TD Bank 2000 Annual Report Download

Download and view the complete annual report

Please find the complete 2000 TD Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 84

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84

Be...
TD BANK FINANCIAL GROUP 145TH ANNUAL REPORT 2000

Table of contents

  • Page 1
    T D B A N K F I N A N C I A L G R O U P 14 5 T H A N N U A L R E P O R T 2 0 0 0 Be...

  • Page 2
    ... the world in five key areas of finance: • investment banking • merchant banking • equities • debt capital markets • foreign exchange. Self-directed brokerage Retail The world's second largest broker to the self-directed investor, with more than 4.4 million customer accounts worldwide...

  • Page 3
    2 How we performed in 2000 4 To our shareholders 14 TD in the community 15 Management discussion and analysis of operating performance 37 Financial results 78 Corporate governance 80 Senior officers 81 Information for shareholders and investors

  • Page 4
    ...% 61% for TD Canada Trust Operating cash basis return on equity, or ROE, broadly measures how effectively we use the money our shareholders invest in us. Our ROE goal takes into consideration our outlook for economic business conditions in each of the markets in which our businesses operate. We've...

  • Page 5
    ... Performance: The World Series Among the "Big 5", November 10, 2000. 15 1.5 10 99 00 0 TD Bank Average of four other major Canadian banks Market capitalization is a measure of the size of a company. It's calculated by multiplying the current share price by the number of shares outstanding. Our...

  • Page 6
    ...businesses has made significant headway this year - TD Canada Trust, a leader in personal and commercial banking in Canada, TD Securities, a leading investment bank in Canada, the U.S. and abroad, TD Waterhouse, the world's second largest broker to the self-directed investor, and TD Asset Management...

  • Page 7
    ... required to compete effectively with major foreign-based financial services companies. Accordingly, our activities must be North American in scope. We're already well positioned in the U.S. TD Waterhouse is the second largest broker to the self-directed investor in the world. TD Waterhouse Bank...

  • Page 8
    ... TD Canada Trust is our personal and commercial bank. It offers services to customers and businesses in Canada and the U.S. through branches, on the internet, over the telephone, and most recently through wireless devices like pagers and cell phones. TD Canada Trust represented 42% of our net...

  • Page 9
    ...'s linked to the global network of Commerce One MarketSite portals, our customers have access to business-to-business e-commerce around the world. Personal loans, credit cards and residential mortgages Personal term and non-term deposits Operating cash basis efficiency ratio1 (percent) 70 60 TD...

  • Page 10
    ... - provides foreign exchange trading and sales through offices in Canada, U.S., Europe, Asia and Australia TD Securities is our wholesale business. It provides capital markets products and advice to corporate, government and institutional clients. In 2000, TD Securities ranked second in terms of...

  • Page 11
    ...sector. We provide financial advice, credit products, debt and equity financing and merger and acquisition services to leading communications companies around the world. Our correspondent banking and trade finance businesses round out the services we offer 75 to clients. Giving clients more choice...

  • Page 12
    ...2000 • Top broker in Australia from a Personal Investor magazine survey of Australian investors, August 2000 TD Waterhouse is a leading global online financial services firm and the world's second largest broker to the self-directed investor. It provides integrated brokerage, mutual fund, banking...

  • Page 13
    ...market, multi-channel 50 self-directed investing service for high net worth Europeans. In India, we formed a joint venture with Tata Finance Limited, one of India's leading industrial and financial conglomerates. 40 98 99 00 We're also teaming up with TD Asset Management to sell TD Waterhouse...

  • Page 14
    ... they need to make informed investment decisions. We're expanding a service with TD Canada Trust to offer financial planning to retail banking customers. We're working closely with TD Waterhouse to offer mutual funds to investors around the world. This year we launched a new series of funds for sale...

  • Page 15
    ... online financial services firms in the world. Our next challenge is to become a global multi-channel e-commerce company...to be where banking is going. A. Charles Baillie Chairman and Chief Executive Officer W. Edmund Clark President and Chief Operating Officer Toronto January 25, 2001 Ed Clark...

  • Page 16
    ...Ohi, to some 407,000 grade one students in Canada. Book Week and the Children's Miracle Network hospitals, they are major beneficiaries of our Community Giving Program. The United Way also receives strong support both from our Community Giving Program and our employees. This year we were recognized...

  • Page 17
    ... a special after tax gain of $431 million from the sale of Knight/Trimark shares. Net interest income (TEB) See supplementary tables 3, 4 and 5, pages 29 and 30 TD Canada Trust TD Securities TD Waterhouse TD Asset Management We calculate net interest income by adding the interest and dividends we...

  • Page 18
    ... after excluding last year's special gains of $1,122 million on the sale of TD Waterhouse Group, Inc. shares and $717 million on the sale of Knight/Trimark shares. While the addition of Canada Trust contributed to the growth in other income, trading activities in TD Securities were also a key driver...

  • Page 19
    ... on the sale of TD Waterhouse Group, Inc. and Knight/Trimark shares, and a further one-time corporate banking security gain of $61 million in 1999. Noninterest expenses exclude one-time restructuring costs related to our acquisition of Canada Trust and non-cash goodwill and intangible amortization...

  • Page 20
    ... regulations that relate to our business • changes in the competitive environment • changes in technology • global capital market activity • changes in government monetary, fiscal and regulatory policies • changes in prevailing interest rates • the level of inflation • general economic...

  • Page 21
    ...TEB) Net income - cash basis Selected volumes and ratios Average loans and customers' liability under acceptances (billions of dollars) Average deposits (billions of dollars) Full-time equivalent staff at October 31 Operating cash basis return on common equity 1 Operating cash basis efficiency ratio...

  • Page 22
    ... in market price levels and trading volumes around the world during the second half of the year. Net income and revenues increased in 2000, after excluding special gains in 1999. We opened one million new customer accounts, not including acquisitions. TD Waterhouse continued to invest heavily...

  • Page 23
    ... Board of Directors reviews and approves all major credit policies and procedures annually. How we manage credit risk By country Country risk is the risk that economic or political change in a country may affect cross border payments for goods and services, loans, trade-related finance and dividends...

  • Page 24
    ...reviewing regulatory capital required for market risk calculated by TD Securities. The Market Risk Policy Group within Group Risk Management is responsible for measuring, reporting and monitoring market risk, as well as communicating and enforcing risk limits throughout all of our trading businesses...

  • Page 25
    ... times a year with the Audit and Risk Management Committee of the Board of Directors. Market risk attribution as of October 31, 2000 (percent) Net trading related revenue vs. Value at Risk (millions of dollars) Actual revenue 25 Value at Risk Credit spread Interest rates Equity Foreign exchange...

  • Page 26
    ... interest rate risk and foreign exchange risk. We are exposed to market risk when we enter into non-trading banking transactions with our TD Canada Trust customers. These transactions primarily include deposit taking and lending, which are also referred to as our "asset and liability" positions. Who...

  • Page 27
    ...equity to total foreign currency risk-weighted assets at a level that is close to our total common equity to risk-weighted asset ratio. This minimizes the risk that changes in foreign currency exchange rates will adversely affect our capital ratios. Future U.S. accounting change Financial Accounting...

  • Page 28
    ...of credit and guarantees less investments in associated corporations and goodwill and net intangibles divided by total regulatory capital. During the year, the Bank's authorized assets to capital multiple was increased from 20 times to 23 times. Managing capital Capital management is the control of...

  • Page 29
    ... total capital ratio. The Office of the Superintendent of Financial Institutions Canada (OSFI) defines these ratios and sets levels for Canadian banks: • The Tier 1 capital ratio is defined as Tier 1 capital divided by risk-weighted assets. OSFI requires banks to meet Tier 1 capital requirements...

  • Page 30
    ... Waterhouse Group, Inc. and Knight/Trimark in 1999, and the restructuring costs related to the integration of Canada Trust in 2000. Operating results are presented on this basis in order to provide a meaningful yearover-year comparison. Cash basis net income excludes the after tax impact of goodwill...

  • Page 31
    ...of goodwill Amortization of intangible assets from business combinations Restructuring costs from CT acquisition Special gains Earnings per common share - consolidated statement of income Return on common shareholders' equity Operating cash basis net income applicable to common shares Average common...

  • Page 32
    ... securities services Credit fees Net investment securities gains1 Trading income Service charges Mutual fund management Card services Foreign exchange - non-trading Property rental income Insurance Income - loan securitizations Other consumer services Other commercial and corporate services Total...

  • Page 33
    ... Depreciation Other Equipment total General Marketing and business development Brokerage related fees Professional and advisory services Communications Capital and business taxes Postage Travel and relocation Deposit insurance premiums Other - excluding non-cash goodwill/intangible amortization and...

  • Page 34
    ... income tax rate 1 Effective total tax rate 1 127 28 76 92 83 406 $ 901 38.7% 45.2% 1 Excludes the special gain on the sale of TD Waterhouse Group, Inc. in 1999, the restructuring costs relating to the integration of Canada Trust in 2000, and goodwill and intangibles gross-up and benefits in 2000...

  • Page 35
    ... Utilities All other loans Total business and government Total 2 Percentage growth By location of ultimate risk Canada Atlantic Québec Ontario Prairies British Columbia Total Canada United States Other international United Kingdom Europe - other Australia and New Zealand Japan Asia - other...

  • Page 36
    ... services Media and entertainment Metals and mining Oil and gas Retail Sundry manufacturing Telecommunications and cable Transportation Utilities All other loans Total business and government Total net impaired loans before general allowances Less: general allowances Total net impaired loans Net...

  • Page 37
    ... Asia and Latin America Total other international Special general provision Total Provision for credit losses as a % of net average loans 2 Canada Residential mortgages Personal Business and other Total Canada United States Other international Special general provision Total $ $ 2000 9 162 171 (10...

  • Page 38
    ... under management 2000 1999 1998 (millions of dollars) Assets under administration TD Canada Trust Retail brokerage and trust Retail custody and other Loans securitized Total TD Canada Trust TD Waterhouse - Customer assets Retail brokerage - Canada - United States and other international Total TD...

  • Page 39
    ...M E N T S 38 38 39 40 41 42 43 71 73 74 Financial reporting responsibility Auditors' report to the shareholders Consolidated balance sheet Consolidated statement of income Consolidated statement of changes in shareholders' equity Consolidated statement of cash flows N O T E S T O C O N S O L I D AT...

  • Page 40
    ... Chief Financial Officer W. Edmund Clark President and Chief Operating Officer Auditors' report to the shareholders We have audited the consolidated balance sheets of The Toronto-Dominion Bank as at October 31, 2000 and 1999 and the consolidated statements of income, changes in shareholders' equity...

  • Page 41
    ... (Note 8) SHAREHOLDERS' EQUITY 4,883 1,656 Capital stock (Note 9) Preferred Common Retained earnings 1,251 2,060 9,039 12,350 833 2,006 8,694 11,533 $ 214,417 Total liabilities and shareholders' equity A. Charles Baillie Chairman and Chief Executive Officer W. Edmund Clark President and Chief...

  • Page 42
    ... fees Net investment securities gains Trading income Service charges Loan securitizations Card services Insurance Other Net interest and other income Gain on sale of TD Waterhouse Group, Inc. (Note 19) Net interest and other income, including gain Non-interest expenses Salaries and staff benefits...

  • Page 43
    ... at end of year Retained earnings Balance at beginning of year Net income Preferred dividends Common dividends Foreign currency translation adjustments, net of income taxes Stock options settled in cash, net of income taxes Other Balance at end of year Total common equity Total shareholders' equity

  • Page 44
    ...used in) operating activities Net income Adjustments to determine net cash flows Provision for credit losses Restructuring costs Depreciation Amortization of goodwill and intangible assets from business combinations Gain on sale of TD Waterhouse Group, Inc. Net investment securities gains Changes in...

  • Page 45
    ... generally accepted accounting principles in Canada and in the United States. The significant accounting policies and practices followed by the Bank are: Unrealized translation gains and losses related to the Bank's investment positions in foreign operations, net of any offsetting gains or losses...

  • Page 46
    ...the Bank to meet the needs of its customers and to take trading positions. Derivative trading portfolios are marked to market with the resulting realized and unrealized gains or losses recognized immediately in other income. The market value for over-the-counter trading derivatives is determined net...

  • Page 47
    ...salaries and staff benefits. (o) Pension and other post-retirement employee benefits The Bank's principal pension plan is The Pension Fund Society of The Toronto-Dominion Bank, a defined benefit plan for which membership is voluntary. As a result of the acquisition of CT Financial Services Inc. (CT...

  • Page 48
    ... Total Total investment securities Trading securities Government and governmentinsured securities Canada Provinces Total Other debt securities Canadian issuers U.S. federal government Other foreign governments Other issuers Total Equity securities Preferred shares Common shares Total Total trading...

  • Page 49
    ... losses 2000 Estimated market value Book value Gross unrealized gains Gross unrealized losses 1999 Estimated market value Investment securities Issued or guaranteed by Canada Provinces U.S. federal government Other debt Equity Total investment securities Trading securities Total securities...

  • Page 50
    ... 2000 Total Specific allowance General allowance 1999 Total Balance at beginning of year Acquisition of CT Financial Services Inc. - balance at date of acquisition Write-offs Recoveries Provisions for credit losses charged to the consolidated statement of income Other, including foreign exchange...

  • Page 51
    ... of dollars) Demand Notice Term 2000 Total 1999 Total Personal Banks Business and government Total Non-interest-bearing deposits included above In domestic offices In foreign offices Interest-bearing deposits included above In domestic offices In foreign offices U.S. federal funds purchased Total...

  • Page 52
    ... and unpaid dividends to the date of redemption. Subsequent to year end, an offer was made to shareholders which would result in the Bank exchanging the Series 4 shares for Bank preferred shares with substantially the same terms. CT Financial Services Inc. First Preference Shares, Series 5 On...

  • Page 53
    ...position of the Bank, each TD CaTS may be automatically exchanged into one preferred share of the Bank without consent of the holder. Distribution rates on preferred shares and trust securities (per share) Annual rate Preferred share dividends Canada Trustco Mortgage Company, Series 1 CT Financial...

  • Page 54
    ... holder, be exchanged into common shares of the Bank, determined by dividing $1,000.00 plus the declared and unpaid dividends to the date of exchange by the greater of $1.00 and 95% of the average trading price of such common shares at that time. By giving at least two business days of notice prior...

  • Page 55
    ... have been restated to reflect the stock dividend. Stock options Under the Bank's 1993 stock option plan, options on common shares may be issued to certain employees for terms of 10 years, vesting over a four-year period and exercisable at the closing market price of the shares on the date prior to...

  • Page 56
    ...of service and the final five years' average salary of the employees. The following table presents the financial position of the Bank's principal pension plan at October 31. The Bank's principal pension plan, The Pension Fund Society of The Toronto-Dominion Bank, is a defined benefit plan funded by...

  • Page 57
    ... gain on sale of TD Waterhouse Group, Inc. Goodwill amortization Dividends from taxable Canadian corporations Lower tax rates on earnings of international subsidiaries Future federal and provincial tax rate reductions effective for 2001 Federal large corporations tax Financial institutions temporary...

  • Page 58
    ... not listed above. Details of the estimated fair value of derivative financial instruments are provided in Note 14. The estimated fair value of securities is determined as the estimated market values reported in Note 2. The estimated fair value of loans reï¬,ects changes in general interest rates...

  • Page 59
    ... of Chartered Accountants' handbook Section 3860, Financial Instruments - Interest rate risk 1 (billions of dollars) Floating rate Within 3 months 3 months to 1 year Total within 1 year 1 year to 5 years Over 5 years Noninterest sensitive 2000 Assets Cash resources Effective yield Securities...

  • Page 60
    ... exchange and over-the-counter markets. Notional principal amounts, upon which payments are based, are not indicative of the credit risk associated with derivative financial instruments. The Bank enters into derivative financial instruments, as described below, for trading and for risk management...

  • Page 61
    ...cash markets relating to movements in interest rates, foreign exchange rates, equity prices and credit spreads. This risk is managed by senior officers responsible for the Bank's trading business and is monitored separately by the Bank's Risk Management Division. The estimated fair value of exchange...

  • Page 62
    ... Positive 1999 Year-end fair value Negative Derivative financial instruments held or issued for trading purposes: Interest rate contracts Forward rate agreements Swaps Options written Options purchased Total interest rate contracts Foreign exchange contracts Forward contracts Swaps Cross-currency...

  • Page 63
    ...5,930 2,327 $ 4,661 $ 3,603 Exchange traded instruments and forward foreign exchange contracts maturing within 14 days are excluded in accordance with the guidelines of the Office of the Superintendent of Financial Institutions Canada. The total positive fair value of the excluded contracts at...

  • Page 64
    ... and payment systems and depositories or to have access to the facilities of central banks in foreign jurisdictions, or as security for contract settlements with derivative exchanges or other derivative counterparties. (e) In the ordinary course of business, the Bank agrees to lend unpaid customer...

  • Page 65
    ... 5% of the total. N O T E 1 7 Segmented information TD Securities provides a full range of services, including investment banking, merchant banking, mergers and acquisitions, fixed income, foreign exchange, derivative products, high yield, money market, equities, and corporate banking. Results of...

  • Page 66
    ...S U LT S Results by business segment (millions of dollars) TD Canada Trust TD Waterhouse TD Asset Management TD Securities 2000 Net interest income (on a taxable equivalent basis) Provision for credit losses Other income Non-interest expenses excluding non-cash goodwill/intangible amortization and...

  • Page 67
    ... of dollars) 2000 $ 6,948 2,590 666 $ 1999 4,772 2,752 458 7,982 $ 1998 4,531 1,377 429 6,337 Canada United States Other international Total 1 1 $ 10,204 $ $ Excludes gain on sale of TD Waterhouse Group, Inc. in 1999. N O T E 1 8 Acquisition of CT Financial Services Inc. Trust. The total...

  • Page 68
    ... has been accrued for severance and employee support costs directly related to this plan. The Bank anticipates that approximately 275 branches will be closed under the restructuring plan, together with rationalization of regional and head office space requirements. Lease termination costs and other...

  • Page 69
    ... internet and other electronic channels as well as an extensive network of branches and service centres. During 1999 TD Waterhouse Group, Inc. (TD Waterhouse), an indirect wholly-owned subsidiary of the Bank, completed an initial public offering of 43.4 million shares of its common stock in Canada...

  • Page 70
    ... shares Common shares Retained earnings Accumulated other comprehensive income Net unrealized gains on available for sale securities Foreign currency translation adjustments Total shareholders' equity Total liabilities and shareholders' equity $ 4,187 13,974 27,090 58,297 120,721 $ - - 796 - 200...

  • Page 71
    ...Bank accounts for all investment account securities as "available for sale" and reports them at estimated fair value with unrealized gains and losses reported net of taxes in other comprehensive income, a separate component of shareholders' equity. Under Canadian GAAP , investment account securities...

  • Page 72
    ... the proposed acquisition of The Canada Life Assurance Company's property and casualty business, in an exchange of assets which will result in a net cash payment of $75 million by the Bank. On November 7, 2000, the Bank announced the proposed acquisition of the shares of Newcrest Holdings Inc. for...

  • Page 73
    ...Truscan Property Corporation TD Mortgage Corporation TD Pacific Mortgage Corporation TD Trust Company CT North and South America Inc. First Nations Bank of Canada (89%) TD Asset Finance Corp. TD Asset Management Inc. TD Capital Group Limited TD Capital Canadian Private Equity Partners Ltd. TD Direct...

  • Page 74
    ...TD Capital Canadian Private Equity Partners (Barbados) Ltd. TD Ireland TD Global Finance Toronto Dominion Australia Limited Toronto Dominion Securities Pty. Limited Toronto Dominion International Inc. TD Reinsurance (Barbados) Inc. TD Trust (Bermuda) Limited Toronto Dominion Investments B.V. TD Bank...

  • Page 75
    ... assets Net interest income (TEB) as a % of average earning assets 1 2 For details of cash basis measurements, see table 2 on page 29. Special gains on the sale of TD Waterhouse Group, Inc. and Knight/Trimark in 1999, and restructuring costs relating to the integration of Canada Trust in 2000.

  • Page 76
    ...and securities services Credit fees Net investment securities gains Trading income Service charges Loan securitizations Card services Insurance Other Net interest and other income Special gains 3 Net interest and other income, including special gains Non-interest expenses Salaries and staff benefits...

  • Page 77
    ... have not been restated to reflect the separate reporting of trading derivatives' market revaluation. 2 Commencing in 1997 the Bank adopted cash basis measurements. See table 2 on page 29 for details. 3 Special gains on the sale of TD Waterhouse Group, Inc. and Knight/Trimark in 1999. 1 $ 1,114 57...

  • Page 78
    ... of net average loans 6 Tier 1 capital to risk-weighted assets Total capital to risk-weighted assets Common equity to total assets Number of common shares outstanding (thousands) 2 Market capitalization (millions) Number of employees Number of retail bank outlets 7 Number of retail brokerage offices...

  • Page 79
    ... the onefor-one stock dividend paid on July 31, 1999. 3 Special gains on the sale of TD Waterhouse Group, Inc. and Knight/Trimark in 1999, and restructuring costs relating to the integration of Canada Trust in 2000. 4 Efficiency ratio excluding non-cash goodwill/intangible amortization and one...

  • Page 80
    ... of the world's leading financial institutions. TD's corporate governance practices comply with The Toronto Stock Exchange's (TSE) Corporate Governance Guidelines. Board of Directors The Board of Directors is responsible for overseeing our management and business affairs and makes all major policy...

  • Page 81
    ... Reviews and approves policies and procedures relating to seven of the eight Canada Deposit Insurance Corporation (CDIC) Standards (credit risk management, foreign exchange risk management, interest rate risk management, internal control, liquidity management, real estate appraisals and securities...

  • Page 82
    ... Toronto TD Securities Global Foreign Exchange and Money Markets Martine M. Irman Toronto Finance Alan J. Jette 1,2 Toronto Finance David E. Kay Ajax Commercial Banking Québec District Louis Lariviere Brossard TD Canada Trust Québec Region Robert R. Laverdure Westmount TD Wealth Management Peter...

  • Page 83
    ... to the Bank's transfer agent or calling the Shareholder Relations department. Dividends will be exchanged into U.S. funds at the Bank of Canada noon rate on the fifth business day after record date, or as otherwise advised by the Bank. Address: The Toronto-Dominion Bank P.O. Box 1 Toronto-Dominion...

  • Page 84
    ... Group". TD Bank Financial Group is one of the top three online financial services firms in the world. We serve more than three million customers over the internet. On October 31, 2000, TD was the second largest bank in Canada in terms of market capitalization. TD Bank is a Schedule I chartered bank...