Toronto-Dominion Bank · TSX:TD
Toronto-Dominion Bank — TD Bank Financial Group — Q1 2002 Earnings Presentation
32 slides from Toronto-Dominion Bank's earnings presentation, 2002
Slide 1: TD Bank Financial Group Investor Presentation - First Quarter 2002
TD Bank Financial Group Dan Marinangeli EVP & CFO INVESTOR PRESENTATION FIRST QUARTER 2002 Overview1 • Basic EPS of $0.79 • Revenue of $2.9B – up 4% from Q1/01 – up 10% from Q4/01 • ROE 16.4% – 19.5% last year – 16.8% last quarter • TDCT net income $281MM, up 5% YoY • TD Waterhouse net income $29MM
Slide 2: Key Goals and Revenue Growth
Key Goals Q1/02 Goals Cash basis ROE 16.4% 17 - 20% PCL/Loans & BAs1 100 bps2 35 bps over a credit cycle TDCT Efficiency3 58.2% 58.0% in 2003 1. Excluding general provisions & reverse repos. 2. Based on Q1/02 PCL annualized 3. Cash operating basis for TDCT which excludes non-cash charges, one-time i
Slide 3: EPS Growth and Segment Performance
EPS Growth 100 1 90 81 Cdn. Peers 11 Cdn. Peers 68 U.S. U.S. Peers Peers Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 1. Cash, excluding special items. Source: UBS Warburg, 2/14/02. U.S. calendar quarter end closest Canadian fiscal quarter end. Slide 5 Segment Performance Retail Wholesale Canada Wealth Securities
Slide 4: TD Canada Trust Operating Performance - Revenue
TD Canada Trust Operating Performance - TD Canada Trust Revenue $Millions $1,432 $1,447 $1,451 ØTop-line growth $1,372 $1,388 continues: • Revenue of $1.45 billion in Q1/02 • Modestly higher than last quarter and $80 million or 6% higher than Q1/01 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Slide 8 4
Slide 5: TD Canada Trust Cash Net Income and Efficiency
Operating Performance - TD Canada Trust Cash Net Income $Millions $277 $281 Ø Solid earnings growth: $267 $271 $275 • Cash net income of $281 million for the quarter • Up $4 million or 1.4% versus Q4/01 and $14 million or 5.2% higher than Q1/01 Ø Operating ROE1: • Q1/02 ROE = 27% versus 29% for Q4/0
Slide 6: TD Canada Trust Net Interest Margin and Loans
Operating Performance - TD Canada Trust Net Interest Margin1 3.39% 3.38% 3.40% 3.45% ØNet interest margin higher: 3.34% • 3.45% this quarter from 3.40% in Q4/01 and 3.34% a year ago • Reflects shift in deposit mix toward higher margin core deposits, as well as wider Prime-BA spread • The trend towar
Slide 7: TD Canada Trust Personal Deposits
Operating Performance - TD Canada Trust Personal Deposits Core Term Market share since merger announcement Core up 130 bps / Term down 33 bps 90 23 80 70 22 60 $B 50 40 21 % 30 Core volume Term volume 20 Q1/01 to Q1/02 = 16.4% Q1/01 to Q1/02 = (6.4)% 20 Q4/01 to Q1/02 = 9.4% Q4/01 to Q1/02 = (3.5)%
Slide 8: TD Wealth Management and TD Waterhouse
TD Wealth Management Revenue Cash Net Income $ Millions $ Millions $671 $588 $573 $72 $552 $58 $518 $30 $27 $19 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Slide 15 TD Waterhouse Global Self Directed Brokerage Revenue Cash Net Income $ Millions $ Millions $497 $409 $405 $47 $367 $343
Slide 9: TD Waterhouse Metrics and Operating Margin
TD Waterhouse1 2001 2002 Yr/Yr Q1 Q4 Q1 Change Active Accounts (000)* 3,241 3,266 3,342 3% New accounts (000) 160 101 115 (28)% Cost per new account (US$) $176 $109 $164 (7)% Revenue Trades/day (000) 140 83 106 (24)% Online penetration 74% 76% 79% 7% Customer Assets* (US$B) $154 $125 $139 (10)% * Re
Slide 10: TD Waterhouse Margin Loans and Trades per Day
TD Waterhouse1 - Margin Loans C$B (period end) $9.3 ØMargin loans increasing: • $6.3 billion this quarter from $6.5 $6.6 $5.5 billion in Q4/01 and $9.3 $6.3 $5.5 billion a year ago • Cautious growth in leverage reflecting uncertainty regarding rebound in the economy & corporate earnings growth, coup
Slide 11: Mutual Funds and Assets Under Management
Mutual Funds Canada Waterhouse Canadian M.F. market share Market share is up 4 bps since the merger announcement $30 10% $25 $20 $B $15 5% $10 WAF Canada: 1.19%, down 2 bps from Q4/01 $5 U.S. 0.72%, up 1 bps from Q4/01 $0 0% Q4/99 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 Q4/01 Q1/01 Restated TD & C
Slide 12: TD Securities Revenue
TD Securities TD Securities: Revenue $ Millions $929 $807 ØTDS revenue up: $794 $766 $770 • $929 million this quarter up $122 million or 15% from Q4/01 • Offsetting $91MM increase in PCL from Q4/01 • revenue up $135MM or 17% from Q1/01 • Partially offsetting $176MM increase in PCL from Q1/01 Q1/01 Q
Slide 13: TD Securities Net Income and ROE
TD Securities Cash Net Income ROE $ Millions % $231 $239 23% 24% $227 23% $216 21% $203 21% Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Slide 25 TD Bank Financial Group Tom Spencer EVP, Risk Management FIRST QUARTER 2002 13
Slide 14: Strong Asset Quality and General Reserves
Strong Asset Quality Ratio of PCL to Loans & BAs % 1.00 1.00 0.80 Four Bank Peer 0.71 0.60 0.40 0.48 0.20 0.00 94 95 96 97 98 99 00 01 02 19 19 19 19 19 19 20 20 1/ Q Excludes special general provisions and reverse repos. Based on Q1/02 PCL annualized Slide 27 General Reserves General Reserves Gener
Slide 15: New Formations and Impaired Loans
New Formations New Formation of Impaired Loans & Loan Substitutes (before Write-offs) As a % of Gross $ Millions Loans & BA’s 31 bps $500 0.4% $400 0.3% $300 0.2% $200 0.1% $100 $0 0.0% Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Slide 29 Impaired Loans $ Millions $1,500 1.3% $1,000 1.0% 0
Slide 16: Corporate Loan Portfolio Reserve Adequacy and Telecom & Cable
Corporate Loan Portfolio Reserve Adequacy 100% 90% 80% 70% Adjusted specific allowance as a % of gross impaired 60% 50% 40% 30% 20% 10% Specific Allowance as a % of Gross Impaired 0% Q2'00 Q3'00 Q4'00 Q1'01 Q2'01 Q3'01 Q4'01 Q1'02 Adjusted specific allowance as a % of gross impaired - cumulative wri
Slide 17: CLEC, Long Haul/Fibre & Paging Loans
CLEC, Long Haul/Fibre & Paging Loans & BAs* Write Offs, Net $C million Gross Gross Impaired Allowances Impaired & M2M % of Gross # Accts $MM # Accts $MM $MM $MM Impaired CLEC 11 $ 583 3 $ 294 $264 $ 30 13% Long Haul/Fibre 7 $ 416 3 $ 168 $73 $ 95 57% Paging 3 $ 161 2 $ 138 $54 $ 84 61% *January 31,
Slide 18: Market Risk and Retail Financial Services
Market Risk Distribution of Daily Net Trading Revenues Q1 - 2002 8 7 6 Frequ en cy (D ays) 5 4 3 2 1 0 <(17) (16) (14) (12) (10) (8) (6) (4) (2) 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Daily P&L (CAD Millions) Slide 35 Retail Financial Services Ed Clark President & COO TD Bank Financial Group FIR
Slide 19: Outline
Outline • TD Canada Trust – Operating performance versus peer group – Update: • Customer satisfaction • Branch mergers • PCL • TD Wealth Management – New structure – Canada: • Strategy • Customer focus Slide 37 TD Canada Trust 19
Slide 20: Revenue and Efficiencies versus Peers
Revenue- Faster Growing, More Stable P&C Revenue Growth 116 112 Four Bank Peer 100 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q401 Q102 Source: company reports. Adjusted for unusual items. RY combines P&C and Insurance segments and excludes revenues from acquisitions after Q2/00 (Liberty and Centura). Slid
Slide 21: Net Income Growth and Customer Satisfaction
Net Income- Faster Growing, More Stable P&C Net Income Growth 139 118 Four Bank Peer 100 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Company reports. Cash earnings, adjusted for special items. Slide 41 Customer Satisfaction Customer Satisfaction Index (CSI) % 83.7 83.4 81.6 81.9 82.2 82.2 82.3 8
Slide 22: Customer Attrition and Provision for Credit Loss
Attrition TDCT Customer Attrition (basis point change) • Branch mergers 60 – Completed in 2001*: 105 of bps 275 10 – Scheduled in 2002: 150 bps – Completed YTD 2002: 43 – Scheduled in 2003: 20 • No discernable attrition in: – customers – balances – revenue 1999 2000 2001 • Within TDCT attrition: – C
Slide 23: TD Canada Trust Q1/02 Provision for Credit Loss
Operating Performance - TD Canada Trust Q1/02 Provision for Credit Loss1 • $23MM or 25% higher than Q4/01, $ Million excluding operational related provision, because of: 138 – Small business and commercial 23 loans returning to a ‘more normal’ loss level following recovery last 97 99 115 quarter 92
Slide 24: TD Retail Financial Services Structure
TD Retail Financial Services Old Structure TD Canada TD Wealth TD Trust Management Waterhouse TD TD Asset TD Private TD Financial Management Client Group Evergreen Planning Slide 47 TD Retail Financial Services New Structure TD Wealth TD TD Canada Management Waterhouse Trust Canada USA/Offshore Slid
Slide 25: TD Wealth Management in Canada
TD Retail Financial Services New Structure TD Wealth Management in Canada TD TD Asset TD Private Waterhouse Management Client Group in Canada Full Service Discount Financial Brokerage Brokerage Planning Slide 49 TD Wealth Management in Canada New Structure TD Asset TD Private TD Management Client Gr
Slide 26: TD Waterhouse in Canada Strategy
TD Waterhouse in Canada Components of our strategy • Leverage Waterhouse – Brand – Technology • Leverage customer bases Slide 51 TD Waterhouse in Canada Components of our strategy • Modify full service advisor compensation to grow investment advisors • Expand Financial Planners and Investment Adviso
Slide 27: Customer Focus
Customer Focus • Customers will be able to – move seamlessly – accessing a continuum of wealth management services – via a “single point of access” – with web-accessible consolidated reporting – under one brand, TD Waterhouse, in Canada Best Rated Technology Continued Low Price Unique offering: TD W
Slide 28: TD Securities Strong Performance
TD Securities Donald A. Wright Vice Chair, TDBFG Chairman & CEO, TD Securities Strong Performance $ Millions Q-1 Q-4 Q-1 2001 2001 2002 Revenue 794 807 929 Provision for Credit Losses 41 126 217 Net Income 231 239 203 ROE 23% 24% 21% Slide 56 28
Slide 29: Revenue Diversification and Trading Revenue
Revenue Diversification Revenue Generating Product distribution % Activities Q-1 2002 • Client Transactions Equity and Services Investments 10% • Origination Foreign • Advisory Debt Capital Exchange Markets 6% • Facilitation 45% • Trading Corporate & Investment Banking • Investing 27% Equity Product
Slide 30: Credit Portfolio Management and LETCO and Stafford
Credit Portfolio Management • Credit is a core product required by our clients • TDS is a leader in loan syndications and the use of capital markets to manage its credit portfolio • Developing a TDS wide credit management system – better information to make relationship credit decisions – optimize t
Slide 31: TDS Core Strengths and Superior ROE
TDS - Core Strengths Client Focus • Understanding Challenges and Opportunities • Innovative, Tailored and Integrated Solutions • Execution Diversified Portfolio of Businesses • Clients • Products • Regions Strong Risk Management • Proactive management of credit and market risk Slide 61 Superior ROE
Slide 32: Forward Looking Statements
Forward Looking Statements This press release may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TD. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from t
TD Bank Financial Group — Q1 2002 Earnings Presentation on 6ix