestment plan.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 28
As at April 30, 2024, the Bank’s leverage ratio was 4.3%. The decrease in the Bank’s leverage ratio from 4.4% as at October 31, 2023 was primarily attributable to
exposure increases across various segments, common shares repurchased for cancellation, items related to the provision for investigations related to the Bank’s
AML program, and the impact of a civil matter provision. The impact of the foregoing items was partially offset by organic capital growth and the issuance of
common shares pursuant to the Bank’s dividend reinvestment plan.
Future Regulatory Capital Developments
There are no future regulatory capital developments in addition to those described in the “Future Regulatory Capital Developments” section of the Bank’s 2023
Annual Report.
TABLE 26: EQUITY AND OTHER SECURITIES
1
(millions of shares/units and millions of Canadian dollars, except as noted)
As at
April 30, 2024
October 31, 2023
Number of
Number of
shares/units
Amount
shares/units
Amount
Common shares outstanding
1,759.6
$
25,257
1,791.4
$
25,434
Treasury – common shares
(0.3)
(24)
(0.7)
(64)
Total common shares
1,759.3
$
25,233
1,790.7
$
25,370
Stock options
Vested
6.1
5.1
Non-vested
9.3
9.0
Preferred shares – Class A
Series 1
20.0
$
500
20.0
$
500
Series 3
20.0
500
20.0
500
Series 5
20.0
500
20.0
500
Series 7
14.0
350
14.0
350
Series 9
8.0
200
8.0
200
Series 16
14.0
350
14.0
350
Series 18
14.0
350
14.0
350
Series 22
2
–
–
14.0
350
Series 24
18.0
450
18.0
450
Series 27
0.8
850
0.8
850
Series 28
0.8
800
0.8
800
129.6
$
4,850
143.6
$
5,200
Other equity instruments
Limited Recourse Capital Notes Series 1
3
1.8
1,750
1.8
1,750
Limited Recourse Capital Notes Series 2
3
1.5
1,500
1.5
1,500
Limited Recourse Capital Notes Series 3
3,4
1.7
2,403
1.7
2,403
134.6
$
10,503
148.6
$
10,853
Treasury – preferred shares and other equity instruments
(0.1)
(8)
(0.1)
(65)
Total preferred shares and other equity instruments
134.5
$
10,495
148.5
$
10,788
1
2
redemption price of $25.00 per Series 22 Preferred Share, for a total redemption cost of $350 million.
3
4
Conditions” table in Note 20 of the Bank’s 2023 Consolidated Financial Statements for further details.
DIVIDENDS
On May 22, 2024, the Board approved a dividend in an amount of one dollar and two cents ($1.02) per fully paid common share in the capital stock of the Bank for
the quarter ending July 31, 2024, payable on and after July 31, 2024, to shareholders of record at the close of business on July 10, 2024.
DIVIDEND REINVESTMENT PLAN
The Bank offers a dividend reinvestment plan for its common shareholders. Participation in the plan is optional and under the terms of the plan, cash dividends on
common shares are used to purchase additional common shares. At the option of the Bank, the common shares may be issued from treasury at an average
market price based on the last five trading days before the date of the dividend payment, with a discount of between 0% to 5% at the Bank’s discretion or
purchased from the open market at market price.
During the three and six months ended April 30, 2024, the Bank issued 1.6 million and 3.3 million common shares, respectively, from treasury with no discount.
During the three and six months ended April 30, 2023, the Bank issued 8.9 million and 16.8 million common shares, respectively, from treasury with a 2% discount.
NORMAL COURSE ISSUER BID
On August 28, 2023, the Bank announced that the Toronto Stock Exchange and OSFI approved a normal course issuer bid (NCIB) to repurchase for cancellation
up to 90 million of its common shares. The NCIB commenced on August 31, 2023, and during the three months ended April 30, 2024, the Bank repurchased
15.2 million common shares under the NCIB, at an average price of $80.10 per share for a total amount of $1.2 billion. During the six months ended April 30, 2024,
the Bank repurchased 36.1 million common shares under the NCIB, at an average price of $81.43 per share for a total amount of $2.9 billion. From the
commencement of the NCIB to April 30, 2024, the Bank repurchased 58 million shares under the program.
NON-VIABILITY CONTINGENT CAPITAL PROVISION
If a non-viability contingent capital (NVCC) trigger event were to occur, for all series of Class A First Preferred Shares excluding the preferred shares issued with
respect to LRCNs, the maximum number of common shares that could be issued, assuming there are no declared and unpaid dividends on the respective series
of preferred shares at the time of conversion, would be 1.0 billion in aggregate.
The LRCNs, by virtue of the recourse to the preferred shares held in the Limited Recourse Trust, include NVCC provisions. For LRCNs, if an NVCC trigger were
to occur, the maximum number of common shares that could be issued, assuming there are no declared and unpaid dividends on the preferred shares series
issued in connection with such LRCNs, would be 1.1 billion in aggregate.
For NVCC subordinated notes and debentures, if an NVCC trigger event were to occur, the maximum number of common shares that could be issued,
assuming there is no accrued and unpaid interest on the respective subordinated notes and debentures, would be 3.4 billion in aggregate.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 29
MANAGING RISK
EXECUTIVE SUMMARY
Growing profitability in financial results based on balanced revenue, expense and capital growth services involves selectively taking and managing risks within the
Bank’s risk appetite. The Bank’s goal is to earn a stable and sustainable rate of return for every dollar of risk it takes, while putting significant emphasis on
investing in its businesses to meet its future strategic objectives.
The Bank’s businesses and operations are exposed to a broad number of risks that have been identified and defined in the Enterprise Risk Framework. The
Bank’s tolerance to those risks is defined in the Enterprise Risk Appetite which has been developed within a comprehensive framework that takes into
consideration current conditions in which the Bank operates and the impact that emerging risks will have on TD’s strategy and risk profile. The Bank’s risk appetite
states that it takes risks required to build its business, but only if those risks: (1) fit the business strategy and can be understood and managed; (2) do not expose
the enterprise to any significant single loss events; TD does not ‘bet the bank’ on any single acquisition, business, or product; and (3) do not risk harming the TD
brand. Each business is responsible for setting and aligning its individual risk appetites with that of the enterprise based on a thorough examination of the specific
risks to which it is exposed.
The Bank considers it critical to regularly assess its operating environment and highlight top and emerging risks. These are risks with a potential to have a
material effect on the Bank and where the attention of senior leaders is focused due to the potential magnitude or immediacy of their impact.
Risks are identified, discussed, and actioned by senior leaders and reported quarterly to the Risk Committee. Specific plans to mitigate top and emerging risks
are prepared, monitored, and adjusted as required.
The Bank’s risk governance structure and risk management approach have not substantially changed from that described in the Bank’s 2023 Annual Report.
Additional information on risk factors can be found in this document and the 2023 MD&A under the heading “Risk Factors and Management”. For a complete
discussion of the risk governance structure and the risk management approach, refer to the “Managing Risk” section in the Bank’s 2023 Annual Report.
The shaded sections of this MD&A represent a discussion relating to market and liquidity risks and form an integral part of the Interim Consolidated Financial
Statements for the period ended April 30, 2024.
CREDIT RISK
Gross credit risk exposure, also referred to as exposure at default (EAD), is the total amount the Bank is exposed to at the time of default of a loan and is
measured before counterparty-specific provisions or write-offs. Gross credit risk exposure does not reflect the effects of credit risk mitigation (CRM) and includes
both on-balance sheet and off-balance sheet exposures. On-balance sheet exposures consist primarily of outstanding loans, acceptances, non-trading securities,
derivatives, and certain other repo-style transactions. Off-balance sheet exposures consist primarily of undrawn commitments, guarantees, and certain other
repo-style transactions.
Gross credit risk exposures for the two approaches the Bank uses to measure credit risk are included in the following table.
TABLE 27: GROSS CREDIT RISK EXPOSURE – Standardized and Internal Ratings-Based (IRB) Approaches
1
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Standardized
IRB
Total
Standardized
IRB
Total
Retail
Residential secured
$
4,469
$
525,100
$
529,569
$
4,815
$
515,152
$
519,967
Qualifying revolving retail
858
170,498
171,356
810
169,183
169,993
Other retail
3,800
101,403
105,203
3,368
99,253
102,621
Total retail
9,127
797,001
806,128
8,993
783,588
792,581
Non-retail
Corporate
2,494
682,411
684,905
3,496
654,369
657,865
Sovereign
65
506,846
506,911
116
527,423
527,539
Bank
4,476
182,464
186,940
5,272
171,180
176,452
Total non-retail
7,035
1,371,721
1,378,756
8,884
1,352,972
1,361,856
Gross credit risk exposures
$
16,162
$
2,168,722
$
2,184,884
$
17,877
$
2,136,560
$
2,154,437
1
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 30
MARKET RISK
Market risk capital is calculated using the Standardized Approach. The Bank continues to use Value-at-Risk (VaR) as an internal management metric to monitor
and control market risk.
Market Risk Linkage to the Balance Sheet
The following table provides a breakdown of the Bank’s balance sheet assets and liabilities exposed to trading and non-trading market risks. Market risk of assets
and liabilities included in the calculation of VaR and metrics used for regulatory market risk capital purposes is classified as trading market risk.
TABLE 28: MARKET RISK LINKAGE TO THE BALANCE SHEET
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Non-trading market
Balance
Trading
Non-trading
Balance
Trading
Non-trading
risk – primary risk
sheet
market risk
market risk
Other
sheet
market risk
market risk
Other
sensitivity
Assets subject to market risk
Interest-bearing deposits with banks
$
87,665
$
886
$
86,779
$
–
$
98,348
$
327
$
98,021
$
–
Interest rate
Trading loans, securities, and other
166,346
164,633
1,713
–
152,090
151,011
1,079
–
Interest rate
Non-trading financial assets at
fair value through profit or loss
5,646
–
5,646
–
7,340
–
7,340
–
Equity,
foreign exchange,
interest rate
Derivatives
82,190
76,141
6,049
–
87,382
81,526
5,856
–
Equity,
foreign exchange,
interest rate
Financial assets designated at
fair value through profit or loss
5,925
–
5,925
–
5,818
–
5,818
–
Interest rate
Financial assets at fair value through
other comprehensive income
75,246
–
75,246
–
69,865
–
69,865
–
Equity,
foreign exchange,
interest rate
Debt securities at amortized cost,
net of allowance for credit losses
293,594
–
293,594
–
308,016
–
308,016
–
Foreign exchange,
interest rate
Securities purchased under
reverse repurchase agreements
205,722
8,920
196,802
–
204,333
9,649
194,684
–
Interest rate
Loans, net of allowance for
loan losses
928,124
–
928,124
–
895,947
–
895,947
–
Interest rate
Customers’ liability under
acceptances
4,183
–
4,183
–
17,569
–
17,569
–
Interest rate
Investment in Schwab
9,866
–
9,866
–
8,907
–
8,907
–
Equity
Other assets
1,2
1,655
–
1,655
–
1,956
–
1,956
–
Interest rate
Assets not exposed to
100,506
–
–
100,506
97,568
–
–
97,568
Total Assets
$
1,966,668
$
250,580
$
1,615,582
$
100,506
$
1,955,139
$
242,513
$
1,615,058
$
97,568
Liabilities subject to market risk
Trading deposits
$
31,221
$
27,548
$
3,673
$
–
$
30,980
$
27,059
$
3,921
$
–
Equity, interest rate
Derivatives
69,742
68,290
1,452
–
71,640
70,382
1,258
–
Equity,
foreign exchange,
interest rate
Securitization liabilities at fair value
17,653
17,653
–
–
14,422
14,422
–
–
Interest rate
Financial liabilities designated at
fair value through profit or loss
188,105
1
188,104
–
192,130
2
192,128
–
Interest rate
Deposits
1,203,771
–
1,203,771
–
1,198,190
–
1,198,190
–
Interest rate,
foreign exchange
Acceptances
4,183
–
4,183
–
17,569
–
17,569
–
Interest rate
Obligations related to securities
sold short
38,145
37,491
654
–
44,661
43,993
668
–
Interest rate
Obligations related to securities sold
under repurchase agreements
192,239
11,337
180,902
–
166,854
12,641
154,213
–
Interest rate
Securitization liabilities at amortized
cost
12,581
–
12,581
–
12,710
–
12,710
–
Interest rate
Subordinated notes and debentures
11,318
–
11,318
–
9,620
–
9,620
–
Interest rate
Other liabilities
1,2
28,804
–
28,804
–
27,062
–
27,062
–
Equity, interest rate
Liabilities and Equity not
exposed to market risk
168,906
–
–
168,906
169,301
–
–
169,301
Total Liabilities and Equity
$
1,966,668
$
162,320
$
1,635,442
$
168,906
$
1,955,139
$
168,499
$
1,617,339
$
169,301
1
2
details.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 31
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
2/1/2024
2/6/2024
2/11/2024
2/16/2024
2/21/2024
2/26/2024
3/2/2024
3/7/2024
3/12/2024
3/17/2024
3/22/2024
3/27/2024
4/1/2024
4/6/2024
4/11/2024
4/16/2024
4/21/2024
4/26/2024
TOTAL VALUE-AT-RISK AND TRADING NET REVENUE
(millions of Canadian dollars)
Calculating VaR
The Bank computes total VaR on a daily basis by combining the General Market Risk (GMR) and Idiosyncratic Debt Specific Risk (IDSR) associated with the
Bank’s trading positions.
GMR is determined by creating a distribution of potential changes in the market value of the current portfolio using historical simulation. The Bank values the
current portfolio using the market price and rate changes of the most recent
products. GMR is computed as the threshold level that portfolio losses are not expected to exceed more than
one
one-day
period is used for GMR calculation.
IDSR measures idiosyncratic (single-name) credit spread risk for credit exposures in the trading portfolio using Monte Carlo simulation. The IDSR model is
based on the historical behaviour of five-year idiosyncratic credit spreads. Similar to GMR, IDSR is computed as the threshold level that portfolio losses are not
expected to exceed more than
one
ten-day
The following graph discloses daily one-day VaR usage and trading net revenue, reported on a TEB, within Wholesale Banking. Trading net revenue includes
trading income and net interest income related to positions within the Bank’s market risk capital trading books. For the quarter ended April 30, 2024, there was
% of the trading days, reflecting normal trading activity. Losses in the year did not exceed
VaR on any trading day.
VaR is a valuable risk measure but it should be used in the context of its limitations, for example:
●
●
●
The Bank continuously improves its VaR methodologies and incorporates new risk measures in line with market conventions, industry best practices, and
regulatory requirements.
To mitigate some of the shortcomings of VaR, the Bank uses additional metrics designed for risk management purposes. This includes Stress Testing as well
as sensitivities to various market risk factors.
The following table presents the end of quarter, average, high, and low usage of TD’s VaR metric.
TABLE 29: PORTFOLIO MARKET RISK MEASURES
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
January 31
April 30
April 30
April 30
2024
2024
2023
2024
2023
As at
Average
High
Low
Average
Average
Average
Average
Interest rate risk
$
$
$
$
$
$
$
$
Credit spread risk
Equity risk
Foreign exchange risk
Commodity risk
Idiosyncratic debt specific risk
Diversification effect
1
(56.8 )
(52.8 )
n/m
2
n/m
(51.2 )
(65.9 )
(51.9 )
(64.4 )
Total Value-at-Risk (one-day)
1
The aggregate VaR is less than the sum of the VaR of the different risk types due to risk offsets resulting from portfolio diversification.
2
Average VaR decreased year-over-year and quarter-over-quarter due to changes in fixed income positions combined with narrower credit spreads.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 32
Validation of VaR Model
The Bank uses a back-testing process to compare actual profits and losses to VaR to review their consistency with the statistical results of the VaR model.
Structural (Non-Trading) Interest Rate Risk
The Bank’s structural interest rate risk arises from traditional personal and commercial banking activity and is generally the result of mismatches between the
maturities and repricing dates of the Bank’s assets and liabilities. The measurement of interest rate risk in the banking book does not include exposures from TD’s
Wholesale Banking or Insurance businesses.
The primary measures for this risk are Economic Value of Shareholders’ Equity (EVE) Sensitivity and Net Interest Income Sensitivity (NIIS).
The EVE Sensitivity measures the impact of a specified interest rate shock to the change in the net present value of the Bank’s banking book assets, liabilities,
and certain off-balance sheet items. It reflects a measurement of the potential present value impact on shareholders’ equity without an assumed term profile for the
management of the Bank’s own equity and excludes product margins.
The NIIS measures the NII change over a twelve-month horizon for a specified change in interest rates for banking book assets, liabilities, and certain off-
balance sheet items assuming a constant balance sheet over the period.
The Bank’s Market Risk policy sets overall limits on the structural interest rate risk measures. These limits are periodically reviewed and approved by the Risk
Committee. In addition to the Board policy limits, book-level risk limits are set for the Bank’s management of non-trading interest rate risk by Risk Management.
Exposures against these limits are routinely monitored and reported, and breaches of the Board limits, if any, are escalated to both the Asset/Liability and Capital
Committee (ALCO) and the Risk Committee.
The following table shows the potential before-tax impact of an immediate and sustained 100 bps increase or decrease in interest rates on the EVE and NIIS
measures. Interest rate floors are applied by currency to the decrease in rates such that they do not exceed expected lower bounds, with the most material
currencies set to a floor of -25 bps.
TABLE 30: STRUCTURAL INTEREST RATE SENSITIVITY MEASURES
(millions of Canadian dollars)
As at
April 30, 2024
January 31, 2024
April 30, 2023
EVE
NII
EVE
NII
EVE
NII
Sensitivity
Sensitivity
1
Sensitivity
Sensitivity
1
Sensitivity
Sensitivity
1
Canada
U.S.
Total
Canada
U.S.
Total
Total
Total
Total
Total
Before-tax impact of
$
(502 )
$
(1,810 )
$
(2,312 )
$
$
$
$
(2,136 )
$
$
(1,682 )
$
(484 )
(569 )
(1,053 )
(1,152 )
(910 )
1
Represents the twelve-month net interest income (NII) exposure to an immediate and sustained shock in rates.
As at April 30, 2024, an immediate and sustained 100 bps increase in interest rates would have had a negative impact to the Bank’s EVE of $
increase of $
sustained 100 bps decrease in interest rates would have had a positive impact to the Bank’s EVE of $
and a negative impact to the Bank’s NII of $
primarily due to an increase in the interest rate sensitivity of the Bank’s investment portfolio in the U.S. Region. The quarter-over-quarter decrease in NII Sensitivity
is primarily
due to Treasury hedging activity.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 33
Liquidity Risk
Liquidity risk is the risk of having insufficient cash or collateral to meet financial obligations and an inability to, in a timely manner, raise funding or monetize assets
at a non-distressed price. Financial obligations can arise from deposit withdrawals, debt maturities, commitments to provide credit or liquidity support, or the need
to pledge additional collateral.
TD’S LIQUIDITY RISK APPETITE
The Bank applies an established set of practices and protocols for managing its potential exposure to liquidity risk. The Bank targets a 90-day survival horizon
under a combined bank-specific and market-wide stress scenario, and a minimum buffer over regulatory requirements prescribed by the OSFI Liquidity Adequacy
Requirements (LAR) guidelines. Under the LAR guidelines, Canadian banks are required to maintain a Liquidity Coverage Ratio (LCR) at the minimum of 100%
other than during periods of financial stress and to maintain a Net Stable Funding Ratio (NSFR) at the minimum of 100%. The Bank’s funding program emphasizes
maximizing deposits as a core source of funding, and having ready access to wholesale funding markets across diversified terms, funding types, and currencies
that is designed to ensure low exposure to a sudden contraction of wholesale funding capacity and to minimize structural liquidity gaps. The Bank also maintains a
contingency funding plan to enhance preparedness for recovery from potential liquidity stress events. The Bank’s strategies and actions comprise an integrated
liquidity risk management program that is designed to ensure low exposure to liquidity risk and compliance with regulatory requirements.
LIQUIDITY RISK MANAGEMENT RESPONSIBILITY
The Bank’s ALCO oversees the Bank’s liquidity risk management program. It ensures there are effective management structures and practices in place to properly
measure and manage liquidity risk. The Global Liquidity & Funding Committee, a subcommittee of the ALCO comprised of senior management from Treasury,
Risk Management and Wholesale Banking, identifies and monitors the Bank’s liquidity risks. The management of liquidity risk is the responsibility of the SET
member responsible for Treasury, while oversight and challenge are provided by the ALCO and independently by Risk Management. The Risk Committee
regularly reviews the Bank’s liquidity position and approves the Bank’s Liquidity Risk Management Framework biennially and the related policies annually.
The Bank has established TD Group US Holding LLC (TDGUS) as TD’s U.S. Intermediate Holding Company (IHC), as well as a Combined U.S. Operations
(CUSO) reporting unit that consists of the IHC and TD’s U.S. branch and agency network. Both TDGUS and CUSO are managed to the U.S. Enhanced Prudential
Standards liquidity requirements in addition to the Bank’s liquidity management framework.
The Bank’s liquidity risk appetite and liquidity risk management approach have not substantially changed from that described in the Bank’s 2023 Annual Report.
For a complete discussion of liquidity risk, refer to the “Liquidity Risk” section in the Bank’s 2023 Annual Report.
Liquid assets
The unencumbered liquid assets the Bank holds to meet its liquidity requirements must be high-quality securities that the Bank believes can be monetized quickly
in stress conditions with minimum loss in market value. The liquidity value of unencumbered liquid assets considers estimated market or trading depths, settlement
timing, and/or other identified impediments to potential sale or pledging.
Assets held by the Bank to meet liquidity requirements are summarized in the following tables. The tables do not include assets held within the Bank’s
insurance businesses as these are used to support insurance-specific liabilities and capital requirements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 34
TABLE 31: SUMMARY OF LIQUID ASSETS BY TYPE AND CURRENCY
1,2
(millions of Canadian dollars, except as noted)
As at
Securities
received as
collateral from
securities
financing and
Bank-owned
derivative
Total
% of
Encumbered
Unencumbered
liquid assets
transactions
liquid assets
total
liquid assets
liquid assets
April 30, 2024
Cash and central bank reserves
$
$
$
%
$
$
Canadian government obligations
National Housing Act Mortgage-Backed
Securities (NHA MBS)
Obligations of provincial governments, public sector entities
and multilateral development banks
3
Corporate issuer obligations
Equities
Total Canadian dollar-denominated
Cash and central bank reserves
U.S. government obligations
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
Obligations of other sovereigns, public sector entities
and multilateral development banks
3
Corporate issuer obligations
Equities
Total non-Canadian dollar-denominated
Total
$
$
$
%
$
$
October 31, 2023
Cash and central bank reserves
$
$
$
%
$
$
Canadian government obligations
NHA MBS
Obligations of provincial governments, public sector entities
and multilateral development banks
3
Corporate issuer obligations
Equities
Total Canadian dollar-denominated
Cash and central bank reserves
U.S. government obligations
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
Obligations of other sovereigns, public sector entities
and multilateral development banks
3
Corporate issuer obligations
Equities
Total non-Canadian dollar-denominated
Total
$
$
$
%
$
$
1
Liquid assets include collateral received that can be re-hypothecated or otherwise redeployed.
2
3
Unencumbered liquid assets held in The Toronto-Dominion Bank and multiple domestic and foreign subsidiaries (excluding insurance subsidiaries) and branches
are summarized in the following table.
TABLE 32: SUMMARY OF UNENCUMBERED LIQUID ASSETS BY BANK, SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
As at
April 30
October 31
2024
2023
The Toronto-Dominion Bank (Parent)
$
$
Bank subsidiaries
Foreign branches
Total
$
$
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 35
The Bank’s monthly average liquid assets (excluding those held in insurance subsidiaries) for the quarters ended April 30, 2024 and January 31, 2024, are
summarized in the following table.
TABLE 33: SUMMARY OF AVERAGE LIQUID ASSETS BY TYPE AND CURRENCY
1,2
(millions of Canadian dollars, except as noted)
Average for the three months ended
Securities
received as
collateral from
securities
financing and
Total
Bank-owned
derivative
liquid
% of
Encumbered
Unencumbered
liquid assets
transactions
assets
Total
liquid assets
liquid assets
April 30, 2024
Cash and central bank reserves
$
21,416
$
–
$
21,416
2
%
$
662
$
20,754
Canadian government obligations
22,788
89,436
112,224
13
54,659
57,565
NHA MBS
41,280
17
41,297
5
1,397
39,900
Obligations of provincial governments, public sector
entities and multilateral development banks
3
42,126
23,814
65,940
8
35,200
30,740
Corporate issuer obligations
20,600
5,514
26,114
3
5,741
20,373
Equities
13,240
3,267
16,507
2
12,554
3,953
Total Canadian dollar-denominated
161,450
122,048
283,498
33
110,213
173,285
Cash and central bank reserves
61,498
–
61,498
7
228
61,270
U.S. government obligations
75,101
63,416
138,517
16
75,230
63,287
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
79,294
12,670
91,964
10
27,618
64,346
Obligations of other sovereigns, public sector entities and
multilateral development banks
3
65,033
36,777
101,810
12
39,427
62,383
Corporate issuer obligations
79,427
14,078
93,505
11
25,515
67,990
Equities
52,723
38,939
91,662
11
51,440
40,222
Total non-Canadian dollar-denominated
413,076
165,880
578,956
67
219,458
359,498
Total
$
574,526
$
287,928
$
862,454
100
%
$
329,671
$
532,783
January 31, 2024
Cash and central bank reserves
$
25,485
$
–
$
25,485
3
%
$
543
$
24,942
Canadian government obligations
17,377
82,565
99,942
12
54,469
45,473
NHA MBS
40,487
–
40,487
5
1,391
39,096
Obligations of provincial governments, public sector
entities and multilateral development banks
3
43,258
24,036
67,294
8
35,838
31,456
Corporate issuer obligations
19,590
5,056
24,646
3
5,314
19,332
Equities
11,845
2,423
14,268
1
10,393
3,875
Total Canadian dollar-denominated
158,042
114,080
272,122
32
107,948
164,174
Cash and central bank reserves
53,870
–
53,870
6
240
53,630
U.S. government obligations
76,266
64,334
140,600
17
70,162
70,438
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
78,957
12,071
91,028
11
26,571
64,457
Obligations of other sovereigns, public sector entities and
multilateral development banks
3
66,149
44,439
110,588
13
43,327
67,261
Corporate issuer obligations
78,943
11,043
89,986
11
17,989
71,997
Equities
48,073
36,885
84,958
10
48,537
36,421
Total non-Canadian dollar-denominated
402,258
168,772
571,030
68
206,826
364,204
Total
$
560,300
$
282,852
$
843,152
100
%
$
314,774
$
528,378
1
2
3
Average unencumbered liquid assets held in The Toronto-Dominion Bank and multiple domestic and foreign subsidiaries (excluding insurance subsidiaries) and
branches are summarized in the following table.
TABLE 34: SUMMARY OF AVERAGE UNENCUMBERED LIQUID ASSETS BY BANK, SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
Average for the three months ended
April 30
January 31
2024
2024
The Toronto-Dominion Bank (Parent)
$
227,812
$
209,171
Bank subsidiaries
278,667
285,938
Foreign branches
26,304
33,269
Total
$
532,783
$
528,378
ASSET ENCUMBRANCE
In the course of the Bank’s day-to-day operations, assets are pledged to obtain funding, support trading and brokerage businesses, and participate in clearing
and/or settlement systems. A summary of encumbered and unencumbered assets (excluding assets held in insurance subsidiaries) is presented in the following
table to identify assets that are used or available for potential funding needs.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 36
TABLE 35: ENCUMBERED AND UNENCUMBERED ASSETS
(millions of Canadian dollars)
As at
Total Assets
Encumbered
1
Unencumbered
Securities
received as
securities
financing and
Bank-owned
derivative
Total
Pledged as
Available as
assets
transactions
2
Assets
Collateral
3
Other
4
Collateral
5
Other
6
April 30, 2024
Cash and due from banks
$
6,308
$
–
$
6,308
$
–
$
–
$
7
$
6,301
Interest-bearing deposits with
banks
87,665
–
87,665
5,358
–
78,526
3,781
Securities, trading loans, and other
7
546,757
435,351
982,108
412,327
18,123
525,410
26,248
Derivatives
82,190
–
82,190
–
–
–
82,190
Securities purchased under reverse
repurchase agreements
8
205,722
(205,722)
–
–
–
–
–
Loans, net of allowance for loan
losses
9
928,124
(13,496)
914,628
62,284
80,013
60,034
712,297
Customers’ liabilities under
acceptances
4,183
–
4,183
–
–
–
4,183
Other assets
10
105,719
–
105,719
311
–
–
105,408
Total assets
$
1,966,668
$
216,133
$
2,182,801
$
480,280
$
98,136
$
663,977
$
940,408
October 31, 2023
Total assets
$
1,955,139
$
215,318
$
2,170,457
$
460,641
$
84,997
$
678,289
$
946,530
1
balance sheet, for the purpose of this disclosure, the on- and off-balance sheet holdings are encumbered in alignment with the business practice.
2
3
transactions. Also includes assets that have been pledged supporting Federal Home Loan Bank (FHLB) activity.
4
issuance.
5
and DSAC that are available for collateral purposes however not regularly utilized in practice.
6
collateral or for pledging to central banks (for example, Canada Mortgage and Housing Corporation insured mortgages that can be securitized into NHA MBS).
7
8
transactions is deducted from the “Securities received as collateral from securities financing and derivative transactions ” column to avoid double-counting with the on-balance sheet
assets.
9
counting with the on-balance sheet assets.
10
dealers, and clients, and other assets on the balance sheet not reported in the above categories.
LIQUIDITY STRESS TESTING AND CONTINGENCY FUNDING PLANS
In addition to the Severe Combined Stress Scenario, the Bank performs liquidity stress testing on multiple alternate scenarios. These scenarios are a mix of TD-
specific events and market-wide stress events designed to test the impact from risk factors material to the Bank’s risk profile. Liquidity assessments are also part
of the Bank’s Enterprise-Wide Stress Testing program.
The Bank has liquidity contingency funding plans (CFP) in place at the overall Bank level and for certain subsidiaries operating in foreign jurisdictions (Regional
CFPs). The Bank’s CFP provides a documented framework for managing unexpected liquidity situations and thus is an integral component of the Bank’s overall
liquidity risk management program. It outlines different contingency levels based on the severity and duration of the liquidity situation and identifies recovery
actions appropriate for each level. For each recovery action, it provides key operational steps required to execute the action. Regional CFPs identify recovery
actions to address region-specific stress events. The actions and governance structure outlined in the Bank’s CFP are aligned with the Bank’s Crisis Management
Recovery Plan.
CREDIT RATINGS
Credit ratings impact the Bank’s borrowing costs and ability to raise funds. Rating downgrades could potentially result in higher financing costs, increased
requirements to pledge collateral, reduced access to capital markets, and could also affect the Bank’s ability to enter into derivative transactions.
Credit ratings and outlooks provided by rating agencies reflect their views and are subject to change from time to time, based on a number of factors including
the Bank’s financial strength, competitive position, and liquidity, as well as factors not entirely within the Bank’s control, including the methodologies used by rating
agencies and conditions affecting the overall financial services industry.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 37
TABLE 36: CREDIT RATINGS
1
As at
April 30, 2024
Moody’s
S&P
Fitch
DBRS
Deposits/Counterparty
2
Aa1
AA-
AA
AA (high)
Legacy Senior Debt
3
Aa2
AA-
AA
AA (high)
Senior Debt
4
A1
A
AA-
AA
Covered Bonds
Aaa
–
AAA
AAA
Subordinated Debt
A2
A
A
AA (low)
Subordinated Debt – NVCC
A2 (hyb)
A-
A
A
Preferred Shares – NVCC
Baa1 (hyb)
BBB
BBB+
Pfd-2 (high)
Limited Recourse Capital Notes – NVCC
Baa1 (hyb)
BBB
BBB+
A (low)
Short-Term Debt (Deposits)
P-1
A-1+
F1+
R-1 (high)
Outlook
Stable
Stable
Stable
Stable
1
recommendations to purchase, sell, or hold a financial obligation in as much as they do not comment on market price or suitability for a particular investor. Ratings are subject to revision
or withdrawal at any time by the rating organization.
2
3
4
The Bank regularly reviews the level of increased collateral its trading counterparties would require in the event of a downgrade of TD’s credit rating. The Bank
holds liquid assets to ensure it is able to provide additional collateral required by trading counterparties in the event of a three-notch downgrade in the Bank’s
senior debt ratings. The following table presents the additional collateral that could have been contractually required to be posted to over-the-counter (OTC)
derivative counterparties as of the reporting date in the event of one, two, and three-notch downgrades of the Bank’s credit ratings.
TABLE 37: ADDITIONAL COLLATERAL REQUIREMENTS FOR RATING DOWNGRADES
1
(millions of Canadian dollars)
Average for the three months ended
April 30
January 31
2024
2024
One-notch downgrade
$
166
$
90
Two-notch downgrade
242
150
Three-notch downgrade
934
800
1
LIQUIDITY COVERAGE RATIO
The LCR is a Basel III metric calculated as the ratio of the stock of unencumbered high-quality liquid assets (HQLA) over the net cash outflow requirements in the
next 30 days under a hypothetical liquidity stress event.
Other than during periods of financial stress, the Bank must maintain the LCR above 100% in accordance with the OSFI LAR requirement. The Bank’s LCR is
calculated according to the scenario parameters in the LAR guideline, including prescribed HQLA eligibility criteria and haircuts, deposit run-off rates, and other
outflow and inflow rates. HQLA held by the Bank that are eligible for the LCR calculation under the LAR are primarily central bank reserves, sovereign-issued or
sovereign-guaranteed securities, and high-quality securities issued by non-financial entities.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 38
The following table summarizes the Bank’s average daily LCR as of the relevant dates.
TABLE 38: AVERAGE BASEL III LIQUIDITY COVERAGE RATIO
1
(millions of Canadian dollars, except as noted)
Average for the three months ended
April 30, 2024
Total unweighted
Total weighted
value (average)
2
value (average)
3
High-quality liquid assets
Total high-quality liquid assets
$
n/a
4
$
332,676
Cash outflows
Retail deposits and deposits from small business customers, of which:
$
480,690
$
30,668
Stable deposits
5
257,719
7,732
Less stable deposits
222,971
22,936
Unsecured wholesale funding, of which:
354,375
178,685
Operational deposits (all counterparties) and deposits in networks of cooperative banks
6
126,605
30,035
Non-operational deposits (all counterparties)
196,382
117,262
Unsecured debt
31,388
31,388
Secured wholesale funding
n/a
46,341
Additional requirements, of which:
342,989
97,537
Outflows related to derivative exposures and other collateral requirements
57,259
37,980
Outflows related to loss of funding on debt products
10,282
10,282
Credit and liquidity facilities
275,448
49,275
Other contractual funding obligations
22,108
11,296
Other contingent funding obligations
7
779,005
12,314
Total cash outflows
$
n/a
$
376,841
Cash inflows
Secured lending
$
243,498
$
32,298
Inflows from fully performing exposures
27,613
12,676
Other cash inflows
66,917
66,917
Total cash inflows
$
338,028
$
111,891
Average for the three months ended
April 30, 2024
January 31, 2024
Total adjusted
Total adjusted
value
value
Total high-quality liquid assets
8
$
332,676
$
334,351
Total net cash outflows
9
264,950
251,329
Liquidity coverage ratio
126
%
133
%
1
2
3
4
5
transactional accounts or the depositors have an established relationship with the Bank that makes deposit withdrawal highly unlikely.
6
activities include clearing, custody, or cash management services.
7
contractual cash outflows. With respect to outstanding debt securities with remaining maturity greater than 30 days, TD has no contractual obligation to buy back these outstanding TD
debt securities, and as a result, a 0% outflow rate is applied under the OSFI LAR guideline.
8
9
The Bank’s average LCR of 126% for the quarter ended April 30, 2024 continues to meet the regulatory requirements.
The Bank holds a variety of liquid assets commensurate with the liquidity needs of the organization. Many of these assets qualify as HQLA under the OSFI LAR
guideline. The average HQLA of the Bank for the quarter ended April 30, 2024 was $333 billion (January 31, 2024 – $334 billion), with Level 1 assets representing
83% (January 31, 2024 – 83%). The Bank’s reported HQLA excludes excess HQLA from the U.S. Retail operations, reflecting liquidity transfer limitations from
U.S. Retail and its affiliates which adheres to OSFI LAR and Federal Reserve Board guidelines.
As described in the “How TD Manages Liquidity Risk” section of the Bank’s 2023 Annual Report, the Bank manages its HQLA and other liquidity buffers to the
higher of TD’s 90-day surplus requirement and the target buffers over regulatory requirements from the LCR, NSFR, and the Net Cumulative Cash Flow metrics.
As a result, the total stock of HQLA is subject to ongoing rebalancing against the projected liquidity requirements.
NET STABLE FUNDING RATIO
The NSFR is a Basel III metric calculated as the ratio of total available stable funding (ASF) over total required stable funding (RSF) in accordance with OSFI’s
LAR guideline. The Bank must maintain an NSFR ratio equal to or above 100% in accordance with the LAR guideline. The Bank’s ASF comprises the Bank’s
liability and capital instruments (including deposits and wholesale funding). The assets that require stable funding are based on the Bank’s on and off-balance
sheet activities and a function of their liquidity characteristics and the requirements of OSFI’s LAR guideline.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 39
TABLE 39: NET STABLE FUNDING RATIO
(millions of Canadian dollars, except as noted)
As at
April 30, 2024
Unweighted value by residential maturity
6 months to
No
Less than
less than
More than
Weighted
maturity
1
6 months
1 year
1 year
value
2
Available Stable Funding Item
Capital
$
108,390
$
n/a
$
n/a
$
10,879
$
119,270
Regulatory capital
108,390
n/a
n/a
10,879
119,270
Other capital instruments
n/a
n/a
n/a
–
–
Retail deposits and deposits from small business customers:
439,111
73,242
36,382
31,910
539,930
Stable deposits
3
250,252
27,285
15,288
16,038
294,223
Less stable deposits
188,859
45,957
21,094
15,872
245,707
Wholesale funding:
244,275
390,301
81,070
244,446
441,704
Operational deposits
4
103,112
2,344
–
–
52,728
Other wholesale funding
141,163
387,957
81,070
244,446
388,976
Liabilities with matching interdependent assets
5
–
3,175
2,021
23,122
–
Other liabilities:
50,470
98,179
2,773
NSFR derivative liabilities
n/a
2,815
All other liabilities and equity not included in the above categories
50,470
91,462
2,259
1,643
2,773
Total Available Stable Funding
$
1,103,677
Required Stable Funding Item
Total NSFR high-quality liquid assets
$
$
$
$
$
61,140
Deposits held at other financial institutions for operational purposes
–
–
–
–
–
Performing loans and securities
106,425
264,865
117,995
669,318
767,215
Performing loans to financial institutions secured by Level 1 HQLA
–
81,829
11,097
–
12,654
Performing loans to financial institutions secured by non-Level 1
HQLA and unsecured performing loans to financial institutions
–
58,692
8,304
10,267
20,905
Performing loans to non-financial corporate clients, loans to retail
and small business customers, and loans to sovereigns, central
banks and PSEs, of which:
38,027
68,889
42,237
290,713
339,652
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
n/a
48,678
26,989
–
37,125
Performing residential mortgages, of which:
31,893
47,393
49,950
300,432
297,262
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
6
31,893
47,393
49,950
300,432
297,262
Securities that are not in default and do not qualify as HQLA,
including exchange-traded equities
36,505
8,062
6,407
67,906
96,742
Assets with matching interdependent liabilities
5
–
2,966
2,292
23,060
–
Other assets:
74,303
146,755
111,919
Physical traded commodities, including gold
11,638
10,076
Assets posted as initial margin for derivative contracts and
contributions to default funds of CCPs
17,688
15,035
NSFR derivative assets
9,841
7,026
NSFR derivative liabilities before deduction of variation margin
posted
25,144
1,257
All other assets not included in the above categories
62,665
85,926
2,162
5,994
78,525
Off-balance sheet items
799,831
28,891
Total Required Stable Funding
$
969,165
Net Stable Funding Ratio
114
%
As at
October 31, 2023
Total Available Stable Funding
$
1,123,816
Total Required Stable Funding
960,590
Net Stable Funding Ratio
117
%
1
positions, open maturity positions, non-HQLA equities, and physical traded commodities.
2
3
an established relationship with the Bank that makes deposit withdrawals highly unlikely.
4
activities include clearing, custody, or cash management services.
5
asset is still on balance sheet, cannot be used to fund any other assets and principal payments from the asset cannot be used for anything other than repaying the liability. As such, the
only interdependent assets and liabilities that qualify for this treatment at the Bank are the liabilities arising from the Canada Mortgage Bonds Program and their corresponding
encumbered assets.
6
The Bank’s NSFR for the quarter ended April 30, 2024 is at 114% (October 31, 2023 – 117%) representing a surplus of $135 billion and adheres to regulatory
requirements. The NSFR remained relatively stable to the previous quarter (January 31, 2024 – 114%), as our funding programs continued to meet our needs in
Q2.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 40
FUNDING
The Bank has access to a variety of unsecured and secured funding sources. The Bank’s funding activities are conducted in accordance with liquidity risk
management policies that require assets be funded to the appropriate term and to a prudent diversification profile.
The
following table illustrates the Bank’s base of personal and commercial, wealth, and Schwab sweep deposits (collectively, “P&C deposits”) that make up
approximately
% (October 31, 2023 –
%) of the Bank’s total funding.
TABLE 40: SUMMARY OF DEPOSIT FUNDING
(millions of Canadian dollars)
As at
April 30
October 31
2024
2023
P&C deposits – Canadian
$
$
P&C deposits – U.S.
1
Total
$
$
1
P&C deposits in U.S. are presented on a Canadian equivalent basis and therefore period-over-period movements reflect both underlying growth and changes in the foreign exchange
rate.
WHOLESALE FUNDING
The Bank maintains various registered external wholesale term (greater than 1 year) funding programs to provide access to diversified funding sources, including
asset securitization, covered bonds, and unsecured wholesale debt. The Bank raises term funding through Senior Notes, NHA MBS, and notes backed by credit
card receivables (Evergreen Credit Card Trust) and home equity lines of credit (Genesis Trust II). The Bank’s wholesale funding is diversified by geography, by
currency, and by funding types. The Bank raises short-term (1 year or less) funding using certificates of deposit, commercial paper, and bankers’ acceptances.
The following table summarizes the registered term funding and capital programs by geography, with the related program size as at April 30, 2024.
Canada
United States
Europe
Capital Securities Program ($20 billion)
Canadian Senior Medium-Term Linked Notes
Program ($5 billion)
HELOC ABS Program (Genesis Trust II) ($7 billion)
U.S. SEC (F-3) Registered Capital and Debt
Program (US$75 billion)
U.K. Financial Conduct Authority (FCA) Registered
Legislative Covered Bond Program ($80 billion)
FCA Registered Global Medium-Term Note Program
(US$40 billion)
The following table presents a breakdown of the Bank’s term debt by currency and funding type. Term funding as at April 30, 2024, was $178.4 billion
(October 31, 2023 – $173.3 billion).
Note that Table 41: Long-Ter m Funding and Table 42: Wholesale Funding do not include any funding accessed via repurchase transactions or securities financing.
TABLE 41: LONG-TERM FUNDING
1
As at
April 30
October 31
Long-term funding by currency
2024
2023
Canadian dollar
27
%
27
%
U.S. dollar
33
35
Euro
28
27
British pound
6
5
Other
6
6
Total
100
%
100
%
Long-term funding by type
Senior unsecured medium-term notes
57
%
61
%
Covered bonds
35
31
Mortgage securitization
2
7
7
Term asset-backed securities
1
1
Total
100
%
100
%
1
The table includes funding issued to external investors only.
2
Mortgage securitization excludes the residential mortgage trading business.
The Bank maintains depositor concentration limits in respect of short-term wholesale deposits so that it is not overly reliant on individual depositors for funding.
The Bank further limits short-term wholesale funding maturity concentration in an effort to mitigate refinancing risk during a stress event.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 41
The following table represents the remaining maturity of various sources of funding outstanding as at April 30, 2024 and October 31, 2023.
TABLE 42: WHOLESALE FUNDING
1
(millions of Canadian dollars)
As at
April 30
October 31
2024
2023
Less than
1 to 3
3 to 6
6 months
Up to 1
Over 1 to
Over
1 month
months
months
to 1 year
year
2 years
2 years
Total
Total
Deposits from banks
2
$
26,389
$
5,815
$
3,660
$
3,321
$
39,185
$
–
$
–
$
39,185
$
42,481
Bearer deposit notes
157
728
539
230
1,654
–
–
1,654
1,804
Certificates of deposit
9,352
28,606
30,402
31,842
100,202
312
–
100,514
113,476
Commercial paper
10,320
15,037
16,436
12,847
54,640
–
–
54,640
40,515
Covered bonds
457
3,488
860
1,720
6,525
19,361
40,197
66,083
56,973
Mortgage securitization
3
–
2,322
1,073
2,738
6,133
3,777
20,325
30,235
27,131
Legacy senior unsecured medium-term
notes
4
–
1,898
–
–
1,898
289
–
2,187
3,162
Senior unsecured medium-term notes
5
–
3,178
5,525
9,455
18,158
19,523
57,308
94,989
97,525
Subordinated notes and debentures
6
–
–
–
–
–
197
11,121
11,318
9,620
Term asset-backed securitization
–
318
1,035
560
1,913
–
375
2,288
2,204
Other
7
26,502
2,290
9,021
4,205
42,018
965
782
43,765
44,348
Total
$
73,177
$
63,680
$
68,551
$
66,918
$
272,326
$
44,424
$
130,108
$
446,858
$
439,239
Of which:
Secured
$
2,865
$
6,128
$
9,160
$
7,426
$
25,579
$
23,139
$
60,901
$
109,619
$
95,328
Unsecured
70,312
57,552
59,391
59,492
246,747
21,285
69,207
337,239
343,911
Total
$
73,177
$
63,680
$
68,551
$
66,918
$
272,326
$
44,424
$
130,108
$
446,858
$
439,239
1
2
3
4
including debt with an original term-to-maturity of less than 400 days.
5
regime (October 31, 2023 – $5.7 billion).
6
7
Includes fixed-term deposits from non-bank institutions (unsecured) of $18.0 billion (October 31, 2023 – $22.1 billion) and the remaining are non-term deposits.
Excluding the Wholesale Banking residential mortgage trading business, the Bank’s total MBS issued to external investors for the three months and six months
ended April 30, 2024 was $0.7 billion and $0.8 billion, respectively (three and six months ended April 30, 2023 – $0.4 billion and $0.8 billion, respectively) and
other asset-backed securities issued for the three and six months ended April 30, 2024 was nil (three and six months ended April 30, 2023 – $0.1 billion and
$0.4 billion, respectively). The Bank also issued $7.5 billion and $8.1 billion, respectively of unsecured medium-term notes for the three and six months ended
April 30, 2024 (three and six months ended April 30, 2023 – $1.0 billion and $13.9 billion) and $10.2 billion and $14.7 billion, respectively of covered bonds for the
three and six months ended April 30, 2024 (three and six months ended April 30, 2023 – $9.7 billion).
MATURITY ANALYSIS OF ASSETS, LIABILITIES, AND OFF-BALANCE SHEET COMMITMENTS
The following table summarizes on-balance sheet and off-balance sheet categories by remaining contractual maturity. Off-balance sheet commitments include
contractual obligations to make future payments on certain lease-related commitments, certain purchase obligations, and other liabilities. The values of credit
instruments reported in the following table represent the maximum amount of additional credit that the Bank could be obligated to extend should such instruments
be fully drawn or utilized. Since a significant portion of guarantees and commitments are expected to expire without being drawn upon, the total of the contractual
amounts is not representative of expected future liquidity requirements. These contractual obligations have an impact on the Bank’s short-term and long-term
liquidity and capital resource needs.
The maturity analysis presented does not depict the degree of the Bank’s maturity transformation or the Bank’s exposure to interest rate and liquidity risk. The
Bank’s objective is to fund its assets appropriately to protect against borrowing cost volatility and potential reductions to funding market availability. The Bank
utilizes stable non-maturity deposits (chequing and savings accounts) and term deposits as the primary source of long-term funding for the Bank’s non-trading
assets including personal and business term loans and the stable balance of revolving lines of credit. Additionally, the Bank issues long-term funding in respect of
such non-trading assets and raises short term funding primarily to finance trading assets. The liquidity of trading assets under stressed market conditions is
considered when determining the appropriate term of the funding.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 42
TABLE 43: REMAINING CONTRACTUAL MATURITY
(millions of Canadian dollars)
As at
April 30, 2024
No
Less than
1 to 3
3 to 6
6 to 9
9 months
Over 1 to
Over 2 to
Over
specific
1 month
months
months
months
to 1 year
2 years
5 years
5 years
maturity
Total
Assets
Cash and due from banks
$
$
$
$
$
$
$
$
$
$
Interest-bearing deposits with banks
Trading loans, securities, and other
1
Non-trading financial assets at fair
value through profit or loss
Derivatives
Financial assets designated at fair
value through profit or loss
Financial assets at fair value through
other comprehensive income
Debt securities at amortized cost,
net of allowances for credit losses
(2 )
Securities purchased under
reverse repurchase agreements
2
Loans
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Total loans
Allowance for loan losses
(7,545 )
(7,545 )
Loans, net of allowance for loan losses
Customers’ liability under acceptances
Investment in Schwab
Goodwill
3
Other intangibles
3
Land, buildings, equipment, and other depreciable
assets, and right-of-use assets
3
Deferred tax assets
Amounts receivable from brokers, dealers, and clients
Other assets
Total assets
$
$
$
$
$
$
$
$
$
$
Liabilities
Trading deposits
$
$
$
$
$
$
$
$
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at
fair value through profit or loss
Deposits
4,5
Personal
Banks
Business and government
Total deposits
Acceptances
Obligations related to securities sold short
1
Obligations related to securities sold under repurchase
agreements
2
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance contract liabilities
Other liabilities
Subordinated notes and debentures
Equity
Total liabilities and equity
$
$
$
$
$
$
$
$
$
$
Off-balance sheet commitments
Credit and liquidity commitments
6,7
$
$
$
$
$
$
$
$
$
$
Other commitments
8
Unconsolidated structured entity commitments
Total off-balance sheet commitments
$
$
$
$
$
$
$
$
$
$
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
3
4
5
in ‘over 9 months to 1 year’, $
6
7
8
.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 43
TABLE 43: REMAINING CONTRACTUAL MATURITY
(continued)
(millions of Canadian dollars)
As at
October 31, 2023
No
Less than
1 to 3
3 to 6
6 to 9
9 months
Over 1 to
Over 2 to
Over
specific
1 month
months
months
months
to 1 year
2 years
5 years
5 years
maturity
Total
Assets
Cash and due from banks
$
$
$
$
$
$
$
$
$
$
Interest-bearing deposits with banks
Trading loans, securities, and other
1
Non-trading financial assets at fair value through
profit or loss
Derivatives
Financial assets designated at fair value through
profit or loss
Financial assets at fair value through other comprehensive
income
Debt securities at amortized cost, net of allowance
for credit losses
(2 )
Securities purchased under reverse repurchase
agreements
2
Loans
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Total loans
Allowance for loan losses
(7,136 )
(7,136 )
Loans, net of allowance for loan losses
Customers’ liability under acceptances
Investment in Schwab
Goodwill
3
Other intangibles
3
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
3
Deferred tax assets
4
Amounts receivable from brokers, dealers, and clients
Other assets
4
Total assets
4
$
$
$
$
$
$
$
$
$
$
Liabilities
Trading deposits
$
$
$
$
$
$
$
$
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at
fair value through profit or loss
Deposits
5,6
Personal
Banks
Business and government
Total deposits
Acceptances
Obligations related to securities sold short
1
Obligations related to securities sold under repurchase
agreements
2
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance contract liabilities
4
Other liabilities
4
Subordinated notes and debentures
Equity
4
Total liabilities and equity
4
$
$
$
$
$
$
$
$
$
$
Off-balance sheet commitments
Credit and liquidity commitments
7,8
$
$
$
$
$
$
$
$
$
$
Other commitments
9
Unconsolidated structured entity commitments
Total off-balance sheet commitments
$
$
$
$
$
$
$
$
$
$
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
3
4
details.
5
6
months to 1 year’, $
7
8
9
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 44
REGULATORY AND STANDARD SETTER DEVELOPMENTS CONCERNING ENVIRONMENTAL AND SOCIAL (E&S) RISK (INCLUDING CLIMATE)
On March 7, 2023, OSFI issued Final Guideline B-15: Climate Risk Management (Guideline B-15), which sets out OSFI’s expectations related to the management
and disclosure of climate-related risks and opportunities. Subsequently, on March 20, 2024, OSFI released updates to Guideline B-15 which align disclosure
expectations with the International Sustainability Standards Board’s final IFRS S2 Climate-related Disclosures standard. Components of Guideline B-15 are initially
effective for D-SIBs for fiscal year-end 2024, where annual disclosures are required to be made publicly available no later than 180 days after fiscal year-end. The
Bank has completed its initial assessment of Guideline B-15 and is working towards implementing the requirements.
ISSB – IFRS S1 and IFRS S2
On June 26, 2023, the International Sustainability Standards Board (ISSB) under the IFRS Foundation, issued its first two sustainability standards, IFRS S1,
General Requirements for Disclosures of Sustainability-related Financial Information
Climate-related Disclosures
disclosure requirements for financially material information about sustainability-related risks and opportunities to meet investor information needs, and S2
specifically sets the disclosure requirement for climate-related risks and opportunities. The effective date for the standards is subject to Canadian jurisdiction’s
endorsement. The International Organization of Securities Commissions has endorsed IFRS S1 and S2 on July 23, 2023, and is now calling its member
jurisdictions to consider ways they may adopt or apply the ISSB standards. The Bank is currently assessing the impact of adopting these standards.
SECURITIZATION AND OFF-BALANCE SHEET ARRANGEMENTS
The Bank enters into securitization and off-balance sheet arrangements in the normal course of operations. The Bank is involved with structured entities (SEs) that
it sponsors, as well as entities sponsored by third parties. Refer to “Securitization and Off-Balance Sheet Arrangements” section, Note 9: Transfers of Financial
Assets and Note 10: Structured Entities of the Bank’s 2023 Annual Report for further details. There have been no significant changes to the Bank’s securitization
and off-balance sheet arrangements during the quarter ended April 30, 2024.
Securitization of Third Party-Originated Assets
Significant Unconsolidated Special Purpose Entities
The Bank securitizes third party-originated assets through Bank-sponsored SEs, including its Canadian multi-seller conduits which are not consolidated. These
Canadian multi-seller conduits securitize Canadian originated third-party assets. The Bank administers these multi-seller conduits and provides liquidity facilities as
well as securities distribution services; it may also provide credit enhancements. TD’s total potential exposure to loss through the provision of liquidity facilities for
multi-seller conduits was $15.9 billion as at April 30, 2024 (October 31, 2023 – $15.2 billion). As at April 30, 2024, the Bank had funded exposure of $13.9 billion
under such liquidity facilities relating to outstanding issuances of asset-backed commercial paper (October 31, 2023 – $13.3 billion).
ACCOUNTING POLICIES AND ESTIMATES
The Bank’s unaudited Interim Consolidated Financial Statements have been prepared in accordance with IFRS. For details of the Bank’s accounting policies under
IFRS, refer to Note 2 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements and 2023 Annual Consolidated Financial Statements. For
details of the Bank’s significant accounting judgments, estimates, and assumptions under IFRS, refer to Note 3 of the Bank’s second quarter 2024 Interim
Consolidated Financial Statements and the Bank’s 2023 Annual Consolidated Financial Statements.
CURRENT CHANGES IN ACCOUNTING POLICIES
The following new standard has been adopted by the Bank on November 1, 2023.
Insurance Contracts
The IASB issued IFRS 17,
Insurance Contracts
Insurance Contracts
reporting periods beginning on or after January 1, 2023, which was November 1, 2023 for the Bank. IFRS 17 establishes principles for recognition, measurement,
presentation and disclosure of insurance contracts.
Under IFRS 17, insurance contracts are aggregated into groups which are measured at the risk-adjusted present value of cash flows in fulfilling the contracts.
Revenue is recognized as insurance services are provided over the coverage period. Losses are recognized immediately if the contract group is expected to be
onerous. The liabilities presented by insurance groups are comprised of the liability for remaining coverage (LRC) and the liability for incurred claims (LIC) and are
reported as Insurance contract liabilities on the Interim Consolidated Balance Sheet. The LRC is the obligation to investigate and pay claims that have not yet
occurred and includes the loss component related to onerous contract groups. The LIC is the estimate of claims incurred, including claims that have occurred but
have not been reported, and related insurance costs.
IFRS 17 introduces two measurement models that are applicable to the Bank, the premium allocation approach model (PAA) and the general measurement model
(GMM). The Bank measures the majority of its insurance contract groups using the PAA, which includes property and casualty contracts as well as short-term life
and health contracts. The PAA is a simplified model applied to insurance contracts that are either one year or less or where the PAA approximates the GMM.
Contracts using the GMM are longer-term life and health contracts. The LRC for insurance contract groups using the PAA is measured as unearned premiums less
deferred acquisition cash flows allocated to the group. The LRC is adjusted for the recognition of insurance revenue and amortization of acquisition cash flows
reported in insurance service expenses on a straight-line basis over the contractual terms of the underlying insurance contracts, usually twelve months. The LRC
for longer term contracts using the GMM model is measured using estimates and assumptions that reflect the timing and uncertainty of insurance cash flows.
When a group of contracts is expected to be onerous, a loss component (expected loss related to fulfilling the related insurance contracts) is established which
increases the LRC and insurance service expenses. The loss component of the LRC is subsequently recognized in income over the contractual term of the
underlying insurance contracts to offset claims incurred and related expenses.
The Bank measures the LIC at the present value of current estimates of claims and related costs for insurable events occurring at or before the Interim
Consolidated Balance Sheet date. The LIC includes a risk adjustment, which represents the compensation the Bank requires for bearing the uncertainty related to
non-financial risks in its fulfilment of insurance contracts. Expenses related to claims incurred and related costs are reported in insurance service expenses and
changes related to discounting the liability are recorded as insurance finance income or expenses in other income (loss). Prior to the adoption of IFRS 17, these
expenses were recorded in insurance claims and related expenses and non-interest expenses.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 45
Reinsurance contracts held are recognized and measured using the same principles as insurance contracts issued. Reinsurance contract assets are presented in
Other assets in the Interim Consolidated Balance Sheet and the net results from reinsurance contracts held are presented in Other income (loss) in the Interim
Consolidated Statement of Income. Refer to Note 14 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements for further details on the results
of insurance and reinsurance contracts.
The Bank initially applied IFRS 17 on November 1, 2023 and restated the comparative period. The Bank transitioned by primarily applying the full retrospective
approach which resulted in the measurement of insurance contracts as if IFRS 17 had always applied to them. The following table sets out adjustments to the
Bank’s insurance-related balances reported under IFRS 4 as at October 31, 2022 used to derive the insurance contract liabilities and reinsurance contract assets
recognized by the Bank as at November 1, 2022 under IFRS 17.
(millions of Canadian dollars)
Amount
Insurance-related liabilities
$
Other liabilities
Other assets
(2,361 )
Net insurance-related balances as at October 31, 2022
$
Changes in actuarial assumptions, including risk adjustment and discount factor
(192 )
Recognition of losses on onerous contracts
Other adjustments
(93 )
Net insurance-related balances as at November 1, 2022
$
Insurance contract liabilities
$
Reinsurance contract assets
(695 )
Net insurance-related balances as at November 1, 2022
$
On November 1, 2022, IFRS 17 transition adjustments resulted in a decrease to the Bank’s deferred tax assets of $60 million and an after-tax increase to retained
earnings of $112 million.
Upon the initial application of IFRS 17 on November 1, 2023, the Bank applied transitional guidance and reclassified certain securities supporting insurance
operations to minimize accounting mismatches arising from the application of the new discount factor under IFRS 17. The transitional guidance for such securities
is applicable for entities that previously used IFRS 9,
Financial Instruments
a decrease to retained earnings and an increase in accumulated other comprehensive income of $10 million.
ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS
The estimates used in the Bank’s accounting policies are essential to understanding its results of operations and financial condition. Some of the Bank’s policies
require subjective, complex judgments and estimates as they relate to matters that are inherently uncertain. Changes in these judgments or estimates and
changes to accounting standards and policies could have a materially adverse impact on the Bank’s Interim Consolidated Financial Statements. The Bank has
established procedures to ensure that accounting policies are applied consistently and that the processes for changing methodologies, determining estimates, and
adopting new accounting standards are well-controlled and occur in an appropriate and systematic manner.
Impairment – Expected Credit Loss Model
The ECL model requires the application of estimates and judgment in the assessment of the current and forward-looking economic environment. There remains
elevated economic uncertainty, and management continues to exercise expert credit judgment in assessing if an exposure has experienced significant increase in
credit risk since initial recognition and in determining the amount of ECLs at each reporting date. To the extent that certain effects are not fully incorporated into the
model calculations, temporary quantitative and qualitative adjustments have been applied.
Insurance Contracts
The assumptions used in establishing the Bank’s insurance claims and policy benefit liabilities are based on best estimates of possible outcomes.
For property and casualty insurance contracts, the ultimate cost of LIC is estimated using a range of standard actuarial claims projection techniques in
accordance with Canadian accepted actuarial practices. Additional qualitative judgment is used to assess the extent to which past trends may or may not apply in
the future, in order to arrive at the estimated ultimate claims cost amounts that present the most likely outcome taking into account all the uncertainties involved.
For life and health insurance contracts, actuarial liabilities consider all future policy cash flows, including premiums, claims, and expenses required to administer
the policies. Critical assumptions used in the measurement of life and health insurance contract liabilities are determined by the appointed actuary.
Further information on insurance risk assumptions is provided in Note 14 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements.
FUTURE CHANGES IN ACCOUNTING POLICIES
The following standard has been issued, but is not yet effective on the date of issuance of the Bank’s Interim Consolidated Financial Statements.
Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18,
Presentation and Disclosure in Financial Statements
Presentation of
Financial Statements
statements. IFRS 18 focuses on the presentation of financial performance in the statement of profit or loss, it will be effective for the Bank’s annual period
beginning November 1, 2027. Early application is permitted. The Bank is currently assessing the impact of adopting this standard.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent interim period, there have been no changes in the Bank’s policies and procedures and other processes that comprise its internal control
over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting. Refer to
Note 2 and Note 3 of the Bank’s second quarter 2024 Interim Consolidated Financial Statements for further information regarding the Bank’s changes to
accounting policies, procedures, and estimates.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 46
GLOSSARY
Financial and Banking Terms
Adjusted Results:
Bank’s businesses and to measure the Bank’s overall performance. To arrive at
adjusted results, the Bank adjusts for “items of note”, from reported results. The
items of note relate to items which management does not believe are indicative
of underlying business performance.
Allowance for Credit Losses:
financial assets, including any off-balance sheet exposures, at
the balance sheet date. Allowance for credit losses consists of Stage 3
allowance for impaired financial assets and Stage 2 and Stage 1 allowance for
performing financial assets and off-balance sheet instruments. The allowance is
increased by the provision for credit losses, decreased by write-offs net of
recoveries and disposals, and impacted by foreign exchange.
Amortized Cost:
measured at initial recognition minus principal repayments, plus or minus the
cumulative amortization, using EIRM, of any differences between the initial
amount and the maturity amount, and minus any reduction for impairment.
Assets under Administration (AUA):
customers where the Bank provides services of an administrative nature, such
as the collection of investment income and the placing of trades on behalf of the
clients (where the client has made his or her own investment selection). The
majority of these assets are not reported on the Bank’s Consolidated Balance
Sheet.
Assets under Management (AUM):
customers, managed by the Bank, where the Bank has discretion to make
investment selections on behalf of the client (in accordance with an investment
policy). In addition to the TD family of mutual funds, the Bank manages assets
on behalf of individuals, pension funds, corporations, institutions, endowments
and foundations. These assets are not reported on the Bank’s Consolidated
Balance Sheet. Some assets under management that are also administered by
the Bank are included in assets under administration.
Asset-Backed Commercial Paper (ABCP):
collateralized by other financial assets. Institutional investors usually purchase
such instruments in order to diversify their assets and generate short-term
gains.
Asset-Backed Securities (ABS):
payments are derived from and collateralized (or “backed”) by a specified pool
of underlying assets.
Average Common Equity:
Average common equity for the business segments
reflects the average allocated capital. The Bank’s methodology for allocating
capital to its business segments is largely aligned with the common equity
capital requirements under Basel III.
Average Interest-Earning Assets:
the Bank’s financial position, and is calculated as the average carrying value of
deposits with banks, loans and securities based on daily balances for the period
ending October 31 in each fiscal year.
Basic Earnings per Share (EPS)
: A performance measure calculated by
dividing net income attributable to common shareholders by the weighted
average number of common shares outstanding for the period. Adjusted basic
EPS is calculated in the same manner using adjusted net income.
Basis Points (bps):
100 basis points.
Book Value per Share:
shareholders’ equity by number of common shares at the end of the period.
Carrying Value:
Consolidated Balance Sheet.
Collateralized Mortgage Obligation (CMO):
obligations consisting of mortgage-backed securities that are separated and
issued as different classes of mortgage pass-through securities with different
terms, interest rates, and risks. CMOs by private issuers are collectively
referred to as non-agency CMOs.
Common Equity Tier 1 (CET1) Capital:
This is a primary Basel III capital
measure comprised mainly of common equity, retained earnings and qualifying
non-controlling interest in subsidiaries. Regulatory deductions made to arrive
at the CET1 Capital include goodwill and intangibles, unconsolidated
investments in banking, financial, and insurance entities, deferred tax assets,
defined benefit pension fund assets, and shortfalls in allowances.
Common Equity Tier 1 (CET1) Capital Ratio:
CET1 Capital ratio represents
the predominant measure of capital adequacy under Basel III
and equals CET1 Capital divided by RWA.
Compound Annual Growth Rate (CAGR):
time periods from the initial investment value to the ending investment value
assuming that the investment has been compounding over the time period.
Credit Valuation Adjustment (CVA):
CVA represents a capital charge that
measures credit risk due to default of derivative counterparties. This charge
requires banks to capitalize for the potential changes in counterparty credit
spread for the derivative portfolios.
Diluted EPS
: A performance measure calculated by dividing net income
attributable to common shareholders by the weighted average number of
common shares outstanding adjusting for the effect of all potentially dilutive
common shares. Adjusted diluted EPS is calculated in the same manner using
adjusted net income.
Dividend Payout Ratio
: A ratio represents the percentage of Bank’s earnings
being paid to common shareholders in the form of dividends and is calculated
by dividing common dividends by net income available to common
shareholders. Adjusted dividend payout ratio is calculated in the same manner
using adjusted net income.
Dividend Yield:
year divided by the daily average closing stock price during the year.
Effective Income Tax Rate:
A rate and performance indicator calculated by
dividing the provision for income taxes as a percentage of net income before
taxes. Adjusted effective income tax rate is calculated in the same manner
using adjusted results.
Effective Interest Rate (EIR):
flows for the expected life of the financial instrument to its carrying value. The
calculation takes into account the contractual interest rate, along with any fees
or incremental costs that are directly attributable to the instrument and all other
premiums or discounts.
Effective Interest Rate Method (EIRM):
interest rate in a period based on the amount of a financial instrument’s book
value at the beginning of the accounting period. Under EIRM, the effective
interest rate, which is a key component of the calculation, discounts the
expected future cash inflows and outflows expected over the life of a financial
instrument.
Efficiency Ratio:
calculated by taking the non-interest expenses as a percentage of total
revenue. A lower ratio indicates a more efficient business operation. Adjusted
efficiency ratio, net of insurance service expenses (ISE) is calculated by
dividing adjusted non-interest expenses by adjusted total revenue, net of ISE.
Management believes presenting efficiency ratio net of ISE is aligned with
industry reporting and allows for better assessment of operating results.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 47
Enhanced Disclosure Task Force (EDTF):
Established by the Financial
Stability Board in May 2012, comprised of banks, analysts, investors, and
auditors, with the goal of enhancing the risk disclosures of banks and other
financial institutions.
Expected Credit Losses (ECLs):
ECLs are the probability-weighted present
value of expected cash shortfalls over the remaining expected life of the
financial instrument and considers reasonable and supportable information
about past events, current conditions, and forecasts of future events and
economic conditions that impact the Bank’s credit risk assessment.
Fair Value:
a liability in an orderly transaction between market participants at the
measurement date, under current market conditions.
Fair value through other comprehensive income (FVOCI):
Under IFRS 9, if
the asset passes the contractual cash flows test (named SPPI), the business
model assessment determines how the instrument is classified. If the instrument
is being held to collect contractual cash flows, that is, if it is not expected to be
sold, it is measured as amortized cost. If the business model for the instrument
is to both collect contractual cash flows and potentially sell the asset, it is
measured at FVOCI.
Fair value through profit or loss (FVTPL):
Under IFRS 9, the classification is
dependent on two tests, a contractual cash flow test (named SPPI) and a
business model assessment. Unless the asset meets the requirements of both
tests, it is measured at fair value with all changes in fair value reported in profit
or loss.
Federal Deposit Insurance Corporation (FDIC):
A U.S. government
corporation which provides deposit insurance guaranteeing the safety of a
depositor’s accounts in member banks. The FDIC also examines and
supervises certain financial institutions for safety and soundness, performs
certain consumer-protection functions, and manages banks in receivership
(failed banks).
Forward Contracts:
one party to the contract to buy and the other party to sell an asset for a fixed
price at a future date.
Futures:
price on a specified future date.
Hedging:
exposure to fluctuations in interest rates, foreign currency exchange rates, or
other market factors. The elimination or reduction of such exposure is
accomplished by engaging in capital markets activities to establish offsetting
positions.
Impaired Loans:
deterioration of credit quality to the extent that the Bank no longer has
reasonable assurance as to the timely collection of the full amount of principal
and interest.
Loss Given Default (LGD):
incur when a borrower defaults on a loan, which is expressed as a percentage
of exposure at default.
Mark-to-Market (MTM):
balance sheet date for financial instruments that are carried at fair value.
Master Netting Agreements:
multiple derivative contracts with each other that provide for the net settlement
of all contracts through a single payment, in a single currency, in the event of
default or termination of any one contract.
Net Corporate Expenses:
Non-interest expenses related to corporate service
and control groups which are not allocated to a business segment.
Net Interest Margin:
percentage of average interest-earning assets to measure performance. This
metric is an indicator of the profitability of the Bank’s earning assets less the
cost of funding. Adjusted net interest margin is calculated in the same manner
using adjusted net interest income.
Non-Viability Contingent Capital (NVCC):
Instruments (preferred shares and
subordinated debt) that contain a feature or a provision that allows the financial
institution to either permanently convert these instruments into common shares
or fully write-down the instrument, in the event that the institution is no longer
viable.
Notional:
instruments are based.
Office of the Superintendent of Financial Institutions Canada (OSFI):
The
regulator of Canadian federally chartered financial institutions and federally
administered pension plans.
Options:
right, but not the obligation, to buy or to sell a security, exchange rate, interest
rate, or other financial instrument or commodity at a predetermined price at or
by a specified future date.
Price-Earnings Ratio
:
A
ratio calculated by dividing the closing share price by
EPS based on a trailing four quarters to indicate market performance. Adjusted
price-earnings ratio is calculated in the same manner using adjusted EPS.
Probability of Default (PD):
to meet its scheduled repayments.
Provision for Credit Losses (PCL):
losses to bring it to a level that management considers adequate to reflect
expected credit-related losses on its portfolio.
Return on Common Equity (ROE):
as net income available to common shareholders as a percentage of average
common shareholders’ equity, utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated as the segment net income
attributable to common shareholders as a percentage of average allocated
capital. Adjusted ROE is calculated in the same manner using adjusted net
income.
Return on Risk-weighted Assets:
Net income available to common
shareholders as a percentage of average risk-weighted assets.
Return on Tangible Common Equity (ROTCE):
measure 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 Tangible common
equity. Adjusted ROTCE is calculated in the same manner using adjusted net
income. Both measures can be utilized in assessing the Bank’s use of equity.
Risk-Weighted Assets (RWA):
Assets calculated by applying a regulatory
risk-weight factor to on and off-balance sheet exposures. The risk-weight
factors are established by the OSFI to convert on and off-balance sheet
exposures to a comparable risk level.
Securitization:
transferred to structures, which normally issue a series of asset-backed
securities to investors to fund the purchase of loans.
Solely Payments of Principal and Interest (SPPI):
following criteria be met in order for a financial instrument to be classified at
amortized cost:
●
bank trading activity), and, as such, an asset is held with the intention of
collecting its contractual cash flows; and
●
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 48
Swaps:
payment obligations and currencies on a notional principal for a specified period
of time.
Tangible common equity (TCE):
common shareholders’ equity less goodwill, imputed goodwill, and intangibles
on an investment in Schwab and TD Ameritrade and other acquired intangible
assets, net of related deferred tax liabilities. It can be utilized in assessing the
Bank’s use of equity.
Taxable Equivalent Basis (TEB):
that increases revenues and the provision for income taxes on certain tax-
exempt securities to an equivalent before-tax basis to facilitate comparison of
net interest income from both taxable and tax-exempt sources.
Tier 1 Capital Ratio:
capital, consisting primarily of common shareholders’ equity, retained earnings,
preferred shares and innovative instruments. Tier 1 Capital ratio is calculated as
Tier 1 Capital divided by RWA.
Total Capital Ratio:
Capital. Total Capital ratio is calculated as Total Capital divided by RWA.
Total Shareholder Return (TSR):
TD’s common shares. The return measures the change in shareholder value,
assuming dividends paid are reinvested in additional shares.
Trading-Related Revenue:
trading income (loss), net interest income on trading positions, and income
(loss) from financial instruments designated at FVTPL that are managed within a
trading portfolio. Trading-related revenue (TEB) in the Wholesale Banking
segment is also a non-GAAP financial measure and is calculated in the same
manner, including TEB adjustments. Both are used for measuring trading
performance.
Value-at-Risk (VaR):
and to calculate the regulatory capital required for market risk in trading
activities. VaR measures the adverse impact that potential changes in market
rates and prices could have on the value of a portfolio over a specified period of
time.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 49
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
INTERIM CONSOLIDATED BALANCE SHEET
(unaudited)
(As at and in millions of Canadian dollars)
April 30, 2024
October 31, 2023
ASSETS
Cash and due from banks
$
$
Interest-bearing deposits with banks
Trading loans, securities, and other
Non-trading financial assets at fair value through profit or loss
Derivatives
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Debt securities at amortized cost, net of allowance for credit losses (Notes 4, 5)
Securities purchased under reverse repurchase agreements
Loans (Notes 4, 6)
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Allowance for loan losses
(7,545 )
(7,136 )
Loans, net of allowance for loan losses
Other
Customers’ liability under acceptances
Investment in Schwab
Goodwill
Other intangibles
Land, buildings, equipment, other depreciable assets and right-of-use assets
Deferred tax assets
1
Amounts receivable from brokers, dealers, and clients
Other assets
1
Total assets
1
$
$
LIABILITIES
Trading deposits
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at fair value through profit or loss
Deposits (Notes 4, 10)
Personal
Banks
Business and government
Other
Acceptances
Obligations related to securities sold short
Obligations related to securities sold under repurchase agreements
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance contract liabilities
1
Other liabilities
1
Subordinated notes and debentures (Notes 4, 12)
Total liabilities
1
EQUITY
Shareholders’ Equity
Common shares
Preferred shares and other equity instruments
Treasury – common shares
(24 )
(64 )
Treasury – preferred shares and other equity instruments
(8 )
(65 )
Contributed surplus
Retained earnings
1
Accumulated other comprehensive income (loss)
Total equity
1
Total liabilities and equity
1
$
$
1
Insurance Contracts
(IFRS 17). Refer to Note 2 for details.
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 50
INTERIM CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
April 30
April 30
April 30
2024
2023
2024
2023
Interest income
1
Loans
$
$
$
$
Reverse repurchase agreements
Securities
Interest
Dividends
Deposits with banks
Interest expense (Note 21)
Deposits
Securitization liabilities
Subordinated notes and debentures
Repurchase agreements and short sales
Other
Net interest income
Non-interest income
Investment and securities services
Credit fees
Trading income (loss)
Service charges
2
Card services
Insurance revenue
2
Other income (loss)
2
(267 )
(1,249 )
Total revenue
2
Provision for (recovery of) credit losses (Note 6)
Insurance service expenses
2
Non-interest expenses
Salaries and employee benefits
Occupancy, including depreciation
Technology and equipment, including depreciation
Amortization of other intangibles
Communication and marketing
Restructuring charges
Brokerage-related and sub-advisory fees
Professional, advisory and outside services
Other
2
Income before income taxes and share of net income from investment
in Schwab
2
Provision for (recovery of) income taxes
2
Share of net income from investment in Schwab (Note 7)
Net income
2
Preferred dividends and distributions on other equity instruments
Net income available to common shareholders
2
$
$
$
$
Earnings per share
Basic
2
$
$
$
$
Diluted
2
Dividends per common share
1
$
2
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 51
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
April 30
April 30
April 30
2024
2023
2024
2023
Net income
1
$
$
$
$
Other comprehensive income (loss)
Items that will be subsequently reclassified to net income
Net change in unrealized gain/(loss) on financial assets at fair value
through other comprehensive income
Change in unrealized gain/(loss)
(42 )
Reclassification to earnings of net loss/(gain)
(3 )
(15 )
(9 )
(14 )
Changes in allowance for credit losses recognized in earnings
(1 )
(1 )
Income taxes relating to:
Change in unrealized gain/(loss)
(42 )
(73 )
(115 )
Reclassification to earnings of net loss/(gain)
(31 )
Net change in unrealized foreign currency translation gain/(loss) on
investments in foreign operations, net of hedging activities
Unrealized gain/(loss)
(825 )
(523 )
Reclassification to earnings of net loss/(gain)
(2 )
Net gain/(loss) on hedges
(1,966 )
(754 )
Reclassification to earnings of net loss/(gain) on hedges
Income taxes relating to:
Net gain/(loss) on hedges
(132 )
(309 )
(491 )
(744 )
Net change in gain/(loss) on derivatives designated as cash flow hedges
Change in gain/(loss)
(517 )
(242 )
Reclassification to earnings of loss/(gain)
(1,246 )
(1,069 )
(1,063 )
Income taxes relating to:
Change in gain/(loss)
(558 )
(911 )
Reclassification to earnings of loss/(gain)
(330 )
(1,286 )
Share of other comprehensive income (loss) from investment in Schwab
(56 )
Items that will not be subsequently reclassified to net income
Remeasurement gain/(loss) on employee benefit plans
Gain/(loss)
(30 )
(49 )
(257 )
Income taxes
(30 )
(22 )
(35 )
(186 )
Change in net unrealized gain/(loss) on equity securities designated at
fair value through other comprehensive income
Change in net unrealized gain/(loss)
(170 )
(157 )
Income taxes
(11 )
(65 )
(136 )
(127 )
Gain/(loss) from changes in fair value due to own credit risk on
financial liabilities designated at fair value through profit or loss
Gain/(loss)
(128 )
Income taxes
(15 )
(32 )
(94 )
Total other comprehensive income (loss)
Total comprehensive income (loss)
1
$
$
$
$
Attributable to:
Common shareholders
1
$
$
$
$
Preferred shareholders and other equity instrument holders
1
1
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 52
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Common shares (Note 13)
Balance at beginning of period
$
$
$
$
Proceeds from shares issued on exercise of stock options
Shares issued as a result of dividend reinvestment plan
Purchase of shares for cancellation and other
(217 )
(512 )
Balance at end of period
Preferred shares and other equity instruments (Note 13)
Balance at beginning of period
Redemption of shares and other equity instruments
(350 )
(350 )
Balance at end of period
Treasury – common shares (Note 13)
Balance at beginning of period
(58 )
(103 )
(64 )
(91 )
Purchase of shares
(2,154 )
(2,235 )
(5,250 )
(4,051 )
Sale of shares
Balance at end of period
(24 )
(99 )
(24 )
(99 )
Treasury – preferred shares and other equity instruments (Note 13)
Balance at beginning of period
(27 )
(9 )
(65 )
(7 )
Purchase of shares and other equity instruments
(153 )
(185 )
(251 )
(326 )
Sale of shares and other equity instruments
Balance at end of period
(8 )
(10 )
(8 )
(10 )
Contributed surplus
Balance at beginning of period
Net premium (discount) on sale of treasury instruments
(11 )
(8 )
Issuance of stock options, net of options exercised
Other
(1 )
(18 )
(2 )
(25 )
Balance at end of period
Retained earnings
Balance at beginning of period
1
Impact on adoption of IFRS 17
2
Impact of reclassification of securities supporting insurance operations
related to the adoption of IFRS 17
2
(10 )
Net income attributable to equity instrument holders
1
Common dividends
(1,795 )
(1,754 )
(3,602 )
(3,500 )
Preferred dividends and distributions on other equity instruments
(190 )
(210 )
(264 )
(293 )
Net premium on repurchase of common shares and redemption of preferred shares and other
equity instruments
(1,002 )
(2,430 )
Remeasurement gain/(loss) on employee benefit plans
(22 )
(35 )
(186 )
Realized gain/(loss) on equity securities designated at fair value through
other comprehensive income
(4 )
(6 )
Balance at end of period
1
Accumulated other comprehensive income (loss)
Net unrealized gain/(loss) on financial assets at fair value through other comprehensive income:
Balance at beginning of period
(163 )
(305 )
(413 )
(476 )
Impact of reclassification of securities supporting insurance operations
related to the adoption of IFRS 17
2
Other comprehensive income (loss)
(31 )
Allowance for credit losses
(1 )
(1 )
Balance at end of period
(194 )
(191 )
(194 )
(191 )
Net unrealized gain/(loss) on equity securities designated at fair value through
other comprehensive income:
Balance at beginning of period
(127 )
Other comprehensive income (loss)
(140 )
(133 )
Reclassification of loss/(gain) to retained earnings
(2 )
Balance at end of period
(104 )
(104 )
Gain/(loss) from changes in fair value due to own credit risk on financial liabilities
designated at fair value through profit or loss:
Balance at beginning of period
(77 )
(99 )
(38 )
Other comprehensive income (loss)
(94 )
Balance at end of period
(38 )
(16 )
(38 )
(16 )
Net unrealized foreign currency translation gain/(loss) on investments in foreign
operations, net of hedging activities:
Balance at beginning of period
Other comprehensive income (loss)
(491 )
(744 )
Balance at end of period
Net gain/(loss) on derivatives designated as cash flow hedges:
Balance at beginning of period
(3,504 )
(3,992 )
(5,472 )
(5,717 )
Other comprehensive income (loss)
(1,286 )
Balance at end of period
(4,790 )
(3,617 )
(4,790 )
(3,617 )
Share of accumulated other comprehensive income (loss) from investment in Schwab
(3,051 )
(3,268 )
(3,051 )
(3,268 )
Total accumulated other comprehensive income
Total equity
1
$
$
$
$
1
2
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 53
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
April 30
April 30
April 30
2024
2023
2024
2023
Cash flows from (used in) operating activities
Net income
1
$
$
$
$
Adjustments to determine net cash flows from (used in) operating activities
Provision for (recovery of) credit losses
Depreciation
Amortization of other intangibles
Net securities loss/(gain)
Share of net income from investment in Schwab
(194 )
(241 )
(335 )
(526 )
Deferred taxes
1
(730 )
(642 )
(797 )
(701 )
Changes in operating assets and liabilities
Interest receivable and payable
Securities sold under repurchase agreements
Securities purchased under reverse repurchase agreements
(6,643 )
(25,418 )
(1,389 )
(35,616 )
Securities sold short
(4,730 )
(6,516 )
Trading loans, securities, and other
(4,826 )
(430 )
(14,256 )
(10,781 )
Loans net of securitization and sales
(24,876 )
(13,552 )
(34,289 )
(19,815 )
Deposits
(31,955 )
(40,210 )
Derivatives
(5,947 )
(3,669 )
Non-trading financial assets at fair value through profit or loss
Financial assets and liabilities designated at fair value through profit or loss
(4,132 )
Securitization liabilities
(96 )
Current taxes
(1,048 )
Brokers, dealers, and clients amounts receivable and payable
(1,053 )
(2,267 )
(6,837 )
Other, including unrealized foreign currency translation loss/(gain)
1
(995 )
(8,092 )
(5,170 )
Net cash from (used in) operating activities
(54,077 )
(14,831 )
(49,019 )
Cash flows from (used in) financing activities
Issuance of subordinated notes and debentures
Redemption or repurchase of subordinated notes and debentures
(18 )
(4 )
(42 )
Common shares issued, net
Repurchase of common shares
(1,219 )
(2,942 )
Redemption of preferred shares and other equity instruments
(350 )
(350 )
Sale of treasury shares and other equity instruments
Purchase of treasury shares and other equity instruments
(2,307 )
(2,420 )
(5,501 )
(4,377 )
Dividends paid on shares and distributions paid on other equity instruments
(1,853 )
(3,597 )
(1,124 )
Repayment of lease liabilities
(158 )
(164 )
(325 )
(320 )
Net cash from (used in) financing activities
(1,768 )
(136 )
(5,332 )
(1,350 )
Cash flows from (used in) investing activities
Interest-bearing deposits with banks
(10,894 )
Activities in financial assets at fair value through other comprehensive income
Purchases
(6,325 )
(7,745 )
(13,626 )
(15,330 )
Proceeds from maturities
Proceeds from sales
Activities in debt securities at amortized cost
Purchases
(2,462 )
(7,683 )
(5,700 )
(18,090 )
Proceeds from maturities
Proceeds from sales
Net purchases of land, buildings, equipment, other depreciable assets, and other intangibles
(425 )
(373 )
(896 )
(776 )
Net cash acquired from (paid for) divestitures and acquisitions
(502 )
(502 )
Net cash from (used in) investing activities
(3,659 )
Effect of exchange rate changes on cash and due from banks
(38 )
(28 )
Net increase (decrease) in cash and due from banks
(25 )
(114 )
(413 )
(1,682 )
Cash and due from banks at beginning of period
Cash and due from banks at end of period
$
$
$
$
Supplementary disclosure of cash flows from operating activities
Amount of income taxes paid (refunded) during the period
$
$
$
$
Amount of interest paid during the period
Amount of interest received during the period
Amount of dividends received during the period
1
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 54
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1: NATURE OF OPERATIONS
CORPORATE INFORMATION
The Toronto-Dominion Bank is a bank chartered under the
Bank Act (Canada)
. The shareholders of a bank are not, as shareholders, liable for any liability, act, or
default of the bank except as otherwise provided under the
Bank Act (Canada)
. The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Group (“TD” or the “Bank”). The Bank was formed through the amalgamation on February 1, 1955, of The Bank of Toronto (chartered in 1855) and The
Dominion Bank (chartered in 1869). The Bank is incorporated and domiciled in Canada with its registered and principal business offices located at 66 Wellington
Street West, Toronto, Ontario. TD serves customers in four business segments operating in a number of locations in key financial centres around the globe:
Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking.
BASIS OF PREPARATION
The accompanying Interim Consolidated Financial Statements and accounting principles followed by the Bank have been prepared in accordance with
International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), including the accounting requirements of
the Office of the Superintendent of Financial Institutions Canada (OSFI). The Interim Consolidated Financial Statements are presented in Canadian dollars, unless
otherwise indicated.
These Interim Consolidated Financial Statements were prepared on a condensed basis in accordance with International Accounting Standard 34,
Interim
Financial Reporting
Certain comparative amounts have been revised to conform with the presentation adopted in the current period.
The preparation of the Interim Consolidated Financial Statements requires that management make judgments, estimates, and assumptions regarding the
reported amount of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities, as further described in Note 3 of the Bank’s 2023
Annual Consolidated Financial Statements and in Note 3 of this report. Accordingly, actual results may differ from estimated amounts as future confirming events
occur.
The Bank’s Interim Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions and events in similar
circumstances. All intercompany transactions, balances, and unrealized gains and losses on transactions are eliminated on consolidation.
The Interim Consolidated Financial Statements for the three and six months ended April 30, 2024, were approved and authorized for issue by the Bank’s Board
of Directors, in accordance with a recommendation of the Audit Committee, on May 22, 2024.
As the Interim Consolidated Financial Statements do not include all of the disclosures normally provided in the Annual Consolidated Financial Statements, they
should be read in conjunction with the Bank’s 2023 Annual Consolidated Financial Statements and the accompanying Notes, and the shaded sections of the 2023
Management’s Discussion and Analysis (MD&A). The risk management policies and procedures of the Bank are provided in the MD&A. The shaded sections of
the “Managing Risk” section of the MD&A in this report, relating to market, liquidity, and insurance risks, are an integral part of these Interim Consolidated Financial
Statements, as permitted by IFRS.
NOTE 2: CURRENT AND FUTURE CHANGES IN ACCOUNTING POLICIES
CURRENT CHANGES IN ACCOUNTING POLICIES
The following new standard has been adopted by the Bank on November 1, 2023.
Insurance Contracts
The IASB issued IFRS 17 which replaced the guidance in IFRS 4,
Insurance Contracts
after January 1, 2023, which was November 1, 2023 for the Bank. IFRS 17 establishes principles for recognition, measurement, presentation and disclosure of
insurance contracts.
Under IFRS 17, insurance contracts are aggregated into groups which are measured at the risk-adjusted present value of cash flows in fulfilling the contracts.
Revenue is recognized as insurance services are provided over the coverage period. Losses are recognized immediately if the contract group is expected to be
onerous. The liabilities presented by insurance groups are comprised of the liability for remaining coverage (LRC) and the liability for incurred claims (LIC) and are
reported as Insurance contract liabilities on the Interim Consolidated Balance Sheet. The LRC is the obligation to investigate and pay claims that have not yet
occurred and includes the loss component related to onerous contract groups. The LIC is the estimate of claims incurred, including claims that have occurred but
have not been reported, and related insurance costs.
IFRS 17 introduces two measurement models that are applicable to the Bank, the premium allocation approach model (PAA) and the general measurement model
(GMM). The Bank measures the majority of its insurance contract groups using the PAA, which includes property and casualty contracts as well as short-term life
and health contracts. The PAA is a simplified model applied to insurance contracts that are either one year or less or where the PAA approximates the GMM.
Contracts using the GMM are longer-term life and health contracts. The LRC for insurance contract groups using the PAA is measured as unearned premiums less
deferred acquisition cash flows allocated to the group. The LRC is adjusted for the recognition of insurance revenue and amortization of acquisition cash flows
reported in insurance service expenses on a straight-line basis over the contractual terms of the underlying insurance contracts, usually twelve months. The LRC
for longer term contracts using the GMM model is measured using estimates and assumptions that reflect the timing and uncertainty of insurance cash flows.
When a group of contracts is expected to be onerous, a loss component (expected loss related to fulfilling the related insurance contracts) is established which
increases the LRC and insurance service expenses. The loss component of the LRC is subsequently recognized in income over the contractual term of the
underlying insurance contracts to offset claims incurred and related expenses.
The Bank measures the LIC at the present value of current estimates of claims and related costs for insurable events occurring at or before the Interim
Consolidated Balance Sheet date. The LIC includes a risk adjustment, which represents the compensation the Bank requires for bearing the uncertainty related to
non-financial risks in its fulfilment of insurance contracts. Expenses related to claims incurred and related costs are reported in insurance service expenses and
changes related to discounting the liability are recorded as insurance finance income or expenses in other income (loss). Prior to the adoption of IFRS 17, these
expenses were recorded in insurance claims and related expenses and non-interest expenses.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 55
Reinsurance contracts held are recognized and measured using the same principles as insurance contracts issued. Reinsurance contract assets are presented in
Other assets on the Interim Consolidated Balance Sheet and the net results from reinsurance contracts held are presented in Other income (loss) on the Interim
Consolidated Statement of Income. Refer to Note 14 for further detail on the balances and results of insurance and reinsurance contracts.
The Bank initially applied IFRS 17 on November 1, 2023 and restated the comparative period. The Bank transitioned by primarily applying the full retrospective
approach which resulted in the measurement of insurance contracts as if IFRS 17 had always applied to them.
The following table sets out adjustments to the
Bank’s insurance-related balances reported under IFRS 4 as at October 31, 2022 used to derive the insurance contract liabilities and reinsurance contract assets
recognized by the Bank as at November 1, 2022 under IFRS 17.
(millions of Canadian dollars)
Amount
Insurance-related liabilities
$
7,468
Other liabilities
131
Other assets
(2,361)
Net insurance-related balances as at October 31, 2022
$
5,238
Changes in actuarial assumptions, including risk adjustment and discount factor
(192)
Recognition of losses on onerous contracts
113
Other adjustments
(93)
Net insurance-related balances as at November 1, 2022
$
5,066
Insurance contract liabilities
$
5,761
Reinsurance contract assets
(695)
Net insurance-related balances as at November 1, 2022
$
5,066
On November 1, 2022, IFRS 17 transition adjustments resulted in a decrease to the Bank’s deferred tax assets of $
earnings of $
Upon the initial application of IFRS 17 on November 1, 2023, the Bank applied transitional guidance and reclassified certain securities supporting insurance
operations to minimize accounting mismatches arising from the application of the new discount factor under IFRS 17. The transitional guidance for such securities
is applicable for entities that previously used IFRS 9,
Financial Instruments
a decrease to retained earnings and an increase in accumulated other comprehensive income (AOCI) of $
FUTURE CHANGES IN ACCOUNTING POLICIES
The following standard has been issued, but is not yet effective on the date of issuance of the Bank’s Interim Consolidated Financial Statements.
Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18,
Presentation and Disclosure in Financial Statements
Presentation of
Financial Statements
statements. IFRS 18 focuses on the presentation of financial performance in the statement of profit or loss, it will be effective for the Bank’s annual period
beginning November 1, 2027. Early application is permitted. The Bank is currently assessing the impact of adopting this standard.
NOTE 3: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS
The estimates used in the Bank’s accounting policies are essential to understanding its results of operations and financial condition. Some of the Bank’s policies
require subjective, complex judgments and estimates as they relate to matters that are inherently uncertain. Changes in these judgments or estimates and
changes to accounting standards and policies could have a material impact on the Bank’s Interim Consolidated Financial Statements. The Bank has established
procedures to ensure that accounting policies are applied consistently and that the processes for changing methodologies, determining estimates, and adopting
new accounting standards are well-controlled and occur in an appropriate and systematic manner. Refer to Note 3 of the Bank’s 2023 Annual Consolidated
Financial Statements for a description of significant accounting judgments, estimates, and assumptions.
Impairment – Expected Credit Loss Model
The expected credit loss (ECL) model requires the application of judgments, estimates, and assumptions in the assessment of the current and forward-looking
economic environment. There remains elevated economic uncertainty, and management continues to exercise expert credit judgment in assessing if an exposure
has experienced significant increase in credit risk since initial recognition and in determining the amount of ECLs at each reporting date. To the extent that certain
effects are not fully incorporated into the model calculations, temporary quantitative and qualitative adjustments have been applied.
Insurance Contracts
The assumptions used in establishing the Bank’s insurance claims and policy benefit liabilities are based on best estimates of possible outcomes.
For property and casualty insurance contracts, the ultimate cost of LIC is estimated using a range of standard actuarial claims projection techniques in
accordance with Canadian accepted actuarial practices. Additional qualitative judgment is used to assess the extent to which past trends may or may not apply in
the future, in order to arrive at the estimated ultimate claims cost amounts that present the most likely outcome taking into account all the uncertainties involved.
For life and health insurance contracts, actuarial liabilities consider all future policy cash flows, including premiums, claims, and expenses required to administer
the policies. Critical assumptions used in the measurement of life and health insurance contract liabilities are determined by the appointed actuary.
Further information on insurance risk assumptions is provided in Note 14.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 56
NOTE 4: FAIR VALUE MEASUREMENTS
There have been no significant changes to the Bank’s approach and methodologies used to determine fair value measurements for the three and six months
ended April 30, 2024.
(a)
The following table reflects the fair value of the Bank’s financial assets and liabilities not carried at fair value.
Financial Assets and Liabilities not carried at Fair Value
1
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Carrying
Fair
Carrying
Fair
value
value
value
value
FINANCIAL ASSETS
Debt securities at amortized cost, net of allowance for credit losses
Government and government-related securities
$
$
$
$
Other debt securities
Total debt securities at amortized cost, net of allowance for credit losses
Total loans, net of allowance for loan losses
Total financial assets not carried at fair value
$
$
$
$
FINANCIAL LIABILITIES
Deposits
$
$
$
$
Securitization liabilities at amortized cost
Subordinated notes and debentures
Total financial liabilities not carried at fair value
$
$
$
$
1
This table excludes financial assets and liabilities where the carrying value approximates their fair value.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 57
(b)
FAIR VALUE HIERARCHY
The following table presents the levels within the fair value hierarchy for each of the assets and liabilities measured at fair value on a recurring basis as at
April 30, 2024 and October 31, 2023.
Fair Value Hierarchy for Assets and Liabilities Measured at Fair Value on a Recurring Basis
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
FINANCIAL ASSETS AND COMMODITIES
Trading loans, securities, and other
1
Government and government-related securities
Canadian government debt
Federal
$
$
$
$
$
$
$
$
Provinces
U.S. federal, state, municipal governments,
Other OECD
2
Mortgage-backed securities
Other debt securities
Canadian issuers
Other issuers
Equity securities
Trading loans
Commodities
Retained interests
Non-trading financial assets at fair value
through profit or loss
Securities
Loans
Derivatives
Interest rate contracts
Foreign exchange contracts
Credit contracts
Equity contracts
Commodity contracts
Financial assets designated at
fair value through profit or loss
Securities
1
Financial assets at fair value through other
comprehensive income
Government and government-related securities
Canadian government debt
Federal
Provinces
U.S. federal, state, municipal governments,
Other OECD government-guaranteed debt
Mortgage-backed securities
Other debt securities
Asset-backed securities
Corporate and other debt
Equity securities
Loans
Securities purchased under reverse
repurchase agreements
FINANCIAL LIABILITIES
Trading deposits
Derivatives
Interest rate contracts
Foreign exchange contracts
Credit contracts
Equity contracts
Commodity contracts
Securitization liabilities at fair value
Financial liabilities designated at fair value
through profit or loss
Obligations related to securities sold short
1
Obligations related to securities sold
under repurchase agreements
-
1
Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but not yet purchased (short positions).
2
Organisation for Economic Cooperation and Development (OECD).
(c)
The Bank’s policy is to record transfers of assets and liabilities between the different levels of the fair value hierarchy using the fair values as at the end of each
reporting period.
There were no significant transfers between Level 1 and Level 2 during the three and six months ended April 30, 2024 and April 30, 2023.
There were no significant transfers between Level 2 and Level 3 during the three and six months ended April 30, 2024 and April 30, 2023.
There were no significant changes to the unobservable inputs and sensitivities for assets and liabilities classified as Level 3 during the three and six months ended
April 30, 2024, and April 30, 2023.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 58
(d)
RECONCILIATION OF CHANGES IN FAIR VALUE FOR LEVEL 3 ASSETS AND LIABILITIES
The following tables set out changes in fair value of all assets and liabilities measured at fair value using significant Level 3 unobservable inputs for the three and
six months ended April 30, 2024 and April 30, 2023.
Reconciliation of Changes in Fair Value for Level 3 Assets and Liabilities
(millions of Canadian dollars)
Change in
unrealized
Fair
Total realized and
Fair
gains
value as at
unrealized gains (losses)
Movements
1
Transfers
value as at
(losses) on
February 1
Included
Included
Purchases/
Sales/
Into
Out of
April 30
instruments
2024
in income
2
in OCI
3,4
Issuances
Settlements
Level 3
Level 3
2024
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
(34 )
$
$
$
$
Other debt securities
(2 )
(4 )
(49 )
(1 )
Equity securities
(1 )
(2 )
(38 )
(49 )
(2 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(10 )
(1 )
(10 )
(1 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(1 )
(11 )
Equity securities
(2 )
(13 )
$
$
$
(3 )
$
$
$
$
$
$
(10 )
FINANCIAL LIABILITIES
Trading deposits
6
$
(1,039 )
$
$
$
(18 )
$
$
$
$
(910 )
$
Derivatives
7
Interest rate contracts
(137 )
(18 )
(148 )
(10 )
Foreign exchange contracts
(1 )
(1 )
(6 )
(7 )
(1 )
Equity contracts
(28 )
(1 )
(23 )
Commodity contracts
(10 )
(14 )
(176 )
(28 )
(6 )
(172 )
Financial liabilities designated
at fair value
through profit or loss
(24 )
(37 )
(79 )
(74 )
(37 )
Change in
unrealized
Fair
Total realized and
Fair
gains
value as at
unrealized gains (losses)
Movements
1
Transfers
value as at
(losses) on
November 1
Included
Included
Purchases/
Sales/
Into
Out of
April 30
instruments
2023
in income
2
in OCI
4
Issuances
Settlements
Level 3
Level 3
2024
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
(67 )
$
$
$
$
Other debt securities
(85 )
(49 )
(2 )
Equity securities
(1 )
(2 )
(154 )
(49 )
(2 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(15 )
(1 )
(15 )
(1 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(4 )
(12 )
Equity securities
(12 )
(186 )
(11 )
$
$
$
(16 )
$
$
(198 )
$
$
$
$
(11 )
FINANCIAL LIABILITIES
Trading deposits
6
$
(985 )
$
$
$
(74 )
$
$
$
$
(910 )
$
Derivatives
7
Interest rate contracts
(126 )
(41 )
(148 )
(23 )
Foreign exchange contracts
(6 )
(6 )
(7 )
(2 )
Equity contracts
(21 )
(1 )
(1 )
(1 )
(23 )
(1 )
Commodity contracts
(1 )
(4 )
(5 )
(154 )
(45 )
(7 )
(172 )
(31 )
Financial liabilities designated
at fair value through profit
or loss
(22 )
(133 )
(74 )
1
Includes foreign exchange.
2
3
4
details.
5
6
7
(January 31, 2024/February 1, 2024 – $
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 59
Reconciliation of Changes in Fair Value for Level 3 Assets and Liabilities
(millions of Canadian dollars)
Change in
unrealized
Fair
Total realized and
Fair
gains
value as at
unrealized gains (losses)
Movements
1
Transfers
value as at
(losses) on
February 1
Included
Included
Purchases/
Sales/
Into
Out of
April 30
instruments
2023
in income
2
in OCI
3
Issuances
Settlements
Level 3
Level 3
2023
still held
4
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
$
$
$
$
Other debt securities
(3 )
(44 )
(25 )
(27 )
Equity securities
(4 )
(5 )
(2 )
(7 )
(49 )
(25 )
(29 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(45 )
(45 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(15 )
(8 )
Equity securities
(189 )
(635 )
(183 )
$
$
$
(204 )
$
$
(643 )
$
$
$
$
(183 )
FINANCIAL LIABILITIES
Trading deposits
5
$
(486 )
$
(17 )
$
$
(89 )
$
$
(6 )
$
$
(592 )
$
(14 )
Derivatives
6
Interest rate contracts
(164 )
(6 )
(169 )
Foreign exchange contracts
(1 )
Equity contracts
(51 )
(9 )
(7 )
(27 )
Commodity contracts
(18 )
(2 )
(1 )
(208 )
(26 )
(7 )
(197 )
Financial liabilities designated
at fair value
through profit or loss
(22 )
(127 )
(49 )
(21 )
Change in
unrealized
Fair
Total realized and
Fair
gains
value as at
unrealized gains (losses)
Movements
1
Transfers
value as at
(losses) on
November 1
Included
Included
Purchases/
Sales/
Into
Out of
April 30
instruments
2022
in income
2
in OCI
3
Issuances
Settlements
Level 3
Level 3
2023
still held
4
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
$
$
$
$
Other debt securities
(59 )
(32 )
(23 )
Equity securities
(4 )
(5 )
(2 )
(64 )
(32 )
(25 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(48 )
(48 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(8 )
(12 )
Equity securities
(211 )
(674 )
(205 )
$
$
$
(219 )
$
$
(686 )
$
$
$
$
(205 )
FINANCIAL LIABILITIES
Trading deposits
5
$
(416 )
$
(29 )
$
$
(148 )
$
$
(9 )
$
$
(592 )
$
(24 )
Derivatives
6
Interest rate contracts
(156 )
(30 )
(169 )
(5 )
Foreign exchange contracts
(4 )
(1 )
Equity contracts
(59 )
(7 )
(2 )
(28 )
(27 )
Commodity contracts
(69 )
(2 )
(4 )
(184 )
(59 )
(2 )
(27 )
(197 )
Financial liabilities designated
at fair value
through profit or loss
(44 )
(187 )
(49 )
1
Includes foreign exchange.
2
3
4
5
6
(January 31, 2023/ February 1, 2023 – $
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 60
NOTE 5: SECURITIES
(a)
UNREALIZED SECURITIES GAINS (LOSSES)
The following table summarizes the unrealized gains and losses as at April 30, 2024 and October 31, 2023.
Unrealized Gains (Losses) for Securities at Fair Value Through Other Comprehensive Income
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Cost/
Gross
Gross
Cost/
Gross
Gross
amortized
unrealized
unrealized
Fair
amortized
unrealized
unrealized
Fair
cost
1
gains
(losses)
value
cost
1
gains
(losses)
value
Government and government-related
securities
Canadian government debt
Federal
$
$
$
(125 )
$
$
$
$
(170 )
$
Provinces
(49 )
(118 )
U.S. federal, state, municipal governments, and
(197 )
(275 )
Other OECD government-guaranteed debt
(17 )
(24 )
Mortgage-backed securities
(24 )
(36 )
(412 )
(623 )
Other debt securities
Asset-backed securities
(16 )
(32 )
Corporate and other debt
(57 )
(99 )
(73 )
(131 )
Total debt securities
(485 )
(754 )
Equity securities
Common shares
(88 )
(116 )
Preferred shares
(168 )
(224 )
(256 )
(340 )
Total securities at fair value through
$
$
$
(741 )
$
$
$
$
(1,094 )
$
1
Includes the foreign exchange translation of amortized cost balances at the period-end spot rate.
(b)
EQUITY SECURITIES DESIGNATED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The Bank designated certain equity securities at FVOCI.
The following table summarizes the fair value of equity securities designated at FVOCI as at
April 30, 2024 and October 31, 2023, and dividend income recognized on these securities for the three and six months ended April 30, 2024 and April 30, 2023.
Equity Securities Designated at Fair Value Through Other Comprehensive Income
(millions of Canadian dollars)
As at
For the three months ended
For the six months ended
April 30, 2024
October 31, 2023
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Fair value
Dividend income recognized
Dividend income recognized
Common shares
$
$
$
$
$
$
Preferred shares
Total
$
$
$
$
$
$
The Bank disposed of certain equity securities in line with the Bank’s investment strategy and disposed of Federal Home Loan Bank (FHLB) stocks in accordance
with FHLB member stockholding requirements, as follows:
Equity Securities Net Realized Gains (Losses)
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Equity Securities
Fair value
$
$
$
$
Cumulative realized gain/(loss)
(1 )
(5 )
(1 )
(8 )
FHLB Stock
Fair value
Cumulative realized gain/(loss)
(c)
DEBT SECURITIES NET REALIZED GAINS (LOSSES)
The following table summarizes the net realized gains and losses for the three and six months ended April 30, 2024 and April 30, 2023, which are included in
Other income (loss) on the Interim Consolidated Statement of Income.
Debt Securities Net Realized Gains (Losses)
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Debt securities at amortized cost
$
(69 )
$
(36 )
$
(69 )
$
(36 )
Debt securities at fair value through other comprehensive income
Total
$
(66 )
$
(21 )
$
(60 )
$
(22 )
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 61
(d)
CREDIT QUALITY OF DEBT SECURITIES
The Bank evaluates non-retail credit risk on an individual borrower basis, using both a borrower risk rating (BRR) and facility risk rating, as detailed in the shaded
area of the “Managing Risk” section of the 2023 MD&A. This system is used to assess all non-retail exposures, including debt securities.
The following table provides the gross carrying amounts of debt securities measured at amortized cost and debt securities at FVOCI by internal risk rating for credit
risk management purposes, presenting separately those debt securities that are subject to Stage 1, Stage 2, and Stage 3 allowances. Refer to the “Allowance for
Credit Losses” table in Note 6 for details regarding the allowance and provision for credit losses on debt securities.
Debt Securities by Risk Rating
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Debt securities
1
Investment grade
$
$
$
n/a
2
$
$
$
$
n/a
$
Non-investment grade
n/a
n/a
Watch and classified
n/a
n/a
n/a
n/a
Default
n/a
n/a
n/a
n/a
Total debt securities
Allowance for credit losses on debt securities
at amortized cost
Total debt securities, net of allowance
$
$
$
$
$
$
$
$
1
Includes debt securities backed by government-guaranteed loans of $
based on the issuer’s credit risk.
2
As at April 30, 2024, total debt securities, net of allowance, in the table above, include debt securities measured at amortized cost, net of allowance, of
$
difference between probability-weighted ECLs and base ECLs on debt securities at FVOCI and at amortized cost as at both April 30, 2024 and October 31, 2023,
was insignificant.
NOTE 6: LOANS, IMPAIRED LOANS, AND ALLOWANCE FOR CREDIT LOSSES
(a)
LOANS AND ACCEPTANCES
The following table provides details regarding the Bank’s loans and acceptances as at April 30, 2024 and October 31, 2023.
Loans and Acceptances
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Residential mortgages
$
$
Consumer instalment and other personal
Credit card
Business and government
Customers’ liability under acceptances
Loans at FVOCI
Total loans and acceptances
Total allowance for loan losses
Total loans and acceptances, net of allowance
$
$
Business and government loans (including loans at FVOCI) and customers’ liability under acceptances are grouped together as reflected below for presentation in
the “Loans and Acceptances by Risk Ratings” table.
Loans and Acceptances – Business and Government
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Loans at amortized cost
$
$
Customers’ liability under acceptances
Loans at FVOCI
Loans and acceptances
Allowance for loan losses
Loans and acceptances, net of allowance
$
$
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 62
(b)
CREDIT QUALITY OF LOANS
In the retail portfolio, including individuals and small businesses, the Bank manages exposures on a pooled basis, using predictive credit scoring techniques. For
non-retail exposures, each borrower is assigned a BRR that reflects the probability of default (PD) of the borrower using proprietary industry and sector specific
risk models and expert judgment. Refer to the shaded areas of the “Managing Risk” section of the 2023 MD&A for further details, including the mapping of PD
ranges to risk levels for retail exposures as well as the Bank’s 21-point BRR scale to risk levels and external ratings for non-retail exposures.
The following table provides the gross carrying amounts of loans, acceptances and credit risk exposures on loan commitments and financial guarantee contracts
by internal risk ratings for credit risk management purposes, presenting separately those that are subject to Stage 1, Stage 2, and Stage 3 allowances.
Loans and Acceptances by Risk Ratings
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Residential mortgages
1,2,3
Low Risk
$
$
$
n/a
$
$
$
$
n/a
$
Normal Risk
n/a
n/a
Medium Risk
n/a
n/a
High Risk
Default
n/a
n/a
n/a
n/a
Total loans
Allowance for loan losses
Loans, net of allowance
Consumer instalment and other personal
4
Low Risk
n/a
n/a
Normal Risk
n/a
n/a
Medium Risk
n/a
n/a
High Risk
Default
n/a
n/a
n/a
n/a
Total loans
Allowance for loan losses
Loans, net of allowance
Credit card
Low Risk
n/a
n/a
Normal Risk
n/a
n/a
Medium Risk
n/a
n/a
High Risk
Default
n/a
n/a
n/a
n/a
Total loans
Allowance for loan losses
Loans, net of allowance
Business and government
1,2,3,5
Investment grade or Low/Normal Risk
n/a
n/a
Non-investment grade or Medium Risk
n/a
n/a
Watch and classified or High Risk
Default
n/a
n/a
n/a
n/a
Total loans and acceptances
Allowance for loan and acceptances losses
Loans and acceptances, net of allowance
Total loans and acceptances
6
Total allowance for loan losses
6,7
Total loans and acceptances, net of
allowance
6
$
$
$
$
$
$
$
$
1
Includes impaired loans with a balance of $
exceeded the loan amount.
2
Excludes trading loans and non-trading loans at fair value through profit or loss (FVTPL) with a fair value of $
$
3
Includes insured mortgages of $
4
5
Includes loans guaranteed by government agencies of $
the borrowers’ credit risk.
6
nil
nil
been included in the “Default” risk rating category as they were impaired at acquisition.
7
nil
nil
).
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 63
Loans and Acceptances by Risk Ratings
(Continued)
1
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Retail Exposures
2
Low Risk
$
$
$
n/a
$
$
$
$
n/a
$
Normal Risk
n/a
n/a
Medium Risk
n/a
n/a
High Risk
Default
n/a
n/a
n/a
n/a
Non-Retail Exposures
3
Investment grade
n/a
n/a
Non-investment grade
n/a
n/a
Watch and classified
Default
n/a
n/a
n/a
n/a
Total off-balance sheet credit
instruments
Allowance for off-balance sheet credit
instruments
Total off-balance sheet credit
instruments, net of allowance
$
$
$
$
$
$
$
$
1
Excludes mortgage commitments.
2
3
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 64
(c)
ALLOWANCE FOR CREDIT LOSSES
The following table provides details on the Bank’s allowance for credit losses as at and for the three and six months ended April 30, 2024 and April 30, 2023,
including allowance for off-balance sheet instruments in the applicable categories.
Allowance for Credit Losses
(millions of Canadian dollars)
Foreign
Foreign
exchange,
exchange,
Balance at
Provision
Write-offs,
disposals,
Balance
Balance at
Provision
Write-offs,
disposals,
Balance
beginning
for credit
net of
and other
at end of
beginning
for credit
net of
and other
at end of
of period
losses
recoveries
adjustments
period
of period
losses
recoveries
adjustments
period
For the three months ended
April 30, 2024
April 30, 2023
Residential mortgages
$
$
(8 )
$
(1 )
$
$
$
$
$
(3 )
$
$
Consumer instalment and other
personal
(288 )
(181 )
Credit card
(403 )
(283 )
Business and government
(207 )
(57 )
Total allowance for loan losses,
including off-balance sheet
instruments
(899 )
(524 )
Debt securities at amortized cost
Debt securities at FVOCI
(1 )
(1 )
Total allowance for credit
losses on debt securities
(1 )
(1 )
Total allowance for credit losses
$
$
$
(899 )
$
$
$
$
$
(524 )
$
$
Comprising:
Allowance for credit losses on
loans at amortized cost
$
$
$
$
Allowance for credit losses on
loans at FVOCI
Allowance for loan losses
Allowance for off-balance sheet
instruments
Allowance for credit losses on
debt securities
For the six months ended
April 30, 2024
April 30, 2023
Residential mortgages
$
$
$
(3 )
$
$
$
$
$
(4 )
$
(1 )
$
Consumer instalment and other
personal
(563 )
(3 )
(377 )
(6 )
Credit card
(772 )
(14 )
(528 )
(8 )
Business and government
(320 )
(39 )
(88 )
Total allowance for loan losses,
including off-balance sheet
instruments
(1,658 )
(53 )
(997 )
(12 )
Debt securities at amortized cost
Debt securities at FVOCI
(1 )
(1 )
Total allowance for credit
losses on debt securities
(1 )
(1 )
Total allowance for credit losses
$
$
$
(1,658 )
$
(53 )
$
$
$
$
(997 )
$
(11 )
$
Comprising:
Allowance for credit losses on
loans at amortized cost
$
$
$
$
Allowance for credit losses on
loans at FVOCI
Allowance for loan losses
Allowance for off-balance sheet
instruments
Allowance for credit losses on
debt securities
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 65
(d)
ALLOWANCE FOR LOAN LOSSES BY STAGE
The following table provides details on the Bank’s allowance for loan losses by stage as at and for the three months ended April 30, 2024 and April 30, 2023.
Allowance for Loan Losses by Stage
(millions of Canadian dollars)
For the three months ended
April 30, 2024
April 30, 2023
Stage 1
Stage 2
Stage 3
1
Total
Stage 1
Stage 2
Stage 3
1
Total
Residential Mortgages
Balance at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(32 )
(21 )
Transfer to Stage 2
(7 )
(6 )
(8 )
(4 )
Transfer to Stage 3
(8 )
(1 )
(3 )
Net remeasurement due to transfers into stage
3
(8 )
(2 )
(4 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(1 )
(1 )
(1 )
(1 )
(2 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(1 )
(7 )
(19 )
(27 )
(1 )
(4 )
(3 )
(8 )
Changes to risk, parameters, and models
7
(31 )
(28 )
Disposals
Write-offs
(2 )
(2 )
(3 )
(3 )
Recoveries
Foreign exchange and other adjustments
Balance at end of period
$
$
$
$
$
$
$
$
Consumer Instalment and Other Personal
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(141 )
(1 )
(135 )
(1 )
Transfer to Stage 2
(58 )
(23 )
(48 )
(19 )
Transfer to Stage 3
(3 )
(62 )
(2 )
(49 )
Net remeasurement due to transfers into stage
3
(63 )
(48 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(18 )
(24 )
(4 )
(46 )
(1 )
(26 )
(3 )
(30 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(16 )
(26 )
(16 )
(58 )
(17 )
(23 )
(8 )
(48 )
Changes to risk, parameters, and models
7
(55 )
(124 )
Disposals
Write-offs
(370 )
(370 )
(254 )
(254 )
Recoveries
Foreign exchange and other adjustments
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
8
Balance at end of period
$
$
$
$
$
$
$
$
Credit Card
9
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(255 )
(8 )
(264 )
(6 )
Transfer to Stage 2
(81 )
(20 )
(76 )
(14 )
Transfer to Stage 3
(5 )
(239 )
(5 )
(179 )
Net remeasurement due to transfers into stage
3
(118 )
(127 )
(1 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(8 )
(6 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(10 )
(18 )
(88 )
(116 )
(10 )
(23 )
(65 )
(98 )
Changes to risk, parameters, and models
7
(61 )
(135 )
Disposals
Write-offs
(486 )
(486 )
(357 )
(357 )
Recoveries
Foreign exchange and other adjustments
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
8
Balance at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
described in the “Significant Increase in Credit Risk” section of Note 2 and Note 3 of the Bank’s 2023 Annual Consolidated Financial Statements, holding all other factors impacting the
change in ECLs constant.
4
5
6
7
subsequent to stage migration. Refer to the “Measurement of Expected Credit Losses”, “Forward-Looking Information ” and “Expert Credit Judgment” sections of Note 2 and Note 3 of the
Bank’s 2023 Annual Consolidated Financial Statements for further details.
8
9
Consolidated Financial Statements for further details.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 66
Allowance for Loan Losses by Stage
(Continued)
(millions of Canadian dollars)
For the three months ended
April 30, 2024
April 30, 2023
Stage 1
Stage 2
Stage 3
1
Total
Stage 1
Stage 2
Stage 3
1
Total
Business and Government
2
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
3
(52 )
(122 )
Transfer to Stage 2
(166 )
(4 )
(124 )
(3 )
Transfer to Stage 3
(2 )
(80 )
(4 )
(18 )
Net remeasurement due to transfers into stage
3
(18 )
(36 )
(9 )
New originations or purchases
3
n/a
n/a
n/a
n/a
Net repayments
3
(11 )
(3 )
(5 )
(18 )
(19 )
(9 )
Derecognition of financial assets (excluding
disposals and write-offs)
3
(161 )
(155 )
(100 )
(416 )
(163 )
(121 )
(106 )
(390 )
Changes to risk, parameters, and models
3
(125 )
Disposals
Write-offs
(222 )
(222 )
(65 )
(65 )
Recoveries
Foreign exchange and other adjustments
(8 )
(3 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
4
Balance at end of period
Total Allowance, including off-balance sheet
instruments, at end of period
Less: Total Allowance for off-balance sheet
instruments
4
Total Allowance for Loan Losses at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
4
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 67
The following table provides details on the Bank’s allowance for loan losses by stage as at and for the six months ended April 30, 2024 and April 30, 2023.
Allowance for Loan Losses by Stage
(millions of Canadian dollars)
For the six months ended
April 30, 2024
April 30, 2023
Stage 1
Stage 2
Stage 3
1
Total
Stage 1
Stage 2
Stage 3
1
Total
Residential Mortgages
Balance at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(65 )
(3 )
(55 )
(1 )
Transfer to Stage 2
(17 )
(11 )
(14 )
(9 )
Transfer to Stage 3
(17 )
(1 )
(8 )
Net remeasurement due to transfers into stage
3
(14 )
(1 )
(11 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(2 )
(2 )
(2 )
(2 )
(4 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(3 )
(12 )
(23 )
(38 )
(2 )
(8 )
(6 )
(16 )
Changes to risk, parameters, and models
7
(71 )
(52 )
Disposals
Write-offs
(4 )
(4 )
(5 )
(5 )
Recoveries
Foreign exchange and other adjustments
(1 )
(1 )
(1 )
Balance at end of period
$
$
$
$
$
$
$
$
Consumer Instalment and Other Personal
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(271 )
(2 )
(303 )
(3 )
Transfer to Stage 2
(130 )
(42 )
(100 )
(37 )
Transfer to Stage 3
(6 )
(122 )
(4 )
(95 )
Net remeasurement due to transfers into stage
3
(117 )
(101 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(36 )
(45 )
(7 )
(88 )
(23 )
(44 )
(6 )
(73 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(33 )
(46 )
(26 )
(105 )
(35 )
(47 )
(17 )
(99 )
Changes to risk, parameters, and models
7
(126 )
(218 )
Disposals
Write-offs
(717 )
(717 )
(520 )
(520 )
Recoveries
Foreign exchange and other adjustments
(1 )
(3 )
(3 )
(2 )
(3 )
(1 )
(6 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
8
Balance at end of period
$
$
$
$
$
$
$
$
Credit Card
9
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(494 )
(15 )
(558 )
(11 )
Transfer to Stage 2
(176 )
(36 )
(162 )
(26 )
Transfer to Stage 3
(11 )
(462 )
(10 )
(343 )
Net remeasurement due to transfers into stage
3
(226 )
(266 )
(8 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
Derecognition of financial assets (excluding
disposals and write-offs)
6
(20 )
(34 )
(172 )
(226 )
(22 )
(41 )
(111 )
(174 )
Changes to risk, parameters, and models
7
(236 )
(255 )
Disposals
Write-offs
(930 )
(930 )
(671 )
(671 )
Recoveries
Foreign exchange and other adjustments
(6 )
(6 )
(2 )
(14 )
(3 )
(5 )
(8 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
8
Balance at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
described in the “Significant Increase in Credit Risk” section of Note 2 and Note 3 of the Bank’s 2023 Annual Consolidated Financial Statements, holding all other factors impacting the
change in ECLs constant.
4
5
6
7
subsequent to stage migration. Refer to the “Measurement of Expected Credit Losses”, “Forward-Looking Information ” and “Expert Credit Judgment” sections of Note 2 and Note 3 of the
Bank’s 2023 Annual Consolidated Financial Statements for further details.
8
9
Consolidated Financial Statements for further details.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 68
Allowance for Loan Losses by Stage
(Continued)
(millions of Canadian dollars)
For the six months ended
April 30, 2024
April 30, 2023
Stage 1
Stage 2
Stage 3
1
Total
Stage 1
Stage 2
Stage 3
1
Total
Business and Government
2
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
3
(114 )
(220 )
(2 )
Transfer to Stage 2
(283 )
(7 )
(283 )
(6 )
Transfer to Stage 3
(16 )
(135 )
(9 )
(39 )
Net remeasurement due to transfers into stage
3
(39 )
(64 )
(13 )
New originations or purchases
3
n/a
n/a
n/a
n/a
Net repayments
3
(19 )
(29 )
(31 )
(39 )
(43 )
(50 )
Derecognition of financial assets (excluding
disposals and write-offs)
3
(333 )
(254 )
(145 )
(732 )
(351 )
(272 )
(239 )
(862 )
Changes to risk, parameters, and models
3
(160 )
(116 )
Disposals
Write-offs
(346 )
(346 )
(108 )
(108 )
Recoveries
Foreign exchange and other adjustments
(17 )
(22 )
(39 )
(2 )
(8 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
4
Balance at end of period
Total Allowance, including off-balance sheet
instruments, at end of period
Less: Total Allowance for off-balance sheet
instruments
4
Total Allowance for Loan Losses at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
4
The allowance for credit losses on all remaining financial assets is not significant.
(e)
Relevant macroeconomic factors are incorporated in risk parameters as appropriate. Additional risk factors that are industry or segment specific are also
incorporated, where relevant. The key macroeconomic variables used in determining ECLs include regional unemployment rates for all retail exposures and
regional housing price indices for residential mortgages and home equity lines of credit. For business and government loans, the key macroeconomic variables
include gross domestic product (GDP), unemployment rates, interest rates, and credit spreads. Refer to Note 3 of the Bank’s 2023 Annual Consolidated Financial
Statements for a discussion of how forward-looking information is generated and considered in determining whether there has been a significant increase in credit
risk and in measuring ECLs.
Macroeconomic Variables
Select macroeconomic variables are projected over the forecast period. The following table sets out average values of the macroeconomic variables over the four
calendar quarters starting with the current quarter, and the remaining 4-year forecast period for the base forecast and upside and downside scenarios used in
determining the Bank’s ECLs as at April 30, 2024. As the forecast period increases, information about the future becomes less readily available and projections
are anchored on assumptions around structural relationships between economic parameters that are inherently much less certain. Restrictive monetary policy is
contributing to elevated economic uncertainty, particularly in Canada where household debt levels remain elevated, and is likely to continue to weigh on near-term
economic growth and lead to a modest increase in the unemployment rate.
Macroeconomic Variables
As at
April 30, 2024
Base Forecast
Upside Scenario
Downside Scenario
Average
Remaining
Average
Remaining
Average
Remaining
Q2 2024-
4-year
Q2 2024-
4-year
Q2 2024-
4-year
Q1 2025
1
period
1
Q1 2025
1
period
1
Q1 2025
1
period
1
Unemployment rate
Canada
%
%
%
%
%
%
United States
Real GDP
Canada
(0.8 )
United States
Home prices
Canada (average existing price)
2
(9.6 )
United States (CoreLogic HPI)
3
(8.2 )
Central bank policy interest rate
Canada
United States
U.S. 10-year treasury yield
U.S. 10-year BBB spread (%-pts)
Exchange rate (U.S. dollar/Canadian dollar)
$
$
$
$
$
$
1
The numbers represent average values for the quoted periods, and average of year-on-year growth for real GDP and home prices.
2
The average home price is the average transacted sale price of homes sold via the Multiple Listing Service; data is collected by the Canadian Real Estate Association.
3
The CoreLogic home price index (HPI) is a repeat-sales index which tracks increases and decreases in the same home’s sales price over time.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 69
(f)
ECLs are sensitive to the inputs used in internally developed models, the macroeconomic variables in the forward-looking forecasts and respective probability
weightings in determining the probability-weighted ECLs, and other factors considered when applying expert credit judgment. Changes in these inputs,
assumptions, models, and judgments would affect the assessment of significant increase in credit risk and the measurement of ECLs.
The following table presents the base ECL scenario compared to the probability-weighted ECLs, with the latter derived from three ECL scenarios for performing
loans and off-balance sheet instruments. The difference reflects the impact of deriving multiple scenarios around the base ECLs and resultant change in ECLs due
to non-linearity and sensitivity to using macroeconomic forecasts.
Change from Base to Probability-Weighted ECLs
(millions of Canadian dollars, except as noted)
As at
April 30, 2024
October 31, 2023
Probability-weighted ECLs
$
$
Base ECLs
Difference – in amount
$
$
Difference – in percentage
%
%
ECLs for performing loans and off-balance sheet instruments consist of an aggregate amount of Stage 1 and Stage 2 probability-weighted ECLs which are twelve-
month ECLs and lifetime ECLs, respectively. Transfers from Stage 1 to Stage 2 ECLs result from a significant increase in credit risk since initial recognition of the
loan.
The following table shows the estimated impact of staging on ECLs by presenting all performing loans and off-balance sheet instruments calculated using
twelve-month ECLs compared to the current aggregate probability-weighted ECLs, holding all risk profiles constant.
Incremental Lifetime ECLs Impact
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
Probability-weighted ECLs
$
$
All performing loans and off-balance sheet instruments using 12-month ECLs
Incremental lifetime ECLs impact
$
$
(g)
Foreclosed assets are repossessed non-financial assets where the Bank gains title, ownership, or possession of individual properties, such as real estate
properties, which are managed for sale in an orderly manner with the proceeds used to reduce or repay any outstanding debt. The Bank does not generally occupy
foreclosed properties for its business use. The Bank predominantly relies on third-party appraisals to determine the carrying value of foreclosed assets. Foreclosed
assets held for sale were $
Sheet.
(h)
A loan is classified as past due when a borrower has failed to make a payment by the contractual due date.
The following table summarizes loans that are past
due but not impaired. Loans less than 31 days contractually past due are excluded as they do not generally reflect a borrower’s ability to meet their payment
obligations.
Loans Past Due but not Impaired
1
(millions of Canadian dollars)
As at
April 30, 2024
October 31, 2023
31-60
61-89
31-60
61-89
days
days
Total
days
days
Total
Residential mortgages
$
$
$
$
$
$
Consumer instalment and other personal
Credit card
Business and government
Total
$
$
$
$
$
$
1
Includes loans that are measured at FVOCI.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 70
NOTE 7: INVESTMENT IN ASSOCIATES AND JOINT VENTURES
INVESTMENT IN THE CHARLES SCHWAB CORPORATION
The Bank has significant influence over The Charles Schwab Corporation (“Schwab”) and the ability to participate in the financial and operating policy-making
decisions of Schwab through a combination of the Bank’s ownership, board representation and the insured deposit account agreement between the Bank and
Schwab. As such, the Bank accounts for its investment in Schwab using the equity method. The Bank’s share of Schwab’s earnings available to common
shareholders is reported with a one-month lag. The Bank takes into account changes in the one-month lag period that would significantly affect the results.
As at April 30, 2024, the Bank’s reported investment in Schwab was approximately
% (October 31, 2023 –
%), consisting of
% of the outstanding
voting common shares and the remainder in non-voting common shares of Schwab with an aggregate fair value of $
$
) on the New York Stock Exchange.
The Bank and Schwab are party to a stockholder agreement (the “Stockholder Agreement”) under which the Bank has the right to designate two members of
Schwab’s Board of Directors and has representation on two Board Committees, subject to the Bank meeting certain conditions. The Bank’s designated directors
currently are the Bank’s Group President and Chief Executive Officer and the Bank’s former Chair of the Board. Under the Stockholder Agreement, the Bank is not
permitted to own more than
% voting common shares of Schwab, and the Bank is subject to customary standstill restrictions and subject to certain exceptions,
transfer restrictions.
The carrying value of the Bank’s investment in Schwab of $
Schwab’s stockholders’ equity, adjusted for goodwill, other intangibles, and cumulative translation adjustment. The Bank’s share of net income from its investment
in Schwab of $
$
The following tables represent the gross amount of Schwab’s total assets, liabilities, net revenues, net income available to common stockholders, other
comprehensive income (loss), and comprehensive income (loss).
Summarized Financial Information
(millions of Canadian dollars)
As at
March 31
September 30
2024
2023
Total assets
$
$
Total liabilities
(millions of Canadian dollars)
For the three months ended
For the six months ended
March 31
March 31
March 31
March 31
2024
2023
2024
2023
Total net revenues
$
$
$
$
Total net income available to common stockholders
Total other comprehensive income (loss)
Total comprehensive income (loss)
Insured Deposit Account (“IDA”) Agreement
On November 25, 2019, the Bank and Schwab signed an insured deposit account agreement (the “2019 Schwab IDA Agreement”), with an initial expiration date of
July 1, 2031. Under the 2019 Schwab IDA Agreement, starting July 1, 2021, Schwab had the option to reduce the deposits by up to US$
to certain limitations and adjustments), with a floor of US$
deposit balances to fluctuate over time, under certain conditions and subject to certain limitations.
On May 4, 2023, the Bank and Schwab entered into an amended insured deposit account agreement (the “2023 Schwab IDA Agreement” or the “Schwab IDA
Agreement”), which replaced the 2019 Schwab IDA Agreement. Pursuant to the 2023 Schwab IDA Agreement, the Bank continues to make sweep deposit
accounts available to clients of Schwab. Schwab designates a portion of the deposits with the Bank as fixed-rate obligation amounts (FROA). Remaining deposits
over FROA are designated as floating-rate obligations. In comparison to the 2019 Schwab IDA Agreement, the 2023 Schwab IDA Agreement extends the initial
expiration date by three years to July 1, 2034 and provides for lower deposit balances in its first six years, followed by higher balances in the later years.
Specifically, until September 2025, the aggregate FROA will serve as the floor. Thereafter, the floor will be set at US$
to buy down up to $
limits. Refer to Note 27 of the Bank’s 2023 Annual Consolidated Financial Statements for further details on the Schwab IDA Agreement.
During the first quarter of 2024, Schwab exercised its option to buy down the remaining $
allowance and paid $
of 2024, Schwab had completed its buy down of the full US$
fees to the Bank. The fees were intended to compensate the Bank for losses incurred from discontinuing certain hedging relationships and for lost revenues. The
net impact was recorded in net interest income.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 71
NOTE 8: SIGNIFICANT TRANSACTION
Acquisition of Cowen Inc.
On March 1, 2023, the Bank completed the acquisition of Cowen Inc. (“Cowen”). The acquisition advances the Wholesale Banking segment’s long-term growth
strategy in the U.S. and adds complementary products and services to the Bank’s existing businesses. The results of the acquired business have been
consolidated by the Bank from the closing date and primarily reported in the Wholesale Banking segment. Consideration included $
(US$
% of Cowen’s common shares outstanding, $
Stock, and $
The acquisition was accounted for as a business combination under the purchase method. The acquisition contributed $
assets and $
allocated to intangible assets of $
purposes.
The Bank plans to dispose of certain non-core businesses that were acquired in connection with the Cowen acquisition. These non-core businesses are
disposal groups which meet the criteria to be classified as held for sale and are measured at the lower of their carrying amount and fair value less costs to sell. The
assets and liabilities of these disposal groups are recorded in Other assets and Other liabilities, respectively, on the Interim Consolidated Balance Sheet. During
the three months ended January 31, 2024, the Bank disposed of Cowen’s legacy prime brokerage and outsourced trading business that was classified as held for
sale. As at April 30, 2024, assets of $
classified as held for sale.
NOTE 9: OTHER ASSETS
Other Assets
(millions of Canadian dollars)
As at
April 30
October 31
2024
2023
Accounts receivable and other items
1
$
$
Accrued interest
Current income tax receivable
Defined benefit asset
Reinsurance contract assets
Prepaid expenses
2
Total
2
$
$
1
Includes assets related to disposal groups classified as held for sale in connection with the Cowen acquisition. Refer to Note 8 for further details.
2
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 72
NOTE 10: DEPOSITS
Demand deposits are those for which the Bank does not have the right to require notice prior to withdrawal, which primarily include business and government
chequing accounts. Notice deposits are those for which the Bank can legally require notice prior to withdrawal, which include both savings and chequing
accounts. Term deposits are payable on a given date of maturity and are purchased by customers to earn interest over a fixed period, with terms ranging from
one day to ten years and generally include fixed term deposits, guaranteed investment certificates, senior debt, and similar instruments. The aggregate amount
of term deposits in denominations of $100,000 or more as at April 30, 2024, was $
Deposits
(millions of Canadian dollars)
As at
April 30
October 31
By Type
By Country
2024
2023
Demand
Notice
Term
1
Canada
United States
International
Total
Total
Personal
$
$
$
$
$
$
$
$
Banks
Business and government
2
Trading
Designated at fair value through
profit or loss
3
Total
$
$
$
$
$
$
$
$
Non-interest-bearing deposits
included above
4
Canada
$
$
United States
International
Interest-bearing deposits
included above
4
Canada
United States
5
International
Total
2,6
$
$
1
Includes $
Canada Deposit Insurance Corporation, including the ability to convert specified eligible shares and liabilities into common shares in the event that the Bank becomes non-viable.
2
Includes $
3
guarantees designated at FVTPL.
4
5
6
currencies.
NOTE 11: OTHER LIABILITIES
Other Liabilities
(millions of Canadian dollars)
As at
April 30
October 31
2024
2023
Accounts payable, accrued expenses, and other items
1,2
$
$
Accrued interest
Accrued salaries and employee benefits
Cheques and other items in transit
2
Current income tax payable
Deferred tax liabilities
Defined benefit liability
Lease liabilities
Liabilities related to structured entities
Provisions
Total
2
$
$
1
Includes liabilities related to disposal groups classified as held for sale in connection with the Cowen acquisition. Refer to Note 8 for further details.
2
NOTE 12: SUBORDINATED NOTES AND DEBENTURES
Issues
On April 9, 2024, the Bank issued $
(the “Notes”), maturing on April 9, 2034. The Notes will bear interest at a fixed rate of
% per annum (paid semi-annually) until April 9, 2029, and at
% thereafter (paid quarterly) until maturity on April 9, 2034. With the prior approval of OSFI, the
Bank may, at its option, redeem the Notes on or after April 9, 2029, in whole or in part, at par plus accrued and unpaid interest by giving not more than
than
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 73
NOTE 13: EQUITY
The following table summarizes the changes to the shares and other equity instruments issued and outstanding, and treasury instruments held as at and for the
three and six months ended April 30, 2024 and April 30, 2023.
Shares and Other Equity Instruments Issued and Outstanding and Treasury Instruments Held
(millions of shares or other equity instruments
and millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Number
Number
Number
Number
of shares
Amount
of shares
Amount
of shares
Amount
of shares
Amount
Common Shares
Balance as at beginning of period
$
$
$
$
Proceeds from shares issued on exercise
of stock options
Shares issued as a result of dividend
reinvestment plan
Purchase of shares for cancellation and other
(15.2 )
(217 )
(36.1 )
(512 )
Balance as at end of period – common shares
$
$
$
$
Preferred Shares and Other Equity Instruments
Preferred Shares – Class A
Balance as at beginning of period
$
$
$
$
Redemption of shares
1
(14.0 )
(350 )
(14.0 )
(350 )
Balance as at end of period
$
$
$
$
Other Equity Instruments
2
Balance as at beginning and end of period
$
$
$
$
Balance as at end of period – preferred shares
and other equity instruments
$
$
$
$
Treasury – common shares
3
Balance as at beginning of period
$
(58 )
$
(103 )
$
(64 )
$
(91 )
Purchase of shares
(2,154 )
(2,235 )
(5,250 )
(4,051 )
Sale of shares
(27.1 )
(26.5 )
(64.6 )
(46.8 )
Balance as at end of period – treasury
– common shares
$
(24 )
$
(99 )
$
(24 )
$
(99 )
Treasury – preferred shares and
other equity instruments
3
Balance as at beginning of period
$
(27 )
$
(9 )
$
(65 )
$
(7 )
Purchase of shares and other equity instruments
(153 )
(185 )
(251 )
(326 )
Sale of shares and other equity instruments
(1.5 )
(1.0 )
(3.2 )
(2.0 )
Balance as at end of period – treasury
– preferred shares and other equity instruments
$
(8 )
$
(10 )
$
(8 )
$
(10 )
1
at a redemption price of $
2
3
reduction in equity.
DIVIDENDS
On May 22, 2024, the Board approved a dividend in an amount of one dollar and two cents ($
) per fully paid common share in the capital stock of the Bank for
the quarter ending July 31, 2024, payable on and after July 31, 2024, to shareholders of record at the close of business on July 10, 2024.
DIVIDEND REINVESTMENT PLAN
The Bank offers a dividend reinvestment plan for its common shareholders. Participation in the plan is optional and under the terms of the plan, cash dividends on
common shares are used to purchase additional common shares. At the option of the Bank, the common shares may be issued from treasury at an average
market price based on the last five trading days before the date of the dividend payment, with a discount of between
% to
% at the Bank’s discretion or
purchased from the open market at market price.
During the three and six months ended April 30, 2024, the Bank issued
During the three and six months ended April 30, 2023, the Bank issued
% discount.
NORMAL COURSE ISSUER BID
On August 28, 2023, the Bank announced that the Toronto Stock Exchange and OSFI approved a normal course issuer bid (NCIB) to repurchase for cancellation
up to
the Bank repurchased
commencement of the NCIB to April 30, 2024, the Bank repurchased
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 74
NOTE 14: INSURANCE
(a)
INSURANCE SERVICE RESULT
Insurance revenue and expenses are presented on the Interim Consolidated Statement of Income under Insurance revenue and Insurance service expenses,
respectively. Net income or expense from reinsurance is presented in other income (loss).
The following table presents components of the insurance service result
presented on the Interim Consolidated Statement of Income for the Bank which includes the results of property and casualty insurance, life and health insurance,
as well as reinsurance issued and held in Canada and internationally.
Insurance Service Result
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Insurance revenue
$
$
$
$
Insurance service expenses
Insurance service result before reinsurance contracts held
Net income (expense) from reinsurance contracts held
(31 )
(38 )
(19 )
(84 )
Insurance service result
$
$
$
$
For the three and six months ended April 30, 2024, the Bank recognized insurance finance expenses of $
months ended April 30, 2023 – $
return on securities supporting insurance contracts is comprised of interest income reported in net interest income and fair value changes reported in other income
(loss). Investment return on securities supporting insurance contracts was $
April 30, 2024 (three and six months ended April 30, 2023 – $
(b)
INSURANCE CONTRACT LIABILITIES
Insurance contract liabilities are comprised of amounts related to the LRC, LIC and other insurance liabilities.
The following table presents LRC and LIC balances for property and casualty insurance contracts.
Property and casualty insurance contract liabilities by LRC and LIC
(millions of Canadian dollars)
As at
April 30, 2024
April 30, 2023
Liability for
Liability for
Liability for
Liability for
remaining coverage
incurred claims
Total
remaining coverage
incurred claims
Total
Estimates
Estimates
of the
of the
present
present
Excluding
value of
Excluding
value of
loss
Loss
future
Risk
loss
Loss
future
Risk
component
component
cash flows
adjustment
component
component
cash flows
adjustment
Balance at beginning of period
Insurance contract liabilities
$
$
$
$
$
$
$
$
$
$
Balance at end of period
Insurance contract liabilities
$
$
$
$
$
$
$
$
$
$
For property and casualty contracts, during the three and six months ended April 30, 2024, the Bank recognized insurance revenue of $
$
$
expenses of $
Other insurance liabilities were $
$
(c)
RISK ADJUSTMENT FOR NON-FINANCIAL RISK AND DISCOUNTING
The risk adjustment reflects an amount that an insurer would rationally pay to remove the uncertainty that future cash flows will exceed the expected value amount.
The Bank has estimated the risk adjustment for its property and casualty operations’ LIC using statistical techniques in accordance with Canadian accepted
actuarial principles to develop potential future observations and a confidence level of 90th percentile.
Insurance contract liabilities are calculated by discounting expected future cash flows. The interest rates used to discount the Bank’s insurance balances over a
duration of
% to
% as at April 30, 2024 (October 31, 2023 –
% to
%).
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 75
NOTE 15: SHARE-BASED COMPENSATION
For the three and six months ended April 30, 2024, the Bank recognized compensation expense for stock option awards of $
respectively (three and six months ended April 30, 2023 – $
April 30, 2023,
nil
stock options were granted by the Bank at a weighted-average fair value of $
The following table summarizes the assumptions used for estimating the fair value of options for the six months ended April 30, 2024 and April 30, 2023.
Assumptions Used for Estimating the Fair Value of Options
(in Canadian dollars, except as noted)
For the six months ended
April 30
April 30
2024
2023
Risk-free interest rate
%
%
Option contractual life
Expected volatility
%
%
Expected dividend yield
%
%
Exercise price/share price
$
$
The risk-free interest rate is based on Government of Canada benchmark bond yields as at the grant date. Expected volatility is calculated based on the historical
average daily volatility and expected dividend yield is based on dividend payouts in the last fiscal year. These assumptions are measured over a period
corresponding to the option contractual life.
NOTE 16: EMPLOYEE BENEFITS
The following table summarizes expenses for the Bank’s principal pension and non-pension post-retirement defined benefit plans and the Bank’s other material
defined benefit pension plans, for the three and six months ended April 30, 2024 and April 30, 2023. Other employee defined benefit plans operated by the Bank
and certain of its subsidiaries are not considered material for disclosure purposes.
Defined Benefit Plan Expenses
(millions of Canadian dollars)
Principal post-retirement
Principal pension plans
benefit plan
Other pension plans
1
For the three months ended
April 30
April 30
April 30
April 30
April 30
April 30
2024
2023
2024
2023
2024
2023
Service cost – benefits earned
$
$
$
$
$
$
Net interest cost (income) on net defined benefit liability (asset)
(21 )
(25 )
Interest cost on asset limitation and minimum funding
requirement
Past service cost
2
Defined benefit administrative expenses
Total
$
$
$
$
$
$
For the six months ended
April 30
April 30
April 30
April 30
April 30
April 30
2024
2023
2024
2023
2024
2023
Service cost – benefits earned
$
$
$
$
$
$
Net interest cost (income) on net defined benefit liability (asset)
(41 )
(50 )
Interest cost on asset limitation and minimum funding
requirement
Past service cost
2
Defined benefit administrative expenses
Total
$
$
$
$
$
$
1
Includes Canada Trust defined benefit pension plan, TD Banknorth defined benefit pension plan, TD Auto Finance defined benefit pension plan, TD Insurance defined benefit pension
plan, and supplemental executive defined benefit pension plans.
2
The following table summarizes expenses for the Bank’s defined contribution plans for the three and six months ended April 30, 2024 and April 30, 2023.
Defined Contribution Plan Expenses
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30
April 30
April 30
April 30
2024
2023
2024
2023
Defined contribution pension plans
1
$
$
$
$
Government pension plans
2
Total
$
$
$
$
1
Includes defined contribution portion of the TD Pension Plan (Canada) and TD Bank, N.A. defined contribution 401(k) plan.
2
Federal Insurance Contributions Act
.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 76
The following table summarizes the remeasurements recognized in OCI for the Bank’s principal pension and post-retirement defined benefit plans and certain of
the Bank’s other material defined benefit pension plans, for the three and six months ended April 30, 2024 and April 30, 2023.
Amounts Recognized in Other Comprehensive Income for Remeasurement of Defined Benefit Plans
1,2,3
(millions of Canadian dollars)
Principal post-retirement
Principal pension plans
benefit plan
Other pension plans
For the three months ended
April 30
April 30
April 30
April 30
April 30
April 30
2024
2023
2024
2023
2024
2023
Remeasurement gain/(loss) – financial
$
$
(147 )
$
$
(3 )
$
$
Remeasurement gain/(loss) – return on plan assets less
interest income
(524 )
Change in asset limitation and minimum funding requirement
Total
$
(61 )
$
(46 )
$
$
(3 )
$
$
For the six months ended
April 30
April 30
April 30
April 30
April 30
April 30
2024
2023
2024
2023
2024
2023
Remeasurement gain/(loss) – financial
$
(685 )
$
(529 )
$
(23 )
$
(27 )
$
(25 )
$
Remeasurement gain/(loss) – return on plan assets less
interest income
Change in asset limitation and minimum funding requirement
Total
$
(209 )
$
$
(23 )
$
(27 )
$
(25 )
$
1
plan, and other employee defined benefit plans operated by the Bank and certain of its subsidiaries not considered material for disclosure purposes as these plans are not remeasured on
a quarterly basis.
2
3
NOTE 17: INCOME TAXES
International Tax Reform – Pillar Two Global Minimum Tax
The OECD published Pillar Two model rules as part of its efforts toward international tax reform. The Pillar Two model rules provide for the implementation of a
15% global minimum tax for large multinational enterprises, which is to be applied on a jurisdiction-by-jurisdiction basis. Pillar Two legislation has been enacted or
substantively enacted in certain jurisdictions in which the Bank operates. On May 2, 2024, the Government of Canada introduced Bill C-69, which includes the
Global Minimum Tax Act
beginning on November 1, 2024. The Bank is assessing its potential exposure to Pillar Two income taxes.
Other Tax Matters
The Canada Revenue Agency (CRA), Revenu Québec Agency (RQA) and Alberta Tax and Revenue Administration (ATRA) are denying certain dividend and
interest deductions claimed by the Bank. During the quarter, the RQA reassessed the Bank for $
taxation year. As at April 30, 2024, the CRA has reassessed the Bank for $
$
for $
were appropriate and filed a Notice of Appeal with the Tax Court of Canada on March 21, 2023.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 77
NOTE 18: EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares
outstanding for the period.
Diluted earnings per share is calculated using the same method as basic earnings per share except that certain adjustments are made to net income
attributable to common shareholders and the weighted-average number of shares outstanding for the effects of all dilutive potential common shares that are
assumed to be issued by the Bank.
The following table presents the Bank’s basic and diluted earnings per share for the three and six months ended April 30, 2024 and April 30, 2023.
Basic and Diluted Earnings Per Share
1
(millions of Canadian dollars, except as noted)
For the three months ended
For the six months ended
April 30
April 30
April 30
April 30
2024
2023
2024
2023
Basic earnings per share
Net income attributable to common shareholders
$
$
$
$
Weighted-average number of common shares outstanding (millions)
Basic earnings per share
(Canadian dollars)
$
$
$
$
Diluted earnings per share
Net income attributable to common shareholders
$
$
$
$
Net income available to common shareholders including impact of dilutive securities
Weighted-average number of common shares outstanding (millions)
Effect of dilutive securities
Stock options potentially exercisable (millions)
2
Weighted-average number of common shares outstanding – diluted (millions)
Diluted earnings per share
(Canadian dollars)
2
$
$
$
$
1
Amounts for the three and six months ended April 30, 2023 have been restated for the adoption of IFRS 17. Refer to Note 2 for details.
2
weighted-average exercise price of $
, respectively, as the option price was greater than the average market price of the Bank’s common shares. For the three and six
months ended April 30, 2023, the computation of diluted earnings per share excluded average options outstanding of
exercise price of $
, respectively, as the option price was greater than the average market price of the Bank’s common shares.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 78
NOTE 19: PROVISIONS AND CONTINGENT LIABILITIES
Other than as described below, there have been no new significant events or transactions except as previously identified in Note 26 of the Bank’s 2023 Annual
Consolidated Financial Statements.
(a)
The Bank continued to undertake certain measures in the second quarter of 2024 to reduce its cost base and achieve greater efficiency. In connection with these
measures, the Bank incurred $
restructuring costs primarily relate to: (i) employee severance and other personnel-related costs recorded as provisions and (ii) real estate optimization mainly
recorded as a reduction to buildings.
(b)
Other than as described below, there have been no new significant legal and regulatory matters, and no significant developments to the matters previously
identified in Note 26 of the Bank’s 2023 Annual Consolidated Financial Statements.
In the ordinary course of business, the Bank and its subsidiaries are involved in various legal and regulatory actions, including but not limited to civil claims and
lawsuits, regulatory examinations, investigations, audits, and requests for information by governmental, regulatory and self-regulatory agencies and law
enforcement authorities in various jurisdictions, in respect of our businesses and compliance programs. The Bank establishes provisions when it becomes
probable that the Bank will incur a loss and the amount can be reliably estimated. The Bank also estimates the aggregate range of reasonably possible losses
(RPL) in its legal and regulatory actions (that is, those which are neither probable nor remote), in excess of provisions. As at April 30, 2024, the Bank’s RPL is
from
estimates based upon currently available information for actions for which estimates can be made, but there are a number of factors that could cause the Bank’s
provisions and/or RPL to be significantly different from its actual or RPL. For example, the Bank’s estimates involve significant judgment due to the varying stages
of the proceedings, the existence of multiple defendants in many proceedings whose share of liability has yet to be determined, the numerous yet-unresolved
issues in many of the proceedings, some of which are beyond the Bank’s control and/or involve novel legal theories and interpretations, the attendant uncertainty
of the various potential outcomes of such proceedings, and the fact that the underlying matters will change from time to time. In addition, some actions seek very
large or indeterminate damages.
The Bank has been responding to formal and informal inquiries from regulatory authorities and law enforcement concerning its
Bank Secrecy Act
/anti-money
laundering compliance program, both generally and in connection with specific clients, counterparties, or incidents in the U.S., including in connection with an
investigation by the United States Department of Justice. The Bank is cooperating with such authorities and is pursuing efforts to enhance its
Bank Secrecy
Act
/anti-money laundering compliance program. In the second quarter, the Bank recorded an initial provision of $
its discussions with one of its U.S. regulators related to this matter. The Bank’s regulatory and law enforcement discussions with three U.S. regulators (including
the regulator previously referenced) and the U.S. Department of Justice are ongoing. The Bank anticipates non-monetary penalties and additional monetary
penalties. This provision does not reflect the final aggregate amount of potential monetary penalties or any non-monetary penalties, which are unknown and not
reliably estimable at this time.
The Bank and certain of its subsidiaries have reached a settlement in principle relating to a civil matter, pursuant to which the Bank has recorded a provision
of $
In management’s opinion, based on its current knowledge and after consultation with counsel, the ultimate disposition of these actions, individually or in the
aggregate, will not have a material adverse effect on the consolidated financial condition or the consolidated cash flows of the Bank. However, because of the
factors listed above, as well as other uncertainties inherent in litigation and regulatory matters, there is a possibility that the ultimate resolution of legal or
regulatory actions may be material to the Bank’s consolidated results of operations for any particular reporting period.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 79
NOTE 20: SEGMENTED INFORMATION
For management reporting purposes, the Bank reports its results from business operations and activities under four key business segments: Canadian Personal
and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking. The Bank’s other activities are grouped into the Corporate
segment.
Canadian Personal and Commercial Banking provides financial products and services to personal, small business and commercial customers, and includes
TD Auto Finance Canada. U.S. Retail is comprised of personal and business banking in the U.S., TD Auto Finance U.S., the U.S. wealth business, as well as the
Bank’s equity investment in Schwab. Wealth Management and Insurance includes the Canadian wealth business which provides investment products and services
to institutional and retail investors, and the insurance business which provides property and casualty insurance, as well as life and health insurance products to
customers across Canada. Effective the first quarter of 2024, certain asset management businesses which were previously reported in the U.S. Retail segment are
now reported in the Wealth Management and Insurance segment. Comparative period information has been adjusted to reflect the new alignment. Wholesale
Banking provides a wide range of capital markets, investment banking, and corporate banking products and services, including underwriting and distribution of new
debt and equity issues, providing advice on strategic acquisitions and divestitures, and meeting the daily trading, funding, and investment needs of the Bank’s
clients. The Corporate segment includes the effects of certain asset securitization programs, treasury management, elimination of taxable equivalent adjustments
and other management reclassifications, corporate level tax items, and residual unallocated revenue and expenses.
The following table summarizes the segment results for the three and six months ended April 30, 2024 and April 30, 2023.
Results by Business Segment
1,2
(millions of Canadian dollars)
Canadian
Wealth
Personal and
Management
Commercial Banking
U.S. Retail
and Insurance
Wholesale Banking
3
Corporate
3
Total
For the three months ended April 30
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Net interest income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
Non-interest income (loss)
(43 )
Total revenue
Provision for (recovery of)
credit losses
Insurance service expenses
Non-interest expenses
Income (loss) before income taxes
and share of net income from
investment in Schwab
(1,080 )
(610 )
Provision for (recovery of)
income taxes
(332 )
(220 )
Share of net income from
investment in Schwab
4,5
(9 )
Net income (loss)
$
$
$
$
$
$
$
$
$
(737 )
$
(399 )
$
$
For the six months ended April 30
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Net interest income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
Non-interest income (loss)
(637 )
Total revenue
(157 )
Provision for (recovery of)
credit losses
Insurance service expenses
Non-interest expenses
Income (loss) before income taxes
and share of net income from
investment in Schwab
(1,940 )
(3,433 )
Provision for (recovery of)
income taxes
(617 )
(442 )
Share of net income from
investment in Schwab
4,5
(42 )
(25 )
Net income (loss)
$
$
$
$
$
$
$
$
$
(1,365 )
$
(3,016 )
$
$
1
Amounts for the three and six months ended April 30, 2023 have been restated for the adoption of IFRS 17. Refer to Note 2 for details.
2
Non-interest expenses, resulting in no impact to Corporate reported Net income (loss). The Net income (loss) included in the U.S. Retail segment includes only the portion of revenue and
credit losses attributable to the Bank under the agreements.
3
segment.
4
share of Schwab’s restructuring charges, and the Bank’s share of Schwab’s FDIC special assessment charge are recorded in the Corporate segment.
5
Total Assets by Business Segment
1
(millions of Canadian dollars)
Canadian
Wealth
Personal and
Management
Wholesale
Commercial Banking
U.S. Retail
and Insurance
Banking
Corporate
Total
As at April 30, 2024
Total assets
$
$
$
$
$
$
As at October 31, 2023
Total assets
$
$
$
$
$
$
1
Balances as at October 31, 2023 have been restated for the adoption of IFRS 17. Refer to Note 2 for details.
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 80
NOTE 21: INTEREST INCOME AND EXPENSE
The following tables present interest income and interest expense by basis of accounting measurement.
Interest Income
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Measured at amortized cost
1
$
$
$
$
Measured at FVOCI – Debt instruments
1
Measured or designated at FVTPL
Measured at FVOCI – Equity instruments
Total
$
$
$
$
1
Interest income is calculated using EIRM.
Interest Expense
(millions of Canadian dollars)
For the three months ended
For the six months ended
April 30, 2024
April 30, 2023
April 30, 2024
April 30, 2023
Measured at amortized cost
1
$
$
$
$
Measured or designated at FVTPL
Total
$
$
$
$
1
Interest expense is calculated using EIRM.
NOTE 22: REGULATORY CAPITAL
The Bank manages its capital under guidelines established by OSFI. The regulatory capital guidelines measure capital in relation to credit, market, and operational
risks. The Bank has various capital policies, procedures, and controls which it utilizes to achieve its goals and objectives. The Bank is designated as a domestic
systemically important bank (D-SIB) and a global systemically important bank (G-SIB).
Canadian banks designated as D-SIBs are required to comply with OSFI’s minimum targets for risk-based capital and leverage ratios. The minimum targets
include a D-SIB surcharge and Domestic Stability Buffer (DSB) for Common Equity Tier 1 (CET1), Tier 1, Total Capital and risk-based Total Loss Absorbing
Capacity (TLAC) ratios. The DSB level was increased to
% as of November 1, 2023, which sets these minimum target ratios at
%,
%,
% and
%, respectively. The OSFI target includes the greater of the D-SIB or G-SIB surcharge, both of which are currently
% for the Bank. On February 1, 2023,
OSFI announced revisions to the Leverage Requirements Guideline to introduce a requirement for D-SIBs to hold a leverage ratio buffer of
% in addition to the
existing minimum requirement. This sets the minimum targets for leverage and TLAC leverage ratios at
% and
%, respectively.
The Bank complied with all minimum risk-based capital and leverage ratio requirements set by OSFI in the six months ended April 30, 2024.
The following table summarizes the Bank’s regulatory capital positions as at April 30, 2024 and October 31, 2023.
The impact to CET1 capital upon adoption of IFRS 17 is immaterial to the Bank.
Regulatory Capital Position
(millions of Canadian dollars, except as noted)
As at
April 30
October 31
2024
2023
Capital
Common Equity Tier 1 Capital
$
$
Tier 1 Capital
Total Capital
Risk-weighted assets used in the calculation of capital ratios
Capital and leverage ratios
Common Equity Tier 1 Capital ratio
%
%
Tier 1 Capital ratio
Total Capital ratio
Leverage ratio
TLAC Ratio
TLAC Leverage Ratio
TD BANK GROUP • SECOND QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 81
SHAREHOLDER AND INVESTOR INFORMATION
Shareholder Services
If you:
And your inquiry relates to:
Are a registered shareholder (your name appears
on your TD share certificate)
Missing dividends, lost share certificates, estate
questions, address changes to the share register,
dividend bank account changes, the dividend
reinvestment plan, eliminating duplicate mailings of
shareholder materials or stopping (or resuming)
receiving annual and quarterly reports
Transfer Agent:
TSX Trust Company
301-100 Adelaide Street West
Toronto, ON M5H 4H1
1-800-387-0825 (Canada and U.S. only)
or 416-682-3860
Facsimile: 1-888-249-6189
shareholderinquiries@tmx.com or www.tsxtrust.com
Hold your TD shares through the
Direct Registration System
in the United States
Missing dividends, lost share certificates, estate
questions, address changes to the share register,
eliminating duplicate mailings of shareholder
materials or stopping (or resuming) receiving annual
and quarterly reports
Co-Transfer Agent and Registrar:
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, RI 02940-3006
or
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
1-866-233-4836
TDD for hearing impaired: 1-800-231-5469
Shareholders outside of U.S.: 201-680-6578
TDD shareholders outside of U.S.: 201-680-6610
Email inquiries: web.queries@computershare.com
For electronic access to your account visit:
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.
General Information
Products and services: Contact TD Canada Trust, 24 hours a day, seven days a week: 1-866-567-8888
French: 1-866-233-2323
Cantonese/Mandarin: 1-800-328-3698
Telephone device for the hearing impaired (TTY): 1-800-361-1180
Website:
Email:
customer.service@td.com
Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on May 23, 2024. The call will be audio webcast live through TD’s website at 8:00 a.m. ET.
The call will feature presentations by TD executives on the Bank’s financial results for second quarter and discussions of related disclosures, 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
May 23, 2024, in advance of the call. A listen-only telephone line is available at 416-641-6150 or 1-866-696-5894 (toll free) and the passcode is 2727354#.
The audio webcast and presentations will be archived at
www.td.com/investor
. Replay of the teleconference will be available from 5:00 p.m. ET on May 23, 2024,
until 11:59 p.m. ET on June 7, 2024, by calling 905-694-9451 or 1-800-408-3053 (toll free). The passcode is 7300743#.