TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 1
TD Bank Group Reports First Quarter 2024 Results
Report to Shareholders
Three months ended January 31, 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 to the presentation adopted in the current period.
Reported results conform to 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 “Non-GAAP and Other Financial Measures” in the “How We Performed”
section of this document.
FIRST QUARTER FINANCIAL HIGHLIGHTS, compared with the first quarter last year:
●
Reported diluted earnings per share were $1.55, compared with $0.82.
●
Adjusted diluted earnings per share were $2.00, compared with $2.23.
●
Reported net income was $2,824 million, compared with $1,581 million.
●
Adjusted net income was $3,637 million, compared with $4,154 million.
FIRST QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The first quarter reported earnings figures included the following items of note:
●
Amortization of acquired intangibles of $94 million ($79 million after-tax or 4 cents per share), compared with $54 million ($46 million after-tax or
3 cents per share) in the first quarter last year.
●
Acquisition and integration charges related to the Schwab transaction of $32 million ($26 million after-tax or 2 cents per share), compared with
$34 million ($28 million after-tax or 2 cents per share) in the first quarter last year.
●
Share of restructuring and other charges from investment in Schwab of $49 million (or 3 cents per share).
●
Restructuring charges of $291 million ($213 million after-tax or 12 cents per share).
●
Acquisition and integration charges related to the Cowen acquisition of $117 million ($93 million after-tax or 5 cents per share).
●
Impact from the terminated FHN acquisition-related capital hedging strategy of $57 million ($43 million after-tax or 2 cents per share).
●
FDIC special assessment of $411 million ($310 million after-tax or 17 cents per share).
TORONTO
, February 29, 2024 – TD Bank Group (“TD” or the “Bank”) today announced its financial results for the first quarter ended January 31, 2024. Reported
earnings were $2.8 billion, up 79% compared with the first quarter last year, and adjusted earnings were $3.6 billion, down 12%.
“TD had a good start to the year, with revenue growth reflecting higher fee-income from our markets-driven businesses, including the contribution from TD Cowen,
and higher volumes and deposit margins in the Canadian Personal and Commercial Bank,” said Bharat Masrani, Group President and Chief Executive Officer, TD
Bank Group. “Expense growth moderated from last quarter as we made progress on our restructuring initiatives, delivering efficiencies across the Bank.”
Canadian Personal and Commercial Banking delivered a strong quarter supported by volume growth and margin expansion
Canadian Personal and Commercial Banking net income was $1,785 million, an increase of 3% compared to the first quarter last year. The increase reflects
revenue growth, partially offset by higher non-interest expenses and provisions for credit losses (PCL). Revenue was $4,884 million, an increase of 6%, reflecting
8% growth in net interest income driven by volume growth and margin expansion.
Canadian Personal and Commercial Banking delivered another strong quarter for New to Canada account openings and continued momentum in credit cards. TD
launched the Low Rate Visa card, further enhancing its award-winning line up of credit cards. In addition, TD Auto Finance delivered strong performance in prime
retail auto lending and accelerated acquisition of dealer relationships in its commercial business year-over-year. Small Business Banking helped over
165,000 clients conveniently repay or refinance Canada Emergency Business Account loans.
The U.S. Retail Bank delivered loan growth and operating momentum in a challenging environment
U.S. Retail reported net income of $907 million, a decrease of 43% (43% in U.S. dollars) compared with the first quarter last year. On an adjusted basis, net
income was $1,217 million, a decline of 27% (27% in U.S. dollars). TD Bank’s investment in The Charles Schwab Corporation (“Schwab”) contributed $194 million
in earnings, a decrease of 36% (35% in U.S. dollars) compared with the first quarter last year.
The U.S. Retail Bank, which excludes the Bank’s investment in Schwab, reported net income of $713 million (US$526 million), a decrease of 44% (45% in U.S.
dollars) from the first quarter last year, primarily reflecting the Federal Deposit Insurance Corporation (FDIC) special assessment, lower revenue and higher PCL.
On an adjusted basis net income was $1,023 million (US$752 million), a decrease of 25% (26% in U.S. dollars) from the first quarter last year.
The U.S. Retail Bank continued to deliver loan growth while maintaining its through-the-cycle underwriting standards, with total average loan balances up 9%
compared with the first quarter last year and up 2% from last quarter. Average deposit volumes declined 9% year-over-year and 1% quarter-over-quarter.
Excluding sweep deposits, total personal and business deposit average balances were down 2% year-over-year and flat quarter-over-quarter, reflecting
competitive market conditions.
During the quarter, TD Bank, America’s Most Convenient Bank® (TD AMCB) announced a three-year US$20 billion Community Impact Plan to support lending,
philanthropy, and banking access in diverse and underserved communities across its footprint. TD AMCB continued to deliver innovative solutions to small
business clients with the launch of Tap to Pay on iPhone and Zelle for Small Business, offering enhanced convenience and payment functionality.
Wealth Management and Insurance delivered good performance reflecting the strength of its diversified businesses
Wealth Management and Insurance net income was $555 million, relatively flat compared with the first quarter last year, as positive top-line momentum was
partially offset by higher insurance service expenses. This quarter’s revenue growth of 8% reflected insurance premium growth and higher fee-based revenue in
the asset management and advice-based businesses.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 2
This quarter, Wealth Management and Insurance’s investments in client-centric innovation continued to drive momentum and gain recognition.TD Direct Investing
ranked as the #1 Direct Investing Brokerage in Canada by the Globe and Mail for the second consecutive year. Eighteen mutual funds and ETFs managed by TD
Asset Management received 2023 FundGrade A+ Awards by Fundata Canada Inc. for demonstrating strong risk-adjusted performance relative to industry peers,
underscoring the expertise of the Bank’s investment teams.
Wholesale Banking delivered record revenue
Wholesale Banking reported net income for the quarter was $205 million, a decrease of $126 million compared with the first quarter last year, reflecting higher non-
interest expenses which include integration-related costs of $117 million and a provision of $102 million taken in connection with the industry-wide U.S. record
keeping matter, partially offset by higher revenues. On an adjusted basis, net income was $298 million, a decrease of $49 million or 14%. Revenue for the quarter
was $1,780 million, an increase of $435 million, or 32%, compared with the first quarter last year, reflecting the segment’s expanded capabilities from the inclusion
of TD Cowen and strong performance across Global Markets and Corporate and Investment Banking.
This quarter, the Wholesale Bank continued to demonstrate its leadership in Environmental, Social, and Governance (ESG). TD Securities was joint lead manager
on a 3-year (US$1.5 billion) Social Bond for the International Finance Corporation (IFC) to support low-income communities in emerging markets. The transaction
represents IFC’s largest social bond ever issued. TD Securities was also joint lead manager on a new (AUD$1.5 billion) Green Bond issued by KFW Development
Bank, the issuer’s largest ever transaction in the Australian market.
Continuing to innovate for customers
The Bank continued to enhance TD Invent, its enterprise approach to innovation, including reaching a milestone with over 700 patents across Canada and the
U.S. as of this quarter. For the third consecutive year, the Bank was recognized by the Business Intelligence Group’s annual BIG Innovation Awards, ranking
highest in the Organization and Product categories for the TD Accessibility Adapter, a colleague-developed browser plug-in that helps to make online experiences
more inclusive.
Capital
TD’s Common Equity Tier 1 Capital ratio was 13.9%.
Conclusion
“Looking ahead, TD is well-positioned from both a capital and funding perspective, with the capacity to continue to invest in our business and return capital to
shareholders,” said Masrani. “I want to thank our more than 95,000 TD bankers who continue to deliver for our customers, communities, and shareholders.”
The foregoing contains forward-looking statements. Please refer to the “Caution Regarding Forward-Looking Statements” on page 4.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
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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 first 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 first 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
First
Quarter
2024
SFI
First
Quarter
2024
SRD
First
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.
25-27, 76
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.
34-51, 56-62
16
Flow statement reconciling the movements of RWA by risk type.
16-17
17
Discussion of Basel III back-testing requirements.
76
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.
22-25, 61-66
21-36
1-5, 13, 16,
18-76
54-66, 88-92,
171-178, 187,
190-191,
217-218
27
Description of the bank’s policies for identifying impaired loans.
66
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.
23, 63-65
25, 29
60, 174-176
29
Analysis of the bank’s counterparty credit risks that arise from derivative
transactions.
50-52, 63-67
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.
74
81-82, 212-213,
221
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
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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
13
How Our Businesses Performed
49
Interim Consolidated Balance Sheet
20
Quarterly Results
50
Interim Consolidated Statement of Income
21
Balance Sheet Review
51
Interim Consolidated Statement of Comprehensive Income
22
Credit Portfolio Quality
52
Interim Consolidated Statement of Changes in Equity
25
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
77
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 months ended January 31, 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 February 28, 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.sedar.com 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.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 5
TABLE 1: FINANCIAL HIGHLIGHTS
(millions of Canadian dollars, except as noted)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Results of operations
Total revenue – reported
1
$
13,714
$
13,178
$
12,201
Total revenue – adjusted
1,2
13,771
13,242
13,077
Provision for (recovery of) credit losses
1,001
878
690
Insurance service expenses (ISE)
1
1,366
1,346
1,164
Non-interest expenses – reported
1
8,030
7,628
8,112
Non-interest expenses – adjusted
1,2
7,125
6,988
6,337
Net income – reported
1
2,824
2,866
1,581
Net income – adjusted
1,2
3,637
3,485
4,154
Financial position
(billions of Canadian dollars)
Total loans net of allowance for loan losses
$
904.3
$
895.9
$
836.7
Total assets
1,910.9
1,955.1
1,926.6
Total deposits
1,181.3
1,198.2
1,220.6
Total equity
112.4
112.1
112.0
Total risk-weighted assets
3
579.4
571.2
531.6
Financial ratios
Return on common equity (ROE) – reported
1,4
10.9
%
10.5
%
5.9
%
Return on common equity – adjusted
1,2
14.1
12.9
16.1
Return on tangible common equity (ROTCE)
1,2,4
14.9
14.3
8.0
Return on tangible common equity – adjusted
1,2
18.7
17.1
21.1
Efficiency ratio – reported
1,4
58.6
57.9
66.5
Efficiency ratio – adjusted, net of ISE
1,2,4,5
57.4
58.7
53.2
Provision for (recovery of) credit losses as a % of net
average loans and acceptances
0.44
0.39
0.32
Common share information – reported
(Canadian dollars)
Per share earnings
1
Basic
$
1.55
$
1.48
$
0.82
Diluted
1.55
1.48
0.82
Dividends per share
1.02
0.96
0.96
Book value per share
4
57.34
56.56
55.07
Closing share price
6
81.67
77.46
92.06
Shares outstanding (millions)
Average basic
1,776.7
1,806.3
1,820.7
Average diluted
1,778.2
1,807.8
1,823.1
End of period
1,772.1
1,790.7
1,828.9
Market capitalization (billions of Canadian dollars)
$
144.7
$
138.7
$
168.4
Dividend yield
4
4.9
%
4.7
%
4.3
%
Dividend payout ratio
4
65.7
64.6
116.6
Price-earnings ratio
1,4
13.1
14.0
11.1
Total shareholder return (1 year)
4
(6.9)
(6.9)
(5.7)
Common share information – adjusted
(Canadian dollars)
1,2
Per share earnings
1
Basic
$
2.01
$
1.82
$
2.24
Diluted
2.00
1.82
2.23
Dividend payout ratio
50.7
%
52.4
%
42.9
%
Price-earnings ratio
1
10.6
9.8
10.8
Capital ratios
3
Common Equity Tier 1 Capital ratio
13.9
%
14.4
%
15.5
%
Tier 1 Capital ratio
15.7
16.2
17.5
Total Capital ratio
17.6
18.1
19.9
Leverage ratio
4.4
4.4
4.8
TLAC ratio
30.8
32.7
36.6
TLAC Leverage ratio
8.6
8.9
9.9
1
Insurance Contracts
the Bank’s first 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 the “How We Performed” section of this document
for further explanation, a list of the items of note, and a reconciliation of adjusted to reported results. Non-GAAP financial measures and ratios used in this document are not defined terms
under IFRS and, therefore, may not be comparable to similar terms used by other issuers.
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
$12,405 million, Q4 2023: $11,896 million, Q1 2023: $11,913 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 6
SIGNIFICANT EVENTS
a)
Restructuring Charges
The Bank continued to undertake certain measures in the first quarter of 2024 to reduce its cost base and achieve greater efficiency. In connection with these
measures, the Bank incurred $291 million of restructuring charges which primarily relate to employee severance and other personnel-related costs and real estate
optimization. The Bank continues to expect to incur restructuring charges in the first half of calendar 2024 that are of a similar magnitude to the restructuring
charges incurred in the fourth quarter of 2023.
b)
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 FDIC 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. The FDIC
plans to provide institutions subject to the special assessment an updated estimate with its first quarter 2024 special assessment invoice, to be released in June
2024. At this time, it is not known what the final FDIC special assessment will be, but the Bank expects the FDIC special assessment to increase.
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 $1.91 trillion in assets on January 31, 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 first quarter 2024 Interim Consolidated Financial
Statements.
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.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 7
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 the minimum level of 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. The fees are intended to
compensate the Bank for losses incurred this quarter from discontinuing certain hedging relationships, and for lost revenues. The net impact is 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
January 31
October 31
January 31
2024
2023
2023
Net interest income
$
7,488
$
7,494
$
7,733
Non-interest income
1
6,226
5,684
4,468
Total revenue
1
13,714
13,178
12,201
Provision for (recovery of) credit losses
1,001
878
690
Insurance service expenses
1
1,366
1,346
1,164
Non-interest expenses
1
8,030
7,628
8,112
Income before income taxes and share of net income from
investment in Schwab
1
3,317
3,326
2,235
Provision for (recovery of) income taxes
1
634
616
939
Share of net income from investment in Schwab
141
156
285
Net income – reported
1
2,824
2,866
1,581
Preferred dividends and distributions on other equity instruments
74
196
83
Net income available to common shareholders
1
$
2,750
$
2,670
$
1,498
1
Interim Consolidated Financial Statements for further details.
TD BANK GROUP • FIRST 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 “Financial
Results Overview” sections.
TABLE 3: NON-GAAP FINANCIAL MEASURES – Reconciliation of Adjusted to Reported Net Income
(millions of Canadian dollars)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Operating results – adjusted
Net interest income
1
$
7,545
$
7,558
$
7,862
Non-interest income
1,2
6,226
5,684
5,215
Total revenue
2
13,771
13,242
13,077
Provision for (recovery of) credit losses
1,001
878
690
Insurance service expenses
2
1,366
1,346
1,164
Non-interest expenses
2,3
7,125
6,988
6,337
Income before income taxes and share of net income from investment in Schwab
4,279
4,030
4,886
Provision for income taxes
872
779
1,060
Share of net income from investment in Schwab
4
230
234
328
Net income – adjusted
2
3,637
3,485
4,154
Preferred dividends and distributions on other equity instruments
74
196
83
Net income available to common shareholders – adjusted
3,563
3,289
4,071
Pre-tax adjustments for items of note
Amortization of acquired intangibles
5
(94)
(92)
(54)
Acquisition and integration charges related to the Schwab transaction
3,4
(32)
(31)
(34)
Share of restructuring and other charges from investment in Schwab
4
(49)
(35)
–
Restructuring charges
3
(291)
(363)
–
Acquisition and integration-related charges
3
(117)
(197)
(21)
Charges related to the terminated First Horizon (FHN) acquisition
3
–
–
(106)
Impact from the terminated FHN acquisition-related capital hedging strategy
1
(57)
(64)
(876)
Litigation (settlement)/recovery
3
–
–
(1,603)
FDIC special assessment
3
(411)
–
–
Less: Impact of income taxes
Amortization of acquired intangibles
(15)
(9)
(8)
Acquisition and integration charges related to the Schwab transaction
(6)
(5)
(6)
Restructuring charges
(78)
(97)
–
Acquisition and integration-related charges
(24)
(36)
(5)
Charges related to the terminated FHN acquisition
–
–
(26)
Impact from the terminated FHN acquisition-related capital hedging strategy
(14)
(16)
(216)
Litigation (settlement)/recovery
–
–
(445)
FDIC special assessment
(101)
–
–
Canada Recovery Dividend (CRD) and federal tax rate increase for fiscal 2022
6
–
–
585
Total adjustments for items of note
(813)
(619)
(2,573)
Net income available to common shareholders – reported
$
2,750
$
2,670
$
1,498
1
to-market gains (losses) on interest rate swaps recorded in non-interest income – Q1 2023: ($998) million, ii) basis adjustment amortization related to de-designated fair value hedge
accounting relationships, recorded in net interest income – 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 – Q1 2023: $251 million. After the termination of the merger agreement, the residual impact of the strategy is
reversed through net interest income – Q1 2024: ($57) million, Q4 2023: ($64) million.
2
Interim Consolidated Financial Statements for further details.
3
i. Amortization of acquired intangibles – Q1 2024: $63 million, Q4 2023: $62 million, Q1 2023: $24 million, reported in the Corporate segment;
ii. The Bank’s own integration and acquisition costs related to the Schwab transaction – Q1 2024: $23 million, Q4 2023: $18 million, Q1 2023: $21 million, reported in the Corporate
segment;
iii. Acquisition and integration-related charges – Q1 2024: $117 million, Q4 2023: $197 million, Q1 2023: $21 million, reported in the Wholesale Banking segment;
iv. Charges related to the terminated FHN acquisition – Q1 2023: $106 million, reported in the U.S. Retail segment;
v. Stanford litigation settlement – Q1 2023: $1,603 million, reported in the Corporate segment;
vi. Restructuring charges – Q1 2024: $291 million, Q4 2023: $363 million, reported in the Corporate segment; and
vii. FDIC special assessment – Q1 2024: $411 million, reported in the U.S. Retail segment.
4
segment:
i. Amortization of Schwab-related acquired intangibles – Q1 2024: $31 million, Q4 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 – Q1 2024: $9 million, Q4 2023: $13 million, Q1 2023: $13 million;
iii. The Bank’s share of restructuring charges incurred by Schwab – Q1 2024: $27 million, Q4 2023: $35 million; and
iv. The Bank’s share of the FDIC special assessment charge incurred by Schwab – Q1 2024: $22 million.
5
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 3 and 4 for amounts.
6
TD BANK GROUP • FIRST 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
January 31
October 31
January 31
2024
2023
2023
Basic earnings per share – reported
2
$
1.55
$
1.48
$
0.82
Adjustments for items of note
0.45
0.34
1.41
Basic earnings per share – adjusted
2
$
2.01
$
1.82
$
2.24
Diluted earnings per share – reported
2
$
1.55
$
1.48
$
0.82
Adjustments for items of note
0.45
0.34
1.41
Diluted earnings per share – adjusted
2
$
2.00
$
1.82
$
2.23
1
rounding.
2
Interim Consolidated Financial Statements for further details.
TABLE 5: AMORTIZATION OF INTANGIBLES, NET OF INCOME TAXES
(millions of Canadian dollars)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Schwab
1
$
31
$
30
$
30
Wholesale Banking related intangibles
42
46
7
Other
6
7
9
Included as items of note
79
83
46
Software and asset servicing rights
96
93
90
Amortization of intangibles, net of income taxes
$
175
$
176
$
136
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
January 31
October 31
January 31
2024
2023
2023
Average common equity
$
100,269
$
100,998
$
100,441
Net income available to common shareholders – reported
1
2,750
2,670
1,498
Items of note, net of income taxes
813
619
2,573
Net income available to common shareholders – adjusted
1
$
3,563
$
3,289
$
4,071
Return on common equity – reported
1
10.9
%
10.5
%
5.9
%
Return on common equity – adjusted
1
14.1
12.9
16.1
1
Interim 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.
TABLE 7: RETURN ON TANGIBLE COMMON EQUITY
(millions of Canadian dollars, except as noted)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Average common equity
$
100,269
$
100,998
$
100,441
Average goodwill
18,208
18,217
17,486
Average imputed goodwill and intangibles on investments in Schwab
6,056
6,094
6,160
Average other acquired intangibles
1
615
635
442
Average related deferred tax liabilities
(231)
(114)
(174)
Average tangible common equity
75,621
76,166
76,527
Net income available to common shareholders – reported
2
2,750
2,670
1,498
Amortization of acquired intangibles, net of income taxes
79
83
46
Net income available to common shareholders adjusted for
amortization of acquired intangibles, net of income taxes
2
2,829
2,753
1,544
Other items of note, net of income taxes
734
536
2,527
Net income available to common shareholders – adjusted
2
$
3,563
$
3,289
$
4,071
Return on tangible common equity
2
14.9
%
14.3
%
8.0
%
Return on tangible common equity – adjusted
2
18.7
17.1
21.1
1
2
Interim Consolidated Financial Statements for further details.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 10
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
January 31, 2024 vs.
January 31, 2023
Increase (Decrease)
U.S. Retail Bank
Total revenue – reported
$
9
Total revenue – adjusted
1
9
Non-interest expenses – reported
6
Non-interest expenses – adjusted
1
5
Net income – reported, after-tax
2
Net income – adjusted, after-tax
1
3
Share of net income from investment in Schwab
2
–
U.S. Retail segment net income – reported, after-tax
2
U.S. Retail segment net income – adjusted, after-tax
1
3
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
January 31
January 31
2024
2023
U.S. dollar
$
0.739
$
0.741
1
document.
2
FINANCIAL RESULTS OVERVIEW
Performance Summary
Outlined below is an overview of the Bank’s performance for the first 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.
●
●
●
1
average of -0.1%.
Net Income
Quarterly comparison – Q1 2024 vs. Q1 2023
Reported net income for the quarter was $2,824 million, an increase of $1,243 million, or 79%, compared with the first quarter last year, primarily reflecting the
impact of the Stanford litigation settlement in the prior year, the loss from the net effect of the terminated FHN acquisition-related capital hedging strategy, and
prior year recognition of a provision for income taxes in connection with the CRD and increase in the Canadian federal tax rate for fiscal 2022. On an adjusted
basis, net income for the quarter was $3,637 million, a decrease of $517 million, or 12%, compared with the first quarter last year, primarily reflecting higher non-
interest expenses and higher PCL, partially offset by higher revenues.
By segment, the increase in reported net income reflects increases in the Corporate segment of $1,989 million, in Canadian Personal and Commercial Banking
of $56 million, and in Wealth Management and Insurance of $1 million, partially offset by decreases in U.S. Retail of $677 million and in Wholesale Banking of
$126 million.
Quarterly comparison – Q1 2024 vs. Q4 2023
Reported net income for the quarter decreased $42 million, or 1%, compared with the prior quarter, primarily reflecting higher non-interest expenses, including the
F
DIC special assessment, and higher PCL, partially offset by 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 $362 million and in the Corporate segment of $37 million, partially offset
by increases in Wholesale Banking of $188 million, in Canadian Personal and Commercial Banking of $106 million, and in Wealth Management and Insurance of
$63 million.
Net Interest Income
Quarterly comparison – Q1 2024 vs. Q1 2023
Reported net interest income for the quarter was $7,488 million, a decrease of $245 million, or 3%, compared with the first quarter last year, primarily reflecting
lower net interest income in Wholesale Banking and lower deposit volumes and margins in U.S. Retail, partially offset by higher volumes
in Canadian Personal and
Commercial Banking. On an adjusted basis, net interest income was $7,545 million, a decrease of $317 million, or 4%.
By segment, the decrease in reported net interest income reflects decreases in Wholesale Banking of $327 million and in U.S. Retail of $268 million, partially
offset by increases in Canadian Personal and Commercial Banking of $294 million, in the Corporate segment of $54 million, and in Wealth Management and
Insurance of $2 million.
1
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 11
Quarterly comparison – Q1 2024 vs. Q4 2023
Reported net interest income for the quarter decreased $6 million, compared with the prior quarter, primarily reflecting lower revenue in treasury and balance sheet
management activities, lower net interest income in Wholesale Banking, and lower deposit volumes in U.S. Retail, partially offset by higher volumes and margins in
Canadian Personal and Commercial Banking. On an adjusted basis, net interest income decreased $13 million.
By segment, the decrease in reported net interest income reflects decreases in the Corporate segment of $55 million, in U.S. Retail of $52 million, and in
Wholesale Banking of $47 million, partially offset by increases in Canadian Personal and Commercial Banking of $128 million and in Wealth Management and
Insurance of $20 million.
Non-Interest Income
Quarterly comparison – Q1 2024 vs. Q1 2023
Reported non-interest income for the quarter was $6,226 million, an increase of $1,758 million, or 39%, compared with the first quarter last year, primarily
reflecting higher equity commissions, lending revenue primarily from syndicated and leveraged finance, underwriting fees, and trading-related revenue in
Wholesale Banking, the prior year’s loss from the net effect of the terminated FHN acquisition-related capital hedging strategy, and higher insurance premiums. On
an adjusted basis, non-interest income was $6,226 million, an increase of $1,011 million, or 19%.
By segment, the increase in reported non-interest income reflects increases in Wholesale Banking of $762 million, in the Corporate segment of $733 million, in
Wealth Management and Insurance of $218 million, in U.S. Retail of $44 million, and in Canadian Personal and Commercial Banking of $1 million.
Quarterly comparison – Q1 2024 vs. Q4 2023
Non-interest income for the quarter increased $542 million, or 10%, compared with the prior quarter, primarily reflecting higher trading-related revenue, lending
revenue, and underwriting fees in Wholesale Banking, and higher insurance premiums.
By segment, the increase in non-interest income reflects increases in Wholesale Banking of $339 million, in Wealth Management and Insurance of $159 million,
in U.S. Retail of $32 million, in the Corporate segment of $10 million, and in Canadian Personal and Commercial Banking of $2 million.
Provision for Credit Losses
Quarterly comparison – Q1 2024 vs. Q1 2023
PCL for the quarter was $1,001 million, an increase of $311 million compared with the first quarter last year. PCL – impaired was $934 million, an increase of
$381 million, or 69%, reflecting further normalization of credit performance in the consumer lending portfolios, and credit migration in the commercial lending
portfolios. PCL – performing was $67 million, a decrease of $70 million, reflecting a lower build in the current quarter. The performing provisions this quarter were
largely recorded in the Canadian Personal and Commercial Banking segment, reflecting volume growth and current credit conditions. Total PCL for the quarter as
an annualized percentage of credit volume was 0.44%.
By segment, PCL was higher by $185 million in U.S. Retail, by $96 million in Canadian Personal and Commercial Banking, by $52 million in the Corporate
segment, and lower by $22 million in Wholesale Banking.
Quarterly comparison – Q1 2024 vs. Q4 2023
PCL for the quarter was $1,001 million, an increase of $123 million compared with the prior quarter. PCL – impaired was $934 million, an increase of $215 million,
or 30%, reflecting further normalization of credit performance in the consumer lending portfolios, and credit migration in the commercial lending portfolios. PCL –
performing was $67 million, a decrease of $92 million, reflecting a lower build in the current quarter. The performing provisions this quarter were largely recorded in
the Canadian Personal and Commercial Banking segment, reflecting volume growth and current credit conditions. Total PCL for the quarter as an annualized
percentage of credit volume was 0.44%.
By segment, PCL was higher by $96 million in U.S. Retail, by $41 million in the Corporate segment, by $33 million in Canadian Personal and Commercial
Banking, and lower by $47 million in Wholesale Banking.
TABLE 9: PROVISION FOR CREDIT LOSSES
1
(millions of Canadian dollars)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Provision for (recovery of) credit losses – Stage 3 (impaired)
Canadian Personal and Commercial Banking
$
364
$
274
$
220
U.S. Retail
377
308
212
Wealth Management and Insurance
–
–
–
Wholesale Banking
5
–
1
Corporate
2
188
137
120
Total provision for (recovery of) credit losses – Stage 3
934
719
553
Provision for (recovery of) credit losses – Stage 1 and Stage 2 (performing)
Canadian Personal and Commercial Banking
59
116
107
U.S. Retail
8
(19)
(12)
Wealth Management and Insurance
–
–
–
Wholesale Banking
5
57
31
Corporate
2
(5)
5
11
Total provision for (recovery of) credit losses – Stage 1
and Stage 2
67
159
137
Total provision for (recovery of) credit losses
$
1,001
$
878
$
690
1
2
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 12
Insurance Service Expenses
Quarterly comparison – Q1 2024 vs. Q1 2023
Insurance service expenses for the quarter were $1,366 million, an increase of $202 million, or 17%, compared with the first quarter last year, reflecting increased
claims severity and less favourable prior years’ claims development.
Quarterly comparison – Q1 2024 vs. Q4 2023
Insurance service expenses for the quarter increased $20 million, or 1%, compared with the prior quarter, reflecting less favourable prior years’ claims
development, partially offset by fewer severe weather-related events.
Non-Interest Expenses and Efficiency Ratio
Quarterly comparison – Q1 2024 vs. Q1 2023
Reported non-interest expenses were $8,030 million, a decrease of $82 million, or 1%, compared with the first quarter last year, primarily reflecting the impact of
the Stanford litigation settlement in the prior year, partially offset by higher employee-related expenses and the FDIC special assessment. On an adjusted basis,
non-interest expenses were $7,125 million, an increase of $788 million, or 12%.
By segment, the decrease in reported non-interest expenses reflects a decrease in the Corporate segment of $1,228 million, partially offset by increases in
Wholesale Banking of $617 million, in U.S. Retail of $370 million, in Canadian Personal and Commercial Banking of $121 million, and in Wealth Management and
Insurance of $38 million.
The Bank’s reported efficiency ratio was 58.6%, compared to 66.5% in the first quarter last year. The Bank’s adjusted efficiency ratio, net of ISE was 57.4%,
compared with 53.2% in the first quarter last year.
Quarterly comparison – Q1 2024 vs. Q4 2023
Reported non-interest expenses increased $402 million, or 5%, compared with the prior quarter, primarily reflecting the FDIC special assessment, higher
employee-related expenses and a provision of $102 million taken in connection with the U.S. record keeping matter, partially offset by lower professional and
advisory spend, and lower acquisition and integration-related charges. Adjusted non-interest expenses increased $137 million, or 2%, compared with the prior
quarter.
By segment, the increase in reported non-interest expenses reflects increases in U.S. Retail of $365 million, in Wealth Management and Insurance of
$90 million, and in Wholesale Banking of $59 million, partially offset by decreases in the Corporate segment of $57 million and in Canadian Personal and
Commercial Banking of $55 million.
The Bank’s reported efficiency ratio was 58.6%, compared with 57.9% in the prior quarter. The Bank’s adjusted efficiency ratio, net of ISE was 57.4%,
compared with 58.7% in the prior quarter.
Income Taxes
The Bank’s effective income tax rate on a reported basis was 19.1% for the current quarter, compared with 42.0% in the first quarter last year and 18.5% in the
prior quarter. The year-over-year decrease primarily reflects the prior period tax adjustments associated with the implementation of the CRD and the Canadian
federal tax rate increase as well as earnings mix. The quarter-over-quarter increase primarily reflects 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 20.4% for the current quarter, compared with 21.7% in the first
quarter last year and 19.3% in the prior quarter. The year-over-year decrease and quarter-over-quarter increase 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
January 31
October 31
January 31
2024
2023
2023
Income taxes at Canadian statutory income
tax rate
$
920
27.7
%
$
922
27.7
%
$
620
27.8
%
Increase (decrease) resulting from:
Dividends received
(19)
(0.6)
(28)
(0.8)
(27)
(1.2)
Rate differentials on international operations
1
(271)
(8.2)
(241)
(7.2)
(227)
(10.2)
Other
4
0.2
(37)
(1.2)
573
25.6
Provision for income taxes and effective
income tax rate – reported
2
$
634
19.1
%
$
616
18.5
%
$
939
42.0
%
Total adjustments for items of note
238
163
121
Provision for income taxes and effective
income tax rate – adjusted
2
$
872
20.4
%
$
779
19.3
%
$
1,060
21.7
%
1
2
Interim 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 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. The earliest the legislation
will be effective for the Bank is the fiscal year beginning on November 1, 2024. On August 4, 2023, draft legislative proposals regarding Canada’s implementation
of the Pillar Two rules were released for public comment and updated proposals are expected to be issued in early 2024. The Bank is assessing its potential
exposure to Pillar Two income taxes.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 13
ECONOMIC SUMMARY AND OUTLOOK
The global economy remains on track to slow in calendar 2024, but to a lesser extent than anticipated in the prior quarter. 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. The lagged impact of cumulative interest rate hikes is expected to be the primary influence dampening economic growth and returning
inflation closer to the target ranges of the various regions by the end of calendar 2024. Geopolitical events remain a downside risk to the economic forecast.
The U.S. economy grew at a solid 3.3% annualized pace in the fourth calendar quarter of 2023. Consumer spending remained healthy, growing at a solid 2.8%
pace, while business investment was more modest, rising 1.9%. Government spending continued to provide support to growth, while housing activity expanded for
the second consecutive quarter. Overall, the U.S. economy accelerated from a 1.9% pace in calendar 2022 to 2.5% in 2023.
Based on the January 2024 data, the U.S. job market was still tight with the unemployment rate historically low at 3.7%. The labour market has shown
impressive resilience in recent months, with job openings still elevated relative to their pre-pandemic level and the pace of hiring picking up slightly in recent
months. Although the downturn in total inflation has stalled due to higher energy costs, core inflation measures have continued to move lower. This has prompted
the central bank to entertain discussions on when interest rate cuts will become appropriate.
TD Economics expects the U.S. Federal Reserve will begin cutting interest rates mid-year from their current restrictive level of 5.25-5.50% to 4.25%-4.50% by
the end of calendar 2024. Interest rates are still expected to weigh on demand through the year.
The Canadian economy slowed notably in calendar 2023. Real GDP contracted in the third calendar quarter by 1% annualized, however domestic demand still
grew by a modest 1.3%. TD Economics expects economic activity to have returned to growth in the final calendar quarter of 2023, thereby avoiding a technical
recession. The trend rate of job growth has also slowed below that of the labour force, pushing the unemployment rate higher. TD Economics expects the
unemployment rate to continue to move higher in the months ahead, contributing to prolonged weakness in consumer spending. As a result, economic growth is
likely to remain quite modest through calendar 2024. Against that subdued backdrop, the uncertainty surrounding the impact of the substantial interest rate hikes
still working their way through the economy leaves recession risks elevated in Canada.
Despite signs of slowing in the Canadian economy, progress on inflation has stalled in recent months. The Bank of Canada has left the overnight interest rate
unchanged at 5.00% since July, but continues to express concern about the persistence of underlying inflation. TD Economics expects some cooling in inflationary
dynamics will allow the Bank of Canada to lower interest rates in the spring, albeit at a gradual pace. The Canadian dollar is expected to hover in the 73 to 74 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 $29 million, compared with
$44 million in the prior quarter and $57 million in the first 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
January 31
October 31
January 31
2024
2023
2023
Net interest income
$
3,833
$
3,705
$
3,539
Non-interest income
1,051
1,049
1,050
Total revenue
4,884
4,754
4,589
Provision for (recovery of) credit losses – impaired
364
274
220
Provision for (recovery of) credit losses – performing
59
116
107
Total provision for (recovery of) credit losses
423
390
327
Non-interest expenses
1,984
2,039
1,863
Provision for (recovery of) income taxes
692
646
670
Net income
$
1,785
$
1,679
$
1,729
Selected volumes and ratios
Return on common equity
1
34.6
%
35.1
%
39.9
%
Net interest margin (including on securitized assets)
2
2.84
2.78
2.80
Efficiency ratio
40.6
42.9
40.6
Number of Canadian retail branches
1,062
1,062
1,060
Average number of full-time equivalent staff
29,271
29,069
28,803
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 14
Quarterly comparison – Q1 2024 vs. Q1 2023
Canadian Personal and Commercial Banking net income for the quarter was $1,785 million, an increase of $56 million, or 3%, compared with the first quarter last
year, reflecting higher revenue, partially offset by higher non-interest expenses and PCL. The annualized ROE for the quarter was 34.6%, compared with 39.9% in
the first quarter last year.
Revenue for the quarter was $4,884 million, an increase of $295 million, or 6%, compared with the first quarter last year.
Net interest income was $3,833 million, an increase of $294 million, or 8%, compared with the first quarter last year, primarily reflecting volume growth. Average
loan volumes increased $36 billion, or 7%, reflecting 7% growth in personal loans and 8% growth in business loans. Average deposit volumes increased
$14 billion, or 3%, reflecting 6% growth in personal deposits, partially offset by 2% decline in business deposits. Net interest margin was 2.84%, an increase of
4 basis points (bps), primarily due to higher margins on deposits, partially offset by lower margins on loans.
Non-interest income was $1,051 million, relatively flat compared with the first quarter last year.
PCL for the quarter was $423 million, an increase of $96 million, compared with the first quarter last year. PCL – impaired for the quarter was $364 million, an
increase of $144 million, or 65%, reflecting further normalization of credit performance in the consumer lending portfolios, and credit migration in the commercial
lending portfolios. PCL – performing was $59 million, a decrease of $48 million, reflecting a lower build in the current quarter. The performing provisions this
quarter largely reflect credit conditions, including some continued normalization of credit performance in the consumer lending portfolios, credit migration in the
commercial lending portfolios, and volume growth. Total PCL as an annualized percentage of credit volume was 0.30%, an increase of 5 bps compared with the
first quarter last year.
Non-interest expenses for the quarter were $1,984 million, an increase of $121 million, or 6%, compared with the first quarter last year, reflecting higher spend
supporting business growth including employee-related expenses and technology costs.
The efficiency ratio for the quarter was 40.6%, flat compared with the first quarter last year.
Quarterly comparison – Q1 2024 vs. Q4 2023
Canadian Personal and Commercial Banking net income for the quarter was $1,785 million, an increase of $106 million, or 6%, compared with the prior quarter,
reflecting higher revenue and lower non-interest expenses, partially offset by higher PCL. The annualized ROE for the quarter was 34.6%, compared with 35.1%,
in the prior quarter.
Revenue increased $130 million, or 3%, compared with the prior quarter. Net interest income increased $128 million, or 3%, reflecting volume growth and
higher margins. Average loan volumes increased $7 billion, or 1%, reflecting 1% growth in personal loans and 2% growth in business loans. Average deposit
volumes increased $8 billion, or 2%, reflecting 3% growth in personal deposits, partially offset by 1% decline in business deposits. Net interest margin was 2.84%,
an increase of 6 bps, primarily due to higher deposit margins.
Non-interest income increased $2 million, relatively flat compared with the prior quarter.
PCL for the quarter was $423 million, an increase of $33 million compared with the prior quarter. PCL – impaired was $364 million, an increase of $90 million, or
33%, reflecting further normalization of credit performance in the consumer lending portfolios, and credit migration in the commercial lending portfolios. PCL –
performing was $59 million, a decrease of $57 million, reflecting a lower build in the current quarter. The performing provisions this quarter largely reflect credit
conditions including some continued normalization of credit performance in the consumer lending portfolios, credit migration in the commercial lending portfolios,
and volume growth. Total PCL as an annualized percentage of credit volume was 0.30%, an increase of 2 bps compared with the prior quarter.
Non-interest expenses decreased $55 million, or 3% compared with the prior quarter, primarily reflecting higher non-credit provisions in the prior quarter and
lower operating expenses within our support functions, partially offset by higher employee-related expenses in Branch Banking
.
The efficiency ratio was 40.6%, compared with 42.9%, in the prior quarter.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 15
TABLE 12: U.S. RETAIL
(millions of dollars, except as noted)
For the three months ended
January 31
October 31
January 31
Canadian Dollars
2024
2023
2023
Net interest income
$
$
$
Non-interest income
Total revenue
Provision for (recovery of) credit losses – impaired
Provision for (recovery of) credit losses – performing
(19)
(12)
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
(14)
(9)
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 – Q1 2023: $106 million or US$78 million ($80 million or US$59 million after-tax); and
ii. FDIC special assessment – Q1 2024: $411 million or US$300 million ($310 million or US$226 million 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 first 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.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 16
Quarterly comparison – Q1 2024 vs. Q1 2023
U.S. Retail reported net income for the quarter was $907 million (US$670 million), a decrease of $677 million (US$503 million), or 43% (43% in U.S. dollars),
compared with the first quarter last year. On an adjusted basis, net income for the quarter was $1,217 million (US$896 million), a decrease of $447 million
(US$336 million), or 27% (27% in U.S. dollars). The reported and adjusted annualized ROE for the quarter were 8.5% and 11.3%, respectively, compared with
15.5% and 16.3%, respectively, in the first 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 $194 million (US$144 million), a decrease of $107 million (US$78 million), or 36% (35% in U.S. dollars).
U.S. Retail Bank reported net income was $713 million (US$526 million), a decrease of $570 million (US$425 million), or 44% (45% in U.S. dollars), compared
with the first quarter last year, primarily reflecting the FDIC special assessment in non-interest expenses, lower revenue and higher PCL. U.S. Retail Bank adjusted
net income was $1,023 million (US$752 million), a decrease of $340 million (US$258 million), or 25% (26% in U.S. dollars), compared with the first quarter last
year, reflecting lower revenue, higher PCL and higher non-interest expenses.
Revenue for the quarter was US$2,587 million, a decrease of US$176 million, or 6%, compared with the first quarter last year. Net interest income of
US$2,141 million, decreased US$207 million, or 9%, driven by lower deposit volumes and margins, partially offset by higher loan volumes. Net interest margin of
3.03%, 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$31 million, or 7%, compared with the first quarter last year, primarily reflecting fee income growth from increased customer activity.
Average loan volumes increased US$16 billion, or 9%, compared with the first quarter last year. Personal loans increased 11%, reflecting lower mortgage
prepayments in the higher rate environment and strong auto originations. Business loans increased 7%, reflecting good originations from new customer growth
and slower payment rates. Average deposit volumes decreased US$33 billion, or 9%, reflecting a 23% decrease in sweep deposits, a 4% decrease in business
deposits, and a 1% decrease in personal deposit volumes.
Assets under administration (AUA) were US$40 billion as at January 31, 2024, an increase of US$2 billion, or 5%, compared with the first quarter last year,
reflecting net asset growth. After giving effect to realignment of certain asset management businesses from U.S. Retail to Wealth Management and Insurance,
Assets under Management (AUM) were US$7 billion as at January 31, 2024, flat compared with the first quarter last year.
PCL for the quarter was US$285 million, an increase of US$136 million compared with the first quarter last year. PCL – impaired was US$279 million, an
increase of US$121 million, or 77%, primarily reflecting further normalization of credit performance in the consumer lending portfolios and credit migration in the
commercial lending portfolios, largely related to commercial real estate. PCL – performing was a build of US$6 million, compared with a recovery of US$9 million in
the prior year. 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
0.61%, an increase of 27 bps, compared with the first quarter last year.
Reported non-interest expenses for the quarter were US$1,779 million, an increase of US$267 million, or 18%, compared with the first quarter last year,
reflecting the FDIC special assessment, and higher employee-related expenses, partially offset by acquisition and integration-related charges for the terminated
First Horizon transaction in the first quarter last year. On an adjusted basis, non-interest expenses increased US$45 million, or 3%, reflecting higher employee-
related expenses.
The reported and adjusted efficiency ratios for the quarter were 68.8% and 57.2%, respectively, compared with 54.7% and 51.9%, respectively, in the first
quarter last year.
Quarterly comparison – Q1 2024 vs. Q4 2023
U.S. Retail reported net income of $907 million (US$670 million), a decrease of $362 million (US$267 million), or 29% (28% in U.S. dollars), compared with the
prior quarter. On an adjusted basis, net income for the quarter was $1,217 million (US$896 million), a decrease of $52 million (US$41 million), or 4% (4% in U.S.
dollars). The reported and adjusted annualized ROE for the quarter were 8.5% and 11.3%, respectively, compared with 12.2%, respectively, in the prior quarter.
The contribution from Schwab of $194 million (US$144 million) decreased $3 million (US$2 million), or 2% (1% in U.S. dollars).
U.S. Retail Bank reported net income was $713 million (US$526 million), a decrease of $359 million (US$265 million), or 33% (34% in U.S. dollars), compared
with the prior quarter, primarily reflecting the FDIC special assessment in non-interest expenses and higher PCL. U.S. Retail Bank adjusted net income was
$1,023 million (US$752 million), a decrease of $49 million (US$39 million), or 5% (5% in U.S. dollars), primarily reflecting higher PCL, partially offset by lower non-
interest expenses.
Revenue for the quarter was US$2,587 million, a decrease of US$9 million, relatively flat compared with the prior quarter. Net interest income of
US$2,141 million decreased US$34 million, or 2%, primarily reflecting lower deposit volumes, partially offset by higher loan volumes. Net interest margin of 3.03%
decreased 4 bps quarter over quarter due to lower deposit margins reflecting higher deposit costs, partially offset by the benefit of higher reinvestment rates. Non-
interest income of US$446 million increased US$25 million, or 6%, primarily reflecting higher deposit-related fees.
Average loan volumes increased US$3 billion, or 2%, compared with the prior quarter. Personal loans increased 2%, reflecting lower mortgage prepayments,
strong auto originations, and seasonal credit card growth. 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 1%
decrease in business deposits, partially offset by a 1% increase in personal deposit volume.
AUA were US$40 billion
as at January 31, 2024, flat compared with the prior quarter. After giving effect to realignment of certain asset management businesses
from U.S. Retail to Wealth Management and Insurance, AUM were US$7 billion, flat compared with the prior quarter.
PCL for the quarter was US$285 million, an increase of US$72 million compared with the prior quarter. PCL – impaired was US$279 million, an increase of
US$52 million, or 23%, reflecting further normalization of credit performance in the consumer lending portfolios, including seasonal trends in the credit card and
auto portfolios. PCL – performing was a build of US$6 million, compared with a recovery of US$14 million in the prior quarter. 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 0.61%, an increase of 15 bps, compared with the prior
quarter.
Reported non-interest expenses for the quarter were US$1,779 million, an increase of US$274 million, or 18%, compared to the prior quarter, primarily reflecting
the FDIC special assessment. On an adjusted basis, non-interest expenses decreased US$26 million, or 2%, reflecting higher legal costs in the prior quarter,
partially offset by higher employee-related expenses.
The reported and adjusted efficiency ratios for the quarter were 68.8% and 57.2%, respectively, compared with 58.0%, respectively, in the prior quarter.
THE CHARLES SCHWAB CORPORATION
Refer to Note 7, Investment in Associates and Joint Ventures of the Bank’s first quarter 2024 Interim Consolidated Financial Statements for further information on
Schwab.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 17
TABLE 13: WEALTH MANAGEMENT AND INSURANCE
(millions of Canadian dollars, except as noted)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Net interest income
$
285
$
265
$
283
Non-interest income
1
2,850
2,691
2,632
Total revenue
3,135
2,956
2,915
Provision for (recovery of) credit losses – impaired
–
–
–
Provision for (recovery of) credit losses – performing
–
–
–
Total provision for (recovery of) credit losses
–
–
–
Insurance service expenses
1
1,366
1,346
1,164
Non-interest expenses
1
1,047
957
1,009
Provision for (recovery of) income taxes
167
161
188
Net income
$
555
$
492
$
554
Selected volumes and ratios
Return on common equity
1,2
37.5
%
33.9
%
39.1
%
Efficiency ratio
1
33.4
32.4
34.6
Efficiency ratio, net of ISE
1,3
59.2
59.4
57.6
Assets under administration (billions of Canadian dollars)
4
$
576
$
531
$
541
Assets under management (billions of Canadian dollars)
479
441
452
Average number of full-time equivalent staff
15,386
15,674
16,400
1
Interim Consolidated Financial Statements for further details.
2
3
Q1 2023: $1,751 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 – Q1 2024 vs. Q1 2023
Wealth Management and Insurance net income for the quarter was $555 million, an increase of $1 million, or relatively flat compared with the first quarter last year,
reflecting higher revenue, offset by higher insurance service expenses and non-interest expenses. The annualized ROE for the quarter was 37.5%, compared with
39.1% in the first quarter last year.
Revenue for the quarter was $3,135 million, an increase of $220 million, or 8%, compared with the first quarter last year. Non-interest income was
$2,850 million, an increase of $218 million, or 8%, reflecting higher insurance premiums, and higher fee-based revenue in the wealth management business. Net
interest income was $285 million, an increase of $2 million, or 1%, compared with the first quarter last year.
AUA were $576 billion as at January 31, 2024, an increase of $35 billion, or 6%, compared with the first quarter last year, reflecting market appreciation and net
asset growth. AUM were $479 billion as at January 31, 2024, an increase of $27 billion, or 6%, compared with the first quarter last year, reflecting market
appreciation.
Insurance service expenses for the quarter were $1,366 million, an increase of $202 million, or 17%, compared with the first quarter last year, reflecting
increased claims severity and less favourable prior years’ claims development.
Non-interest expenses for the quarter were $1,047 million, an increase of $38 million, or 4%, compared with the first quarter last year, reflecting higher variable
compensation commensurate with higher revenues, and technology costs.
The efficiency ratio for the quarter was 33.4%, compared with 34.6% in the first quarter last year. The efficiency ratio, net of ISE for the quarter was 59.2%,
compared with 57.6% in the first quarter last year.
Quarterly comparison – Q1 2024 vs. Q4 2023
Wealth Management and Insurance net income for the quarter was $555 million, an increase of $63 million, or 13%, compared with the prior quarter, reflecting
higher revenue, partially offset by higher non-interest expenses. The annualized ROE for the quarter was 37.5%, compared with 33.9%, in the prior quarter.
Revenue increased $179 million, or 6%, compared with the prior quarter. Non-interest income increased $159 million, or 6%, reflecting higher insurance
premiums, as well as higher fee-based and transaction revenue in the wealth management business. Net interest income increased $20 million, or 8%, reflecting
higher deposit margins.
AUA increased $45 billion, or 8%, and AUM increased $38 billion, or 9%, compared with the prior quarter, both primarily reflecting market appreciation and net
asset growth.
Insurance service expenses for the quarter increased $20 million, or 1%, compared with the prior quarter, reflecting less favourable prior years’ claims
development, partially offset by fewer severe weather-related events.
Non-interest expenses increased $90 million, or 9%, compared with the prior quarter, primarily reflecting higher employee-related expenses including variable
compensation commensurate with higher revenues.
The efficiency ratio for the quarter was 33.4%, compared with 32.4% in the prior quarter. The efficiency ratio, net of ISE for the quarter was 59.2%, compared
with 59.4% in the prior quarter.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 18
TABLE 14: WHOLESALE BANKING
1
(millions of Canadian dollars, except as noted)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Net interest income (TEB)
$
198
$
245
$
525
Non-interest income
1,582
1,243
820
Total revenue
1,780
1,488
1,345
Provision for (recovery of) credit losses – impaired
5
–
1
Provision for (recovery of) credit losses – performing
5
57
31
Total provision for (recovery of) credit losses
10
57
32
Non-interest expenses – reported
1,500
1,441
883
Non-interest expenses – adjusted
2,3
1,383
1,244
862
Provision for (recovery of) income taxes (TEB) – reported
65
(27)
99
Provision for (recovery of) income taxes (TEB) – adjusted
2
89
9
104
Net income – reported
$
205
$
17
$
331
Net income – adjusted
2
298
178
347
Selected volumes and ratios
Trading-related revenue (TEB)
4
$
730
$
590
$
662
Average gross lending portfolio (billions of Canadian dollars)
5
96.2
93.0
96.9
Return on common equity – reported
6
5.3
%
0.5
%
9.4
%
Return on common equity – adjusted
2,6
7.6
4.9
9.9
Efficiency ratio – reported
84.3
96.8
65.7
Efficiency ratio – adjusted
2
77.7
83.6
64.1
Average number of full-time equivalent staff
7,100
7,346
5,365
1
2
document.
3
$197 million ($161 million after-tax), Q1 2023: $21 million ($16 million after-tax).
4
$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 – Q1 2024 vs. Q1 2023
Wholesale Banking reported net income for the quarter was $205 million, a decrease of $126 million, or 38%, compared with the first quarter last year, primarily
reflecting higher non-interest expenses, partially offset by higher revenues. On an adjusted basis, net income was $298 million, a decrease of $49 million or 14%.
Revenue for the quarter, including TD Cowen, was $1,780 million, an increase of $435 million, or 32%, compared with the first quarter last year. Higher revenue
primarily reflects higher equity commissions, lending revenue primarily from syndicated and leveraged finance, underwriting fees, and trading-related revenue.
PCL for the quarter was $10 million, a decrease of $22 million compared with the first quarter last year. PCL – impaired was $5 million. PCL – performing was
$5 million, a decrease of $26 million due to prior period build.
Reported non-interest expenses for the quarter, including TD Cowen, were $1,500 million, an increase of $617 million, or 70%, compared with the first quarter
last year, primarily reflecting TD Cowen and the associated acquisition and integration-related costs and higher variable compensation commensurate with higher
revenues as well as a provision of $102 million taken in connection with the U.S. record keeping matter. On an adjusted basis, non-interest expenses were
$1,383 million, an increase of $521 million, or 60%.
Quarterly comparison – Q1 2024 vs. Q4 2023
Wholesale Banking reported net income for the quarter was $205 million, an increase of $188 million compared with the prior quarter, primarily reflecting higher
revenues, partially offset by higher non-interest expenses. On an adjusted basis, net income was $298 million, an increase of $120 million, or 67%.
Revenue for the quarter increased $292 million, or 20%, compared with the prior quarter. Higher revenue primarily reflects higher trading-related revenue,
lending revenue, and underwriting fees.
$5 million, a decrease of $52 million due to prior quarter build.
Reported non-interest expenses for the quarter, increased $59 million, or 4%, compared with the prior quarter, primarily reflecting a provision of $102 million
taken in connection with the U.S. record keeping matter, partially offset by lower acquisition and integration related costs. On an adjusted basis, non-interest
expenses increased $139 million or 11%.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 19
TABLE 15: CORPORATE
(millions of Canadian dollars)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Net income (loss) – reported
$
(628)
$
(591)
$
(2,617)
Adjustments for items of note
Amortization of acquired intangibles
94
92
54
Acquisition and integration charges related to the Schwab transaction
32
31
34
Share of restructuring and other charges from investment in Schwab
49
35
–
Restructuring charges
291
363
–
Impact from the terminated FHN acquisition-related capital hedging strategy
57
64
876
Litigation settlement
–
–
1,603
Less: impact of income taxes
CRD and federal tax rate increase for fiscal 2022
–
–
(585)
Other items of note
113
127
675
Net income (loss) – adjusted
1
$
(218)
$
(133)
$
(140)
Decomposition of items included in net income (loss) – adjusted
Net corporate expenses
2
$
(254)
$
(227)
$
(191)
Other
36
94
51
Net income (loss) – adjusted
1
$
(218)
$
(133)
$
(140)
Selected volumes
Average number of full-time equivalent staff
23,437
23,491
21,844
1
document.
2
Quarterly comparison – Q1 2024 vs. Q1 2023
Corporate segment’s reported net loss for the quarter was $628 million, compared with a reported net loss of $2,617 million in the first quarter last year. The lower
net loss primarily reflects the impact of the Stanford litigation settlement in the prior year, the net effect of the terminated FHN acquisition-related capital hedging
strategy, and prior year recognition of a 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 in the current quarter. Net corporate expenses increased $63 million compared to the prior year, mainly reflecting
investments in our risk and control infrastructure. The adjusted net loss for the quarter was $218 million, compared with an adjusted net loss of $140 million in the
first quarter last year.
Quarterly comparison – Q1 2024 vs. Q4 2023
Corporate segment’s reported net loss for the quarter was $628 million, compared with a reported net loss of $591 million in the prior quarter. The higher net loss
reflects lower revenue in treasury and balance sheet management activities and higher risk and control expenses, partially offset by lower restructuring charges.
Net corporate expenses increased $27 million compared to the prior quarter, mainly reflecting investments in our risk and control infrastructure. The adjusted net
loss for the quarter was $218 million, compared with an adjusted net loss of $133 million in the prior quarter.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 20
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
Jan. 31
Oct. 31
Jul. 31
Apr. 30
Jan. 31
Oct. 31
Jul. 31
Apr. 30
Net interest income
$
7,488
$
7,494
$
7,289
$
7,428
$
7,733
$
7,630
$
7,044
$
6,377
Non-interest income
1
6,226
5,684
5,625
4,969
4,468
7,933
3,881
4,886
Total revenue
1
13,714
13,178
12,914
12,397
12,201
15,563
10,925
11,263
Provision for (recovery of) credit losses
1,001
878
766
599
690
617
351
27
Insurance service expenses
1
1,366
1,346
1,386
1,118
1,164
723
829
592
Non-interest expenses
1
8,030
7,628
7,359
6,756
8,112
6,545
6,096
6,033
Provision for (recovery of) income taxes
1
634
616
704
859
939
1,297
703
1,002
Share of net income from investment in Schwab
141
156
182
241
285
290
268
202
Net income – reported
1
2,824
2,866
2,881
3,306
1,581
6,671
3,214
3,811
Pre-tax adjustments for items of note
2
Amortization of acquired intangibles
94
92
88
79
54
57
58
60
Acquisition and integration charges related to the
Schwab transaction
32
31
54
30
34
18
23
20
Share of restructuring and other charges from
investment in Schwab
49
35
–
–
–
–
–
–
Restructuring charges
291
363
–
–
–
–
–
–
Acquisition and integration-related charges
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
57
64
177
134
876
(2,319)
678
–
Impact of retroactive tax legislation on payment card
clearing services
4
–
–
57
–
–
–
–
–
Litigation settlement/(recovery)
4
–
–
–
39
1,603
–
–
(224)
FDIC special assessment
411
–
–
–
–
–
–
–
Gain on sale of Schwab shares
4
–
–
–
–
–
(997)
–
–
Total pre-tax adjustments for items of note
1,051
782
909
509
2,694
(3,156)
788
(144)
Less: Impact of income taxes
2,5
238
163
141
108
121
(550)
189
(47)
Net income – adjusted
1,2
3,637
3,485
3,649
3,707
4,154
4,065
3,813
3,714
Preferred dividends and distributions on other
equity instruments
74
196
74
210
83
107
43
66
Net income available to common
shareholders – adjusted
1,2
$
3,563
$
3,289
$
3,575
$
3,497
$
4,071
$
3,958
$
3,770
$
3,648
(Canadian dollars, except as noted)
Basic earnings per share
1
Reported
$
1.55
$
1.48
$
1.53
$
1.69
$
0.82
$
3.62
$
1.76
$
2.08
Adjusted
2
2.01
1.82
1.95
1.91
2.24
2.18
2.09
2.02
Diluted earnings per share
1
Reported
1.55
1.48
1.53
1.69
0.82
3.62
1.75
2.07
Adjusted
2
2.00
1.82
1.95
1.91
2.23
2.18
2.09
2.02
Return on common equity – reported
10.9
%
10.5
%
10.8
%
12.4
%
5.9
%
26.5
%
13.5
%
16.4
%
Return on common equity – adjusted
1,2
14.1
12.9
13.8
14.0
16.1
16.0
16.1
15.9
(billions of Canadian dollars, except as noted)
Average total assets
$
1,934
$
1,910
$
1,898
$
1,944
$
1,931
$
1,893
$
1,811
$
1,778
Average interest-earning assets
6
1,729
1,715
1,716
1,728
1,715
1,677
1,609
1,595
Net interest margin – reported
1.72
%
1.73
%
1.69
%
1.76
%
1.79
%
1.81
%
1.74
%
1.64
%
Net interest margin – adjusted
2
1.74
1.75
1.70
1.81
1.82
1.80
1.73
1.64
1
2
document as well as footnotes 3 and 4.
3
4
i. Settlement of
TD Bank, N.A. v. Lloyd’s Underwriters et al.
, in Canada pursuant to which the Bank recovered losses resulting from the previous resolution of proceedings in the U.S.
related to an alleged Ponzi scheme perpetrated by Scott Rothstein. The amount is reported in the U.S. Retail segment.
ii. 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.
iii. Stanford litigation settlement reflects the foreign exchange loss, reported in the Corporate segment.
iv. 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 21
BALANCE SHEET REVIEW
TABLE 17: SELECTED INTERIM CONSOLIDATED BALANCE SHEET ITEMS
(millions of Canadian dollars)
As at
January 31, 2024
October 31, 2023
Assets
Cash and Interest-bearing deposits with banks
$
81,381
$
105,069
Trading loans, securities, and other
161,520
152,090
Non-trading financial assets at fair value through profit or loss
6,985
7,340
Derivatives
60,574
87,382
Financial assets designated at fair value through profit or loss
5,970
5,818
Financial assets at fair value through other comprehensive income
74,730
69,865
Debt securities at amortized cost, net of allowance for credit losses
300,071
308,016
Securities purchased under reverse repurchase agreements
199,079
204,333
Loans, net of allowance for loan losses
904,336
895,947
Investment in Schwab
9,548
8,907
Other
1
106,698
110,372
Total assets
1
$
1,910,892
$
1,955,139
Liabilities
Trading deposits
$
30,634
$
30,980
Derivatives
54,073
71,640
Financial liabilities designated at fair value through profit or loss
180,112
192,130
Deposits
1,181,254
1,198,190
Obligations related to securities sold under repurchase agreements
174,129
166,854
Subordinated notes and debentures
9,554
9,620
Other
1
168,701
173,654
Total liabilities
1
1,798,457
1,843,068
Total equity
1
112,435
112,071
Total liabilities and equity
1
$
1,910,892
$
1,955,139
1
details.
Total assets
appreciation in the Canadian dollar decreased total assets by $31 billion.
The decrease in total assets reflects a decrease in derivative assets of $27 billion, cash and interest-bearing deposits with banks of $24 billion, debt securities at
amortized cost (DSAC), net of allowance for credit losses of $8 billion, securities purchased under reverse repurchase agreements of $5 billion, and other assets
of $4 billion. The decrease was partially offset by an increase in trading loans, securities, and other of $10 billion, loans, net of allowances for loan losses of
$8 billion, financial assets at fair value through other comprehensive income (FVOCI) of $5 billion and investment in Schwab of $1 billion.
Cash and interest-bearing deposits with banks
decreased $24 billion primarily reflecting cash management activities.
Trading loans, securities, and other
increased $10 billion primarily in equity securities, partially offset by commodities held for trading and the impact of foreign
exchange translation.
Derivative
assets
decreased $27 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 and the impact of foreign exchange translation.
Debt securities at amortized cost, net of allowance for credit losses
translation, partially offset by new investments.
Securities purchased under reverse repurchase agreements
decreased $5 billion
primarily
reflecting the impact of foreign exchange translation and a
decrease in volume.
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
and decrease in current income tax receivable, partially offset by an increase in amounts receivable from brokers, dealers, and clients due to higher volumes of
pending trades.
Total liabilities
appreciation in the Canadian dollar decreased total liabilities by $32 billion.
The decrease in total liabilities reflects a decrease in derivative liabilities of $18 billion, deposits of $17 billion, financial liabilities designated at fair value through
profit or loss (FVTPL) of $12 billion and other liabilities of $5 billion. The decrease was partially offset by obligations related to securities sold under repurchase
agreements of $7 billion.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 22
Derivative
liabilities
decreased $18 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
decreased $17 billion primarily reflecting the impact of foreign exchange translation and volume decrease in bank deposits, partially offset by higher
volumes in personal deposits.
Obligations related to securities sold under repurchase agreements
increased $7 billion reflecting an increase in volume, partially offset by the impact of
foreign exchange translation.
Other
impact of foreign exchange translation, partially offset by increase in amounts payable to brokers, dealers, and clients due to higher volumes of pending trades and
volume increase in securitization liabilities at fair value.
Equity
was $112 billion as at January 31, 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 the net income for the quarter.
CREDIT PORTFOLIO QUALITY
Quarterly comparison – Q1 2024 vs. Q1 2023
Gross impaired loans excluding acquired credit-impaired (ACI) loans were $3,709 million as at January 31, 2024, an increase of $1,118 million, or 43%, compared
with the first quarter last year. Canadian Personal and Commercial Banking gross impaired loans increased $552 million, or 52%, compared with the first quarter
last year, reflecting formations outpacing resolutions in the commercial and consumer lending portfolios. U.S. Retail gross impaired loans increased $565 million,
or 38%, compared with the first 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 $1 million, compared with the first quarter last year. Net impaired loans were $2,526 million as at
January 31, 2024, an increase of $762 million, or 43%, compared with the first quarter last year.
The allowance for credit losses of $8,268 million as at January 31, 2024 was comprised of Stage 3 allowance for impaired loans of $1,187 million, Stage 2
allowance of $4,258 million and Stage 1 allowance of $2,820 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 $355 million, or 43%, reflecting further normalization of credit performance in the consumer lending portfolios,
credit migration in the commercial lending portfolios, and the impact of foreign exchange. The Stage 1 and Stage 2 allowance for loan losses increased
$433 million, or 7%, reflecting credit conditions, including credit migration, volume growth, and the impact of foreign exchange. The allowance change included an
increase of $99 million attributable to the retailer program partners’ share of the U.S. strategic cards portfolio.
The allowance for debt securities increased by $1 million, compared with the first 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 first 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 first 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 $371 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 – Q1 2024 vs. Q4 2023
Gross impaired loans excluding ACI loans increased $410 million, or 12%, compared with the prior quarter. Impaired loans net of allowance increased
$249 million, or 11%, compared with the prior quarter.
The allowance for credit losses of $8,268 million as at January 31, 2024 was comprised of Stage 3 allowance for impaired loans of $1,187 million, Stage 2
allowance of $4,258 million and Stage 1 allowance of $2,820 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 $151 million, or 15%, compared with the prior quarter,
largely reflecting some further normalization of credit performance in the consumer lending portfolios, and credit migration in the commercial lending portfolios. The
Stage 1 and Stage 2 allowance for loan losses decreased $71 million, compared with the prior quarter, primarily reflecting the impact of foreign exchange, partially
offset by an increase in the consumer lending portfolios related to volume growth and current credit conditions, including credit migration.
The allowance for debt securities decreased by $1 million, compared to 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 first quarter 2024 Interim Consolidated Financial Statements.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 23
TABLE 18: CHANGES IN GROSS IMPAIRED LOANS AND ACCEPTANCES
1,2,3
(millions of Canadian dollars)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
Personal, Business, and Government Loans
Impaired loans as at beginning of period
$
3,299
$
2,980
$
2,503
Classified as impaired during the period
2,005
1,677
1,350
Transferred to performing during the period
(315)
(263)
(240)
Net repayments
(308)
(332)
(361)
Disposals of loans
(10)
–
–
Amounts written off
(917)
(855)
(625)
Exchange and other movements
(45)
92
(36)
Impaired loans as at end of period
$
3,709
$
3,299
$
2,591
1
2
3
TABLE 19: ALLOWANCE FOR CREDIT LOSSES
(millions of Canadian dollars, except as noted)
As at
January 31
October 31
January 31
2024
2023
2023
Allowance for loan losses for on-balance sheet loans
Stage 1 allowance for loan losses
$
2,396
$
2,673
$
2,569
Stage 2 allowance for loan losses
3,686
3,435
3,093
Stage 3 allowance for loan losses
1,183
1,028
830
Total allowance for loan losses for on-balance sheet loans
1
7,265
7,136
6,492
Allowance for off-balance sheet instruments
Stage 1 allowance for loan losses
424
476
456
Stage 2 allowance for loan losses
572
565
527
Stage 3 allowance for loan losses
4
8
2
Total allowance for off-balance sheet instruments
1,000
1,049
985
Allowance for loan losses
8,265
8,185
7,477
Allowance for debt securities
3
4
2
Allowance for credit losses
$
8,268
$
8,189
$
7,479
Impaired loans, net of allowance
2
$
2,526
$
2,277
$
1,764
Net impaired loans as a percentage of net loans
2
0.28
%
0.25
%
0.21
%
Total allowance for credit losses as a percentage of gross loans and acceptances
0.89
0.89
0.86
Provision for (recovery of) credit losses as a percentage of net average loans and acceptances
0.44
0.39
0.32
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
January 31, 2024
Total
$
266,316
$
86,890
$
353,206
$
31,024
$
384,230
October 31, 2023
Total
$
263,733
$
86,943
$
350,676
$
30,675
$
381,351
1
2
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 24
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
January 31, 2024
Canada
Atlantic provinces
$
2,539
1.0
%
$
4,600
1.7
%
$
175
0.1
%
$
1,998
1.7
%
$
2,714
0.7
%
$
6,598
1.7
%
British Columbia
4
8,586
3.2
46,537
17.5
889
0.8
21,758
18.5
9,475
2.5
68,295
17.8
Ontario
4
22,391
8.4
120,974
45.4
3,010
2.6
64,329
54.5
25,401
6.6
185,303
48.2
Prairies
4
18,419
6.9
20,683
7.8
1,686
1.4
11,932
10.1
20,105
5.2
32,615
8.5
Québec
7,137
2.7
14,450
5.4
569
0.5
11,568
9.8
7,706
2.0
26,018
6.8
Total Canada
59,072
22.2
%
207,244
77.8
%
6,329
5.4
%
111,585
94.6
%
65,401
17.0
%
318,829
83.0
%
United States
1,414
53,940
–
10,369
1,414
64,309
Total
$
60,486
$
261,184
$
6,329
$
121,954
$
66,815
$
383,138
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
January 31, 2024
Canada
0.8
%
2.7
%
5.8
%
14.5
%
31.8
%
25.4
%
1.4
%
17.6
%
100.0
%
United States
4.7
1.2
3.3
7.6
11.3
70.9
0.5
0.5
100.0
Total
1.5
%
2.4
%
5.4
%
13.3
%
28.2
%
33.3
%
1.3
%
14.6
%
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 January 31, 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
January 31, 2024
October 31, 2023
Canada
Atlantic provinces
68
%
65
%
67
%
69
%
67
%
68
%
British Columbia
6
65
59
62
65
59
63
Ontario
6
67
60
64
66
60
63
Prairies
6
72
68
71
72
69
71
Québec
69
68
68
69
67
68
Total Canada
67
61
65
67
62
65
United States
72
61
68
75
63
72
Total
68
%
61
%
65
%
68
%
62
%
66
%
1
2
3
4
5
6
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 25
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
January 31, 2024
Region
Europe
$
7,258
$
7
$
5,492
$
12,757
$
3,526
$
1,881
$
7,884
$
13,291
$
921
$
24,768
$
2,156
$
27,845
$
53,893
United Kingdom
8,418
6,761
2,512
17,691
2,668
444
12,351
15,463
625
936
282
1,843
34,997
Asia
239
26
2,347
2,612
410
656
2,338
3,404
391
10,047
964
11,402
17,418
Other
5
225
67
483
775
180
343
2,746
3,269
174
1,141
2,904
4,219
8,263
Total
$
16,140
$
6,861
$
10,834
$
33,835
$
6,784
$
3,324
$
25,319
$
35,427
$
2,111
$
36,892
$
6,306
$
45,309
$
114,571
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 January 31, 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 26
Global Systemically Important Banks Disclosures
The Financial Stability Board (FSB), in consultation with the BCBS and national authorities, identifies G-SIBs. The G-SIB assessment methodology is based on the
submissions of the largest global banks. Thirteen indicators are used in the G-SIB assessment methodology to determine systemic importance. The score for a
particular indicator is calculated by dividing the individual bank value by the aggregate amount for the indicator summed across all banks included in the
assessment. Accordingly, an individual bank’s ranking is reliant on the results and submissions of other global banks.
The Bank is required to publish the thirteen indicators used in the G-SIB indicator-based assessment framework. Public disclosure of financial year-end data is
required annually, no later than the date of a bank’s first quarter public disclosure of shareholder financial data in the following year.
Public communications on G-SIB status are issued annually each November. On November 22, 2019, the Bank was designated as a G-SIB by the FSB. The
Bank continued to maintain its G-SIB status when the FSB published the 2023 list of G-SIBs on November 27, 2023. As a result of this designation, the Bank is
subject to an additional loss absorbency requirement (CET1 as a percentage of RWA) of 1% under applicable FSB member authority requirements. The Bank’s
G-SIB designation has no additional impact on the Bank’s minimum CET1 regulatory requirements, as the G-SIB surcharge is consistent with the D-SIB
requirement set out by OSFI. 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%.
Company (IHC), to maintain a minimum amount of TLAC and long-term debt.
bank’s total score on the G-SIB scale.
Trading volume increase was mainly driven by higher U.S. fixed income trading. The increase in Trading and other securities was due to an increase in treasury
and government-related securities. Other notable changes in the indicators from prior year primarily reflect normal business activities of the Bank.
TABLE 25: G-SIB INDICATORS
1
(millions of Canadian dollars)
As at
October 31, 2023
October 31, 2022
Category (and weighting)
Individual Indicator
Cross-jurisdictional activity (20%)
Cross-jurisdictional claims
$
1,003,230
$
1,061,844
Cross-jurisdictional liabilities
964,092
1,037,857
Size (20%)
Total exposures as defined for use in the Basel III leverage ratio
2,112,677
2,086,338
Interconnectedness (20%)
Intra-financial system assets
109,833
111,106
Intra-financial system liabilities
55,247
46,280
Securities outstanding
470,767
475,328
Substitutability/financial institution
Assets under custody
563,783
544,237
infrastructure (20%)
Payments activity
39,499,576
35,006,485
Underwritten transactions in debt and equity markets
186,110
168,956
Trading Volume (includes the two sub indicators)
– Trading volume fixed income sub indicator
9,239,393
5,472,810
– Trading volume equities and other securities sub indicator
2,958,869
3,102,383
Complexity (20%)
Notional amount of OTC derivatives
21,198,657
20,854,259
Trading and other securities
2
64,944
43,174
Level 3 assets
3,548
3,481
1
Requirements. Given the Bank was designated as a G-SIB by the FSB on November 22, 2019, additional public disclosures on these indicators are required. Refer to the Bank’s
Regulatory Capital Disclosures at www.td.com/investor-relations/ir-homepage/regulatory-disclosures/g-sib/disclosures.jsp for these additional disclosures on the 2023 G-SIB indicators.
The Bank is required to submit its G-SIB indicators to OSFI and BCBS for review following the date of this report. In the event that one or both regulators provide comments to the Bank
regarding its submission that would result in changes to the G-SIB indicators listed in the table above, the Bank will publish such revised G-SIB indicators on its website.
2
Includes trading securities, securities designated at FVTPL, and securities at FVOCI.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 27
The following table provides details of the Bank’s regulatory capital position.
TABLE 26: CAPITAL STRUCTURE AND RATIOS – Basel III
(millions of Canadian dollars, except as noted)
As at
January 31
October 31
January 31
2024
2023
2023
Common Equity Tier 1 Capital
Common shares plus related contributed surplus
$
25,428
$
25,522
$
25,174
Retained earnings
72,347
73,044
73,501
Accumulated other comprehensive income
3,830
2,750
1,923
Common Equity Tier 1 Capital before regulatory adjustments
101,605
101,316
100,598
Common Equity Tier 1 Capital regulatory adjustments
Goodwill (net of related tax liability)
(17,922)
(18,424)
(17,134)
Intangibles (net of related tax liability)
(2,654)
(2,606)
(2,133)
Deferred tax assets excluding those arising from temporary differences
(198)
(207)
(85)
Cash flow hedge reserve
3,559
5,571
4,033
Shortfall of provisions to expected losses
–
–
–
Gains and losses due to changes in own credit risk on fair valued liabilities
(148)
(379)
(152)
Defined benefit pension fund net assets (net of related tax liability)
(773)
(908)
(1,132)
Investment in own shares
(20)
(21)
(18)
Non-significant investments in the capital of banking, financial, and insurance entities, net of eligible
short positions (amount above 10% threshold)
(2,724)
(1,976)
(1,649)
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
(56)
(49)
–
Other deductions or regulatory adjustments to CET1 as determined by OSFI
10
–
–
Total regulatory adjustments to Common Equity Tier 1 Capital
(20,926)
(18,999)
(18,270)
Common Equity Tier 1 Capital
80,679
82,317
82,328
Additional Tier 1 Capital instruments
Directly issued qualifying Additional Tier 1 instruments plus stock surplus
10,830
10,791
11,246
Additional Tier 1 Capital instruments before regulatory adjustments
10,830
10,791
11,246
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)
(138)
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)
(488)
Additional Tier 1 Capital
10,475
10,435
10,758
Tier 1 Capital
91,154
92,752
93,086
Tier 2 Capital instruments and provisions
Directly issued qualifying Tier 2 instruments plus related stock surplus
9,357
9,424
11,138
Collective allowances
1,781
1,964
2,265
Tier 2 Capital before regulatory adjustments
11,138
11,388
13,403
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
(228)
(196)
(220)
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
(115)
(136)
(77)
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
(503)
(492)
(457)
Tier 2 Capital
10,635
10,896
12,946
Total Capital
$
101,789
$
103,648
$
106,032
Risk-weighted assets
$
579,424
$
571,161
$
531,644
Capital Ratios and Multiples
Common Equity Tier 1 Capital (as percentage of risk-weighted assets)
13.9
%
14.4
%
15.5
%
Tier 1 Capital (as percentage of risk-weighted assets)
15.7
16.2
17.5
Total Capital (as percentage of risk-weighted assets)
17.6
18.1
19.9
Leverage ratio
2
4.4
4.4
4.8
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 January 31, 2024, the Bank’s CET1, Tier 1, and Total Capital ratios were 13.9%, 15.7%, and 17.6%, 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 quarter. 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 28
As at January 31, 2024, the Bank’s leverage ratio was 4.4%, consistent with the ratio reported at October 31, 2023. The leverage ratio impact from exposure
increases across various segments and common shares repurchased for cancellation was 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 27: EQUITY AND OTHER SECURITIES
1
(millions of shares/units and millions of Canadian dollars, except as noted)
As at
January 31, 2024
October 31, 2023
Number of
Number of
shares/units
Amount
shares/units
Amount
Common shares outstanding
1,772.8
$
25,318
1,791.4
$
25,434
Treasury – common shares
(0.7)
(58)
(0.7)
(64)
Total common shares
1,772.1
$
25,260
1,790.7
$
25,370
Stock options
Vested
6.4
5.1
Non-vested
9.5
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
14.0
350
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
143.6
$
5,200
143.6
$
5,200
Other equity instruments
Limited Recourse Capital Notes Series 1
2
1.8
1,750
1.8
1,750
Limited Recourse Capital Notes Series 2
2
1.5
1,500
1.5
1,500
Limited Recourse Capital Notes Series 3
2,3
1.7
2,403
1.7
2,403
148.6
$
10,853
148.6
$
10,853
Treasury – preferred shares and other equity instruments
(0.1)
(27)
(0.1)
(65)
Total preferred shares and other equity instruments
148.5
$
10,826
148.5
$
10,788
1
2
3
Conditions” table in Note 20 of the Bank’s 2023 Consolidated Financial Statements for further details.
DIVIDENDS
On February 28, 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 April 30, 2024, payable on and after April 30, 2024, to shareholders of record at the close of business on April 9, 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 months ended January 31, 2024, the Bank issued 2.0 million common shares from treasury with no discount. During the three months ended
January 31, 2023, the Bank issued 7.9 million common shares 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 January 31, 2024, the Bank repurchased
20.9 million common shares under the NCIB, at an average price of $82.39 per share for a total amount of $1.7 billion.
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 2.7 billion in aggregate.
TD BANK GROUP • FIRST 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 January 31, 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 28: GROSS CREDIT RISK EXPOSURE – Standardized and Internal Ratings-Based (IRB) Approaches
1
(millions of Canadian dollars)
As at
January 31, 2024
October 31, 2023
Standardized
IRB
Total
Standardized
IRB
Total
Retail
Residential secured
$
4,485
$
516,992
$
521,477
$
4,815
$
515,152
$
519,967
Qualifying revolving retail
821
167,594
168,415
810
169,183
169,993
Other retail
3,633
99,189
102,822
3,368
99,253
102,621
Total retail
8,939
783,775
792,714
8,993
783,588
792,581
Non-retail
Corporate
2,776
664,502
667,278
3,496
654,369
657,865
Sovereign
94
491,549
491,643
116
527,423
527,539
Bank
3,996
155,738
159,734
5,272
171,180
176,452
Total non-retail
6,866
1,311,789
1,318,655
8,884
1,352,972
1,361,856
Gross credit risk exposures
$
15,805
$
2,095,564
$
2,111,369
$
17,877
$
2,136,560
$
2,154,437
1
TD BANK GROUP • FIRST 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 29: MARKET RISK LINKAGE TO THE BALANCE SHEET
(millions of Canadian dollars)
As at
January 31, 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
$
75,048
$
275
$
74,773
$
–
$
98,348
$
327
$
98,021
$
–
Interest rate
Trading loans, securities, and other
161,520
159,063
2,457
–
152,090
151,011
1,079
–
Interest rate
Non-trading financial assets at
fair value through profit or loss
6,985
–
6,985
–
7,340
–
7,340
–
Equity,
foreign exchange,
interest rate
Derivatives
60,574
56,397
4,177
–
87,382
81,526
5,856
–
Equity,
foreign exchange,
interest rate
Financial assets designated at
fair value through profit or loss
5,970
–
5,970
–
5,818
–
5,818
–
Interest rate
Financial assets at fair value through
other comprehensive income
74,730
–
74,730
–
69,865
–
69,865
–
Equity,
foreign exchange,
interest rate
Debt securities at amortized cost,
net of allowance for credit losses
300,071
–
300,071
–
308,016
–
308,016
–
Foreign exchange,
interest rate
Securities purchased under
reverse repurchase agreements
199,079
8,606
190,473
–
204,333
9,649
194,684
–
Interest rate
Loans, net of allowance for
loan losses
904,336
–
904,336
–
895,947
–
895,947
–
Interest rate
Customers’ liability under
acceptances
13,066
–
13,066
–
17,569
–
17,569
–
Interest rate
Investment in Schwab
9,548
–
9,548
–
8,907
–
8,907
–
Equity
Other assets
1,2
1,775
–
1,775
–
1,956
–
1,956
–
Interest rate
Assets not exposed to
98,190
–
–
98,190
97,568
–
–
97,568
Total Assets
$
1,910,892
$
224,341
$
1,588,361
$
98,190
$
1,955,139
$
242,513
$
1,615,058
$
97,568
Liabilities subject to market risk
Trading deposits
$
30,634
$
27,226
$
3,408
$
–
$
30,980
$
27,059
$
3,921
$
–
Equity, interest rate
Derivatives
54,073
51,749
2,324
–
71,640
70,382
1,258
–
Equity,
foreign exchange,
interest rate
Securitization liabilities at fair value
16,543
16,543
–
–
14,422
14,422
–
–
Interest rate
Financial liabilities designated at
fair value through profit or loss
180,112
2
180,110
–
192,130
2
192,128
–
Interest rate
Deposits
1,181,254
–
1,181,254
–
1,198,190
–
1,198,190
–
Interest rate,
foreign exchange
Acceptances
13,066
–
13,066
–
17,569
–
17,569
–
Interest rate
Obligations related to securities
sold short
42,875
41,088
1,787
–
44,661
43,993
668
–
Interest rate
Obligations related to securities sold
under repurchase agreements
174,129
11,760
162,369
–
166,854
12,641
154,213
–
Interest rate
Securitization liabilities at amortized
cost
12,358
–
12,358
–
12,710
–
12,710
–
Interest rate
Subordinated notes and debentures
9,554
–
9,554
–
9,620
–
9,620
–
Interest rate
Other liabilities
1,2
26,497
–
26,497
–
27,062
–
27,062
–
Equity, interest rate
Liabilities and Equity not
exposed to market risk
169,797
–
–
169,797
169,301
–
–
169,301
Total Liabilities and Equity
$
1,910,892
$
148,368
$
1,592,727
$
169,797
$
1,955,139
$
168,499
$
1,617,339
$
169,301
1
2
details.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 31
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
11/1/2023
11/6/2023
11/11/2023
11/16/2023
11/21/2023
11/26/2023
12/1/2023
12/6/2023
12/11/2023
12/16/2023
12/21/2023
12/26/2023
12/31/2023
1/5/2024
1/10/2024
1/15/2024
1/20/2024
1/25/2024
1/30/2024
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 out of every 100 trading days. A one-day holding
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 out of every 100 trading days. IDSR is measured for a ten-day holding period.
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 January 31, 2024, there were
4 days of trading losses and trading net revenue was positive for
% 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 30: PORTFOLIO MARKET RISK MEASURES
(millions of Canadian dollars)
For the three months ended
January 31
October 31
January 31
2024
2023
2023
As at
Average
High
Low
Average
Average
Interest rate risk
$
$
$
$
$
$
Credit spread risk
Equity risk
Foreign exchange risk
Commodity risk
Idiosyncratic debt specific risk
Diversification effect
1
(50.7 )
(51.2 )
n/m
2
n/m
(56.9 )
(62.7 )
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 interest rate risk positions and tighter credit spreads.
TD BANK GROUP • FIRST 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 31: STRUCTURAL INTEREST RATE SENSITIVITY MEASURES
(millions of Canadian dollars)
As at
January 31, 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
$
(402 )
$
(1,734 )
$
(2,136 )
$
$
$
$
(2,211 )
$
$
(1,610 )
$
(605 )
(547 )
(1,152 )
(1,099 )
(1,216 )
1
Represents the twelve-month net interest income (NII) exposure to an immediate and sustained shock in rates.
As at January 31, 2024, an immediate and sustained 100 bps increase in interest rates would have had a negative impact to the Bank’s EVE of $
decrease 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 $
Sensitivity is primarily due to a decrease in the interest rate sensitivity of the Bank’s investment portfolio in the U.S. Region, partially offset by an increase in the
duration of net assets supported by equity. The quarter-over-quarter increase in down shock EVE Sensitivity is primarily due to an increase in the duration of net
assets supported by equity. The quarter-over-quarter increase in both up and down shock NII Sensitivity is primarily
due to changes in deposit composition and
Treasury hedging activity.
TD BANK GROUP • FIRST 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 is 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 bi-annually and the related policies annually.
The Bank has established TDGUS as TD’s U.S. 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 34
TABLE 32: 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
January 31, 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 33: SUMMARY OF UNENCUMBERED LIQUID ASSETS BY BANK, SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
As at
January 31
October 31
2024
2023
The Toronto-Dominion Bank (Parent)
$
$
Bank subsidiaries
Foreign branches
Total
$
$
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 35
The Bank’s monthly average liquid assets (excluding those held in insurance subsidiaries) for the quarters ended January 31, 2024 and October 31, 2023, are
summarized in the following table.
TABLE 34: 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
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
October 31, 2023
Cash and central bank reserves
$
30,169
$
–
$
30,169
4
%
$
478
$
29,691
Canadian government obligations
17,188
87,770
104,958
12
65,465
39,493
NHA MBS
39,047
–
39,047
4
1,068
37,979
Obligations of provincial governments, public sector
entities and multilateral development banks
3
40,614
23,474
64,088
7
33,166
30,922
Corporate issuer obligations
17,625
4,741
22,366
3
4,573
17,793
Equities
11,338
3,039
14,377
2
8,756
5,621
Total Canadian dollar-denominated
155,981
119,024
275,005
32
113,506
161,499
Cash and central bank reserves
63,529
–
63,529
8
243
63,286
U.S. government obligations
72,220
62,823
135,043
16
63,096
71,947
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
80,429
14,100
94,529
11
28,197
66,332
Obligations of other sovereigns, public sector entities and
multilateral development banks
3
65,257
49,780
115,037
13
51,138
63,899
Corporate issuer obligations
84,183
9,711
93,894
11
15,193
78,701
Equities
39,737
39,120
78,857
9
44,434
34,423
Total non-Canadian dollar-denominated
405,355
175,534
580,889
68
202,301
378,588
Total
$
561,336
$
294,558
$
855,894
100
%
$
315,807
$
540,087
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 35: SUMMARY OF AVERAGE UNENCUMBERED LIQUID ASSETS BY BANK, SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
Average for the three months ended
January 31
October 31
2024
2023
The Toronto-Dominion Bank (Parent)
$
209,171
$
207,164
Bank subsidiaries
285,938
294,582
Foreign branches
33,269
38,341
Total
$
528,378
$
540,087
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 36
TABLE 36: 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
January 31, 2024
Cash and due from banks
$
6,333
$
–
$
6,333
$
–
$
–
$
7
$
6,326
Interest-bearing deposits with
banks
75,048
–
75,048
5,719
119
65,937
3,273
Securities, trading loans, and other
7
549,276
435,951
985,227
397,303
16,846
546,941
24,137
Derivatives
60,574
–
60,574
–
–
–
60,574
Securities purchased under reverse
repurchase agreements
8
199,079
(199,079)
–
–
–
–
–
Loans, net of allowance for loan
losses
9
904,336
(13,549)
890,787
55,582
75,370
60,643
699,192
Customers’ liabilities under
acceptances
13,066
–
13,066
–
–
–
13,066
Other assets
10
103,180
–
103,180
646
–
–
102,534
Total assets
$
1,910,892
$
223,323
$
2,134,215
$
459,250
$
92,335
$
673,528
$
909,102
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 37
TABLE 37: CREDIT RATINGS
1
As at
January 31, 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 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 38: ADDITIONAL COLLATERAL REQUIREMENTS FOR RATING DOWNGRADES
1
(millions of Canadian dollars)
Average for the three months ended
January 31
October 31
2024
2023
One-notch downgrade
$
90
$
153
Two-notch downgrade
150
230
Three-notch downgrade
800
955
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 38
The following table summarizes the Bank’s average daily LCR as of the relevant dates.
TABLE 39: AVERAGE BASEL III LIQUIDITY COVERAGE RATIO
1
(millions of Canadian dollars, except as noted)
Average for the three months ended
January 31, 2024
Total unweighted
Total weighted
value (average)
2
value (average)
3
High-quality liquid assets
Total high-quality liquid assets
$
n/a
4
$
334,351
Cash outflows
Retail deposits and deposits from small business customers, of which:
$
482,805
$
30,811
Stable deposits
5
256,660
7,700
Less stable deposits
226,145
23,111
Unsecured wholesale funding, of which:
349,412
174,407
Operational deposits (all counterparties) and deposits in networks of cooperative banks
6
128,573
30,354
Non-operational deposits (all counterparties)
192,654
115,868
Unsecured debt
28,185
28,185
Secured wholesale funding
n/a
38,464
Additional requirements, of which:
346,601
105,521
Outflows related to derivative exposures and other collateral requirements
60,479
43,247
Outflows related to loss of funding on debt products
11,461
11,461
Credit and liquidity facilities
274,661
50,813
Other contractual funding obligations
19,252
10,385
Other contingent funding obligations
7
771,815
11,987
Total cash outflows
$
n/a
$
371,575
Cash inflows
Secured lending
$
224,349
$
35,812
Inflows from fully performing exposures
21,167
10,038
Other cash inflows
74,396
74,396
Total cash inflows
$
319,912
$
120,246
Average for the three months ended
January 31, 2024
October 31, 2023
Total adjusted
Total adjusted
value
value
Total high-quality liquid assets
8
$
334,351
$
325,142
Total net cash outflows
9
251,329
250,314
Liquidity coverage ratio
133
%
130
%
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 133% for the quarter ended January 31, 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 January 31, 2024 was $334 billion (October 31, 2023 – $325 billion), with Level 1 assets
representing 83% (October 31, 2023 – 82%). The Bank’s reported HQLA excludes excess HQLA from the U.S. Retail operations, as required by the OSFI LAR
guideline, to reflect liquidity transfer considerations between U.S. Retail and its affiliates as a result of the U.S. Federal Reserve Board’s regulations. By excluding
excess HQLA, the U.S. Retail LCR is effectively capped at 100% prior to total Bank consolidation.
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 39
TABLE 40: NET STABLE FUNDING RATIO
(millions of Canadian dollars, except as noted)
As at
January 31, 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
$
109,250
$
n/a
$
n/a
$
9,113
$
118,363
Regulatory capital
109,250
n/a
n/a
9,113
118,363
Other capital instruments
n/a
n/a
n/a
–
–
Retail deposits and deposits from small business customers:
434,080
65,298
39,640
30,458
529,638
Stable deposits
3
250,832
24,753
15,242
15,120
291,406
Less stable deposits
183,248
40,545
24,398
15,338
238,232
Wholesale funding:
235,934
361,919
100,168
234,625
437,491
Operational deposits
4
100,803
2,283
1
–
51,544
Other wholesale funding
135,131
359,636
100,167
234,625
385,947
Liabilities with matching interdependent assets
5
–
2,119
1,634
21,620
–
Other liabilities:
54,220
95,202
2,381
NSFR derivative liabilities
n/a
(958)
All other liabilities and equity not included in the above categories
54,220
92,789
1,980
1,391
2,381
Total Available Stable Funding
$
1,087,873
Required Stable Funding Item
Total NSFR high-quality liquid assets
$
$
$
$
$
62,180
Deposits held at other financial institutions for operational purposes
–
–
–
–
–
Performing loans and securities
108,989
225,917
118,247
673,137
758,227
Performing loans to financial institutions secured by Level 1 HQLA
–
71,624
9,075
–
10,865
Performing loans to financial institutions secured by non-Level 1
HQLA and unsecured performing loans to financial institutions
509
41,570
6,825
12,293
20,786
Performing loans to non-financial corporate clients, loans to retail
and small business customers, and loans to sovereigns, central
banks and PSEs, of which:
37,171
67,047
46,137
284,009
333,861
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
n/a
45,282
29,534
–
36,346
Performing residential mortgages, of which:
30,968
37,571
51,651
305,942
291,042
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
6
30,968
37,571
51,651
305,942
291,042
Securities that are not in default and do not qualify as HQLA,
including exchange-traded equities
40,341
8,105
4,559
70,893
101,673
Assets with matching interdependent liabilities
5
–
1,715
2,438
21,540
–
Other assets:
69,568
135,698
104,767
Physical traded commodities, including gold
10,729
9,411
Assets posted as initial margin for derivative contracts and
contributions to default funds of CCPs
17,634
14,989
NSFR derivative assets
5,218
6,177
NSFR derivative liabilities before deduction of variation margin
posted
18,871
944
All other assets not included in the above categories
58,839
86,349
1,664
5,962
73,246
Off-balance sheet items
770,848
27,722
Total Required Stable Funding
$
952,896
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 January 31, 2024 is at 114% (October 31, 2023 – 117%) representing a surplus of $135 billion adhering to regulatory
requirements. Decreases are attributable to changes in our funding composition and lower deposit balance in the U.S. Retail Segment.
TD BANK GROUP • FIRST 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 41: SUMMARY OF DEPOSIT FUNDING
(millions of Canadian dollars)
As at
January 31
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 January 31, 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)
United Kingdom Listing Authority (UKLA) Registered
Legislative Covered Bond Program ($80 billion)
UKLA 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 January 31, 2024, was $175.8 billion
(October 31, 2023 – $173.3 billion).
Note that Table 42: Long-Term Funding and Table 43: Wholesale Funding do not include any funding accessed via repurchase transactions or securities financing.
TABLE 42: LONG-TERM FUNDING
1
As at
January 31
October 31
Long-term funding by currency
2024
2023
Canadian dollar
27
%
27
%
U.S. dollar
34
35
Euro
26
27
British pound
7
5
Other
6
6
Total
100
%
100
%
Long-term funding by type
Senior unsecured medium-term notes
59
%
61
%
Covered bonds
33
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 41
The following table represents the remaining maturity of various sources of funding outstanding as at January 31, 2024 and October 31, 2023.
TABLE 43: WHOLESALE FUNDING
1
(millions of Canadian dollars)
As at
January 31
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
$
19,867
$
4,794
$
3,640
$
4,470
$
32,771
$
–
$
–
$
32,771
$
42,481
Bearer deposit notes
199
328
767
498
1,792
–
–
1,792
1,804
Certificates of deposit
9,320
21,638
32,642
38,122
101,722
95
–
101,817
113,476
Commercial paper
4,564
14,716
10,093
17,413
46,786
–
–
46,786
40,515
Covered bonds
3,000
3,268
3,456
852
10,576
11,703
38,828
61,107
56,973
Mortgage securitization
3
–
695
2,287
2,660
5,642
4,120
19,140
28,902
27,131
Legacy senior unsecured medium-term
notes
4
–
1,021
1,883
–
2,904
208
23
3,135
3,162
Senior unsecured medium-term notes
5
–
10,393
3,115
13,049
26,557
17,864
52,794
97,215
97,525
Subordinated notes and debentures
6
–
–
–
–
–
197
9,357
9,554
9,620
Term asset-backed securitization
400
–
309
1,008
1,717
–
404
2,121
2,204
Other
7
32,987
2,890
2,703
2,409
40,989
613
700
42,302
44,348
Total
$
70,337
$
59,743
$
60,895
$
80,481
$
271,456
$
34,800
$
121,246
$
427,502
$
439,239
Of which:
Secured
$
12,112
$
3,963
$
6,052
$
4,520
$
26,647
$
15,824
$
58,376
$
100,847
$
95,328
Unsecured
58,225
55,780
54,843
75,961
244,809
18,976
62,870
326,655
343,911
Total
$
70,337
$
59,743
$
60,895
$
80,481
$
271,456
$
34,800
$
121,246
$
427,502
$
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 $18.9 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 ended
January 31, 2024 was $0.2 billion (three months ended January 31, 2023 – $0.4 billion) and other asset-backed securities issued for the three months ended
January 31, 2024 was nil (three months ended January 31, 2023 – $0.3 billion). Total unsecured medium-term notes and covered bonds issuances for the three
months ended January 31, 2024, were $0.7 billion and $4.5 billion, respectively (three months ended January 31, 2023 – $12.9 billion and nil, respectively).
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 42
TABLE 44: REMAINING CONTRACTUAL MATURITY
(millions of Canadian dollars)
As at
January 31, 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 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
(7,265 )
(7,265 )
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 6 to 9 months’, $
6
7
8
.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 43
TABLE 44: 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 • FIRST 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. Guideline B-15 is iterative and is currently organized into interrelated and mutually reinforcing chapters,
Chapter 1 – Governance and Risk Management Expectations and Chapter 2 – Climate-Related Financial Disclosures. 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 is currently assessing the impact of adopting Guideline B-15.
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 ISSB recommends an effective date for annual reporting periods
beginning on or after January 1, 2024, this is subject to Canadian jurisdiction’s endorsement. Early application is permitted on or before the date of initial
application of IFRS S1 and S2. 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 January 31, 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 $15.7 billion as at January 31, 2024 (October 31, 2023 – $15.2 billion). As at January 31, 2024, the Bank had funded exposure of
$14.1 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 first 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 first 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 • FIRST 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 13 of the Bank’s first 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 13 of the Bank’s first quarter 2024 Interim Consolidated Financial Statements.
FUTURE CHANGES IN ACCOUNTING POLICIES
There were no new or amended material accounting policies that have been issued, but are not yet effective on the date of issuance of the Bank’s Interim
Consolidated Financial Statements.
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 first quarter 2024 Interim Consolidated Financial Statements for further information regarding the Bank’s changes to accounting
policies, procedures, and estimates.
TD BANK GROUP • FIRST 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 • FIRST 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.
Swaps:
payment obligations and currencies on a notional principal for a specified period
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 48
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 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 • FIRST 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)
January 31, 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
(7,265 )
(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 (Note 4)
Total liabilities
1
EQUITY
Shareholders’ Equity
Common shares
Preferred shares and other equity instruments
Treasury – common shares
(58 )
(64 )
Treasury – preferred shares and other equity instruments
(27 )
(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 • FIRST 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
January 31
January 31
2024
2023
Interest income
1
Loans
$
$
Reverse repurchase agreements
Securities
Interest
Dividends
Deposits with banks
Interest expense (Note 20)
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
(105 )
(982 )
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
interest rate method (EIRM).
2
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 51
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
(millions of Canadian dollars)
For the three months ended
January 31
January 31
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)
Reclassification to earnings of net loss/(gain)
(6 )
Changes in allowance for credit losses recognized in earnings
(1 )
(1 )
Income taxes relating to:
Change in unrealized gain/(loss)
(85 )
(73 )
Reclassification to earnings of net loss/(gain)
Net change in unrealized foreign currency translation gain/(loss) on
investments in foreign operations, net of hedging activities
Unrealized gain/(loss)
(3,883 )
(2,365 )
Reclassification to earnings of net loss/(gain)
(2 )
Net gain/(loss) on hedges
Reclassification to earnings of net loss/(gain) on hedges
Income taxes relating to:
Net gain/(loss) on hedges
(676 )
(517 )
Reclassification to earnings of net loss/(gain) on hedges
(2,127 )
(2,040 )
Net change in gain/(loss) on derivatives designated as cash flow hedges
Change in gain/(loss)
Reclassification to earnings of loss/(gain)
Income taxes relating to:
Change in gain/(loss)
(89 )
(353 )
Reclassification to earnings of loss/(gain)
(658 )
Share of other comprehensive income (loss) from investment in Schwab
Items that will not be subsequently reclassified to net income
Remeasurement gain/(loss) on employee benefit plans
Gain/(loss)
(227 )
Income taxes
(44 )
(164 )
Change in net unrealized gain/(loss) on equity securities designated at
fair value through other comprehensive income
Change in net unrealized gain/(loss)
Income taxes
(54 )
(4 )
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)
(54 )
(243 )
Income taxes
(39 )
(177 )
Total other comprehensive income (loss)
(13 )
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 52
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(millions of Canadian dollars)
For the three months ended
January 31, 2024
January 31, 2023
Common shares (Note 12)
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
(295 )
Balance at end of period
Preferred shares and other equity instruments (Note 12)
Balance at beginning and end of period
Treasury – common shares (Note 12)
Balance at beginning of period
(64 )
(91 )
Purchase of shares
(3,096 )
(1,816 )
Sale of shares
Balance at end of period
(58 )
(103 )
Treasury – preferred shares and other equity instruments (Note 12)
Balance at beginning of period
(65 )
(7 )
Purchase of shares and other equity instruments
(98 )
(141 )
Sale of shares and other equity instruments
Balance at end of period
(27 )
(9 )
Contributed surplus
Balance at beginning of period
Net premium (discount) on sale of treasury instruments
Issuance of stock options, net of options exercised
Other
(1 )
(7 )
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
(1,807 )
(1,746 )
Preferred dividends and distributions on other equity instruments
(74 )
(83 )
Net premium on repurchase of common shares and redemption of preferred shares and other
equity instruments
(1,428 )
Remeasurement gain/(loss) on employee benefit plans
(164 )
Realized gain/(loss) on equity securities designated at fair value through
other comprehensive income
(2 )
(2 )
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
(413 )
(476 )
Impact of reclassification of securities supporting insurance operations
related to the adoption of IFRS 17
2
–
Other comprehensive income (loss)
Allowance for credit losses
(1 )
(1 )
Balance at end of period
(163 )
(305 )
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)
Reclassification of loss/(gain) to retained earnings
Balance at end of period
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
(38 )
Other comprehensive income (loss)
(39 )
(177 )
Balance at end of period
(77 )
(99 )
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)
(2,127 )
(2,040 )
Balance at end of period
Net gain/(loss) on derivatives designated as cash flow hedges:
Balance at beginning of period
(5,472 )
(5,717 )
Other comprehensive income (loss)
Balance at end of period
(3,504 )
(3,992 )
Share of accumulated other comprehensive income (loss) from investment in Schwab
(2,995 )
(3,721 )
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 53
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of Canadian dollars)
For the three months ended
January 31
January 31
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)
(6 )
Share of net income from investment in Schwab
(141 )
(285 )
Deferred taxes
1
(67 )
(58 )
Changes in operating assets and liabilities
Interest receivable and payable
Securities sold under repurchase agreements
Securities purchased under reverse repurchase agreements
(10,198 )
Securities sold short
(1,786 )
Trading loans, securities, and other
(9,430 )
(10,351 )
Loans net of securitization and sales
(9,413 )
(6,263 )
Deposits
(17,282 )
(8,255 )
Derivatives
Non-trading financial assets at fair value through profit or loss
Financial assets and liabilities designated at fair value through profit or loss
(12,170 )
Securitization liabilities
(931 )
Current taxes
Brokers, dealers, and clients amounts receivable and payable
(1,214 )
(8,920 )
Other, including unrealized foreign currency translation loss/(gain)
1
Net cash from (used in) operating activities
(20,112 )
Cash flows from (used in) financing activities
Redemption or repurchase of subordinated notes and debentures
(24 )
Common shares issued, net
Repurchase of common shares
(1,723 )
Sale of treasury shares and other equity instruments
Purchase of treasury shares and other equity instruments
(3,194 )
(1,957 )
Dividends paid on shares and distributions paid on other equity instruments
(1,744 )
(1,124 )
Repayment of lease liabilities
(167 )
(156 )
Net cash from (used in) financing activities
(3,564 )
(1,214 )
Cash flows from (used in) investing activities
Interest-bearing deposits with banks
(7,024 )
Activities in financial assets at fair value through other comprehensive income
Purchases
(7,301 )
(7,585 )
Proceeds from maturities
Proceeds from sales
Activities in debt securities at amortized cost
Purchases
(3,238 )
(10,407 )
Proceeds from maturities
Proceeds from sales
Net purchases of land, buildings, equipment, other depreciable assets, and other intangibles
(471 )
(403 )
Net cash acquired from divestitures
Net cash from (used in) investing activities
(5,301 )
Effect of exchange rate changes on cash and due from banks
(159 )
(111 )
Net increase (decrease) in cash and due from banks
(388 )
(1,568 )
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 • FIRST 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 months ended January 31, 2024, were approved and authorized for issue by the Bank’s Board of
Directors, in accordance with a recommendation of the Audit Committee, on February 28, 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,
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 • FIRST 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 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 13 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
There were no new or amended material accounting policies that have been issued, but are not yet effective on the date of issuance of the Bank’s Interim
Consolidated Financial Statements.
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 13.
TD BANK GROUP • FIRST 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 months ended
January 31, 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
January 31, 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 • FIRST 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
January 31, 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
January 31, 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 Co-operation and Development (OECD).
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 58
(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 months ended January 31, 2024 and January 31, 2023.
There were no significant transfers between Level 2 and Level 3 during the three months ended January 31, 2024 and January 31, 2023.
There were no significant changes to the unobservable inputs and sensitivities for assets and liabilities classified as Level 3 during the three months ended
January 31, 2024, and January 31, 2023.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 59
(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
months ended January 31, 2024 and January 31, 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
November 1
Included
Included
Purchases/
Sales/
Into
Out of
January 31
instruments
2023
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
$
$
$
$
$
(33 )
$
$
$
$
(1 )
Other debt securities
(81 )
(1 )
Equity securities
(1 )
(2 )
(116 )
(2 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(5 )
(5 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(3 )
(1 )
(3 )
Equity securities
(10 )
(231 )
$
$
$
(13 )
$
$
(232 )
$
$
$
$
(1 )
FINANCIAL LIABILITIES
Trading deposits
6
$
(985 )
$
(24 )
$
$
(56 )
$
$
$
$
(1,039 )
$
(43 )
Derivatives
7
Interest rate contracts
(126 )
(23 )
(137 )
(12 )
Foreign exchange contracts
(6 )
(1 )
(1 )
Equity contracts
(21 )
(6 )
(1 )
(28 )
(5 )
Commodity contracts
(1 )
(19 )
(10 )
(17 )
(154 )
(17 )
(7 )
(1 )
(176 )
(35 )
Financial liabilities designated
at fair value
through profit or loss
(22 )
(54 )
(24 )
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
January 31
instruments
2022
in income
2
in OCI
4
Issuances
Settlements
Level 3
Level 3
2023
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
$
$
$
$
Other debt securities
(15 )
(7 )
Equity securities
(15 )
(7 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(3 )
(3 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(4 )
Equity securities
(22 )
(39 )
(22 )
$
$
$
(15 )
$
$
(43 )
$
$
$
$
(22 )
FINANCIAL LIABILITIES
Trading deposits
6
$
(416 )
$
(12 )
$
$
(59 )
$
$
(3 )
$
$
(486 )
$
(11 )
Derivatives
7
Interest rate contracts
(156 )
(24 )
(164 )
(9 )
Foreign exchange contracts
(3 )
(1 )
Equity contracts
(59 )
(2 )
(21 )
(51 )
Commodity contracts
(51 )
(8 )
(184 )
(33 )
(2 )
(20 )
(208 )
(10 )
Financial liabilities designated
at fair value
through profit or loss
(44 )
(60 )
(22 )
1
Includes foreign exchange.
2
3
4
details.
5
6
7
October 31, 2022/November 1, 2022 – $
derivative liabilities of $
October 31, 2022/November 1, 2022 – $
been netted in this table for presentation purposes only.
TD BANK GROUP • FIRST 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 January 31, 2024 and October 31, 2023.
Unrealized Gains (Losses) for Securities at Fair Value Through Other Comprehensive Income
(millions of Canadian dollars)
As at
January 31, 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
$
$
$
(102 )
$
$
$
$
(170 )
$
Provinces
(50 )
(118 )
U.S. federal, state, municipal governments, and
(174 )
(275 )
Other OECD government-guaranteed debt
(19 )
(24 )
Mortgage-backed securities
(14 )
(36 )
(359 )
(623 )
Other debt securities
Asset-backed securities
(21 )
(32 )
Corporate and other debt
(63 )
(99 )
(84 )
(131 )
Total debt securities
(443 )
(754 )
Equity securities
Common shares
(82 )
(116 )
Preferred shares
(180 )
(224 )
(262 )
(340 )
Total securities at fair value through
$
$
$
(705 )
$
$
$
$
(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
January 31, 2024 and October 31, 2023, and dividend income recognized on these securities for the three months ended January 31, 2024 and January 31, 2023.
Equity Securities Designated at Fair Value Through Other Comprehensive Income
(millions of Canadian dollars)
As at
For the three months ended
January 31, 2024
October 31, 2023
January 31, 2024
January 31, 2023
Fair value
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
January 31, 2024
January 31, 2023
Equity Securities
Fair value
$
$
Cumulative realized gain/(loss)
(3 )
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 months ended January 31, 2024 and January 31, 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
January 31, 2024
January 31, 2023
Debt securities at fair value through other comprehensive income
$
$
(1 )
TD BANK GROUP • FIRST 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
January 31, 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 January 31, 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 January 31, 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 January 31, 2024 and October 31, 2023.
Loans and Acceptances
(millions of Canadian dollars)
As at
January 31, 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
January 31, 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 • FIRST 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
January 31, 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 63
Loans and Acceptances by Risk Ratings
(Continued)
1
(millions of Canadian dollars)
As at
January 31, 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
(c)
ALLOWANCE FOR CREDIT LOSSES
The following table provides details on the Bank’s allowance for credit losses as at and for the three months ended January 31, 2024 and January 31, 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
January 31, 2024
January 31, 2023
Residential mortgages
$
$
$
(2 )
$
$
$
$
$
(1 )
$
(4 )
$
Consumer instalment and other
personal
(275 )
(23 )
(196 )
(17 )
Credit card
(369 )
(61 )
(245 )
(37 )
Business and government
(113 )
(79 )
(31 )
(45 )
Total allowance for loan losses,
including off-balance sheet
instruments
(759 )
(162 )
(473 )
(103 )
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
$
$
$
(759 )
$
(163 )
$
$
$
$
(473 )
$
(104 )
$
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 64
(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 January 31, 2024 and
January 31, 2023.
Allowance for Loan Losses by Stage
(millions of Canadian dollars)
For the three months ended
January 31, 2024
January 31, 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
(33 )
(3 )
(34 )
(1 )
Transfer to Stage 2
(10 )
(5 )
(6 )
(5 )
Transfer to Stage 3
(9 )
(5 )
Net remeasurement due to transfers into stage
3
(6 )
(7 )
(1 )
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
(2 )
(5 )
(4 )
(11 )
(1 )
(4 )
(3 )
(8 )
Changes to risk, parameters, and models
7
(40 )
(24 )
Disposals
Write-offs
(2 )
(2 )
(2 )
(2 )
Recoveries
Foreign exchange and other adjustments
(2 )
(2 )
(1 )
(1 )
(4 )
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
(130 )
(1 )
(168 )
(2 )
Transfer to Stage 2
(72 )
(19 )
(52 )
(18 )
Transfer to Stage 3
(3 )
(60 )
(2 )
(46 )
Net remeasurement due to transfers into stage
3
(54 )
(53 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(18 )
(21 )
(3 )
(42 )
(22 )
(18 )
(3 )
(43 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(17 )
(20 )
(10 )
(47 )
(18 )
(24 )
(9 )
(51 )
Changes to risk, parameters, and models
7
(71 )
(94 )
Disposals
Write-offs
(347 )
(347 )
(266 )
(266 )
Recoveries
Foreign exchange and other adjustments
(9 )
(12 )
(2 )
(23 )
(7 )
(8 )
(2 )
(17 )
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
(239 )
(7 )
(294 )
(5 )
Transfer to Stage 2
(95 )
(16 )
(86 )
(12 )
Transfer to Stage 3
(6 )
(223 )
(5 )
(164 )
Net remeasurement due to transfers into stage
3
(108 )
(139 )
(7 )
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
(10 )
(16 )
(84 )
(110 )
(12 )
(18 )
(46 )
(76 )
Changes to risk, parameters, and models
7
(175 )
(120 )
Disposals
Write-offs
(444 )
(444 )
(314 )
(314 )
Recoveries
Foreign exchange and other adjustments
(21 )
(29 )
(11 )
(61 )
(14 )
(19 )
(4 )
(37 )
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
Transfers represent stage transfer movements prior to ECL remeasurement.
3
Represents the mechanical remeasurement between twelve-month (i.e., Stage 1) and lifetime ECLs (i.e., Stage 2 or 3) due to stage transfers necessitated by credit risk migration, as 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
Represents the increase in the allowance resulting from loans that were newly originated, purchased, or renewed.
5
Represents the changes in the allowance related to cash flow changes associated with new draws or repayments on loans outstanding.
6
Represents the decrease in the allowance resulting from loans that were fully repaid and excludes the decrease associated with loans that were disposed or fully written off.
7
Represents the changes in the allowance related to current period changes in risk (e.g., PD) caused by changes to macroeconomic factors, level of risk, parameters, and/or models, 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
The allowance for loan losses for off-balance sheet instruments is recorded in Other liabilities on the Interim Consolidated Balance Sheet.
9
Credit cards are considered impaired and migrate to Stage 3 when they are 90 days past due and written off at 180 days past due. Refer to Note 2 of the Bank’s 2023 Annual Consolidated Financial
Statements for further details.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 65
Allowance for Loan Losses by Stage
(Continued)
(millions of Canadian dollars)
For the three months ended
January 31, 2024
January 31, 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
(62 )
(98 )
(2 )
Transfer to Stage 2
(117 )
(3 )
(159 )
(3 )
Transfer to Stage 3
(14 )
(55 )
(5 )
(21 )
Net remeasurement due to transfers into stage
3
(21 )
(28 )
(4 )
New originations or purchases
3
n/a
n/a
n/a
n/a
Net repayments
3
(8 )
(26 )
(26 )
(21 )
(24 )
(41 )
Derecognition of financial assets (excluding
disposals and write-offs)
3
(172 )
(99 )
(45 )
(316 )
(188 )
(151 )
(133 )
(472 )
Changes to risk, parameters, and models
3
(162 )
Disposals
Write-offs
(124 )
(124 )
(43 )
(43 )
Recoveries
Foreign exchange and other adjustments
(35 )
(30 )
(14 )
(79 )
(20 )
(20 )
(5 )
(45 )
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 January 31, 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 lead to a near-term deceleration
in economic growth and a modest increase in unemployment rate.
Macroeconomic Variables
As at
January 31, 2024
Base Forecast
Upside Scenario
Downside Scenario
Average
Remaining
Average
Remaining
Average
Remaining
Q1 2024-
4-year
Q1 2024-
4-year
Q1 2024-
4-year
Q4 2024
1
period
1
Q4 2024
1
period
1
Q4 2024
1
period
1
Unemployment rate
Canada
%
%
%
%
%
%
United States
Real GDP
Canada
(1.1 )
United States
(0.2 )
Home prices
Canada (average existing price)
2
(3.1 )
(1.0 )
(10.8 )
United States (CoreLogic HPI)
3
(8.3 )
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 66
(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
January 31, 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
January 31, 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 $
Balance 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
January 31, 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 67
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 January 31, 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 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 $
amortization of certain intangibles net of tax.
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
December 31
September 30
2023
2023
Total assets
$
$
Total liabilities
(millions of Canadian dollars)
For the three months ended
December 31
December 31
2023
2022
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 the minimum level of 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$
has the option to buy down up to $
to certain 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 $
compensate the Bank for losses incurred this quarter from discontinuing certain hedging relationships and for lost revenues. The net impact is recorded in net
interest income.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 68
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 purchase price allocation can be adjusted during the
measurement period, which shall not exceed one year from the acquisition date, to reflect new information obtained about facts and circumstances. The
acquisition contributed $
over the fair value of the tangible net assets acquired is allocated to other intangible assets of $
$
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 January 31, 2024, assets of $
classified as held for sale.
NOTE 9: OTHER ASSETS
Other Assets
(millions of Canadian dollars)
As at
January 31
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
$
24,513
$
27,629
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 69
NOTE 10: DEPOSITS
Demand deposits are those for which the Bank does not have the right to require notice prior to withdrawal and are in general chequing accounts. Notice
deposits are those for which the Bank can legally require notice prior to withdrawal and are in general savings 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 January 31, 2024, was $
Deposits
(millions of Canadian dollars)
As at
January 31
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
January 31
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
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 70
NOTE 12: 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 months ended January 31, 2024 and January 31, 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
January 31, 2024
January 31, 2023
Number
Number
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
(20.9 )
(295 )
Balance as at end of period – common shares
$
$
Preferred Shares and Other Equity Instruments
Preferred Shares – Class A
Balance as at beginning of period
$
$
Issue of shares
Redemption of shares
Balance as at end of period
$
$
Other Equity Instruments
1
Balance as at beginning and end of period
$
$
Balance as at end of period – preferred shares
and other equity instruments
$
$
Treasury – common shares
2
Balance as at beginning of period
$
(64 )
$
(91 )
Purchase of shares
(3,096 )
(1,816 )
Sale of shares
(37.5 )
(20.3 )
Balance as at end of period – treasury
– common shares
$
(58 )
$
(103 )
Treasury – preferred shares and
other equity instruments
2
Balance as at beginning of period
$
(65 )
$
(7 )
Purchase of shares and other equity instruments
(98 )
(141 )
Sale of shares and other equity instruments
(1.7 )
(0.9 )
Balance as at end of period – treasury
– preferred shares and other equity instruments
$
(27 )
$
(9 )
1
For Limited Recourse Capital Notes, the number of shares represents the number of notes issued.
2
reduction in equity.
DIVIDENDS
On February 28, 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 April 30, 2024, payable on and after April 30, 2024, to shareholders of record at the close of business on April 9, 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 months ended January 31, 2024, the Bank issued
January 31, 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
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 71
NOTE 13: 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 in 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
January 31, 2024
January 31, 2023
Insurance revenue
$
$
Insurance service expenses
Insurance service result before reinsurance contracts held
Net income (expense) from reinsurance contracts held
(45 )
Insurance service result
$
$
The Bank recognized insurance finance expenses of $
months ended January 31, 2023 – $
interest income reported in net interest income and fair value changes reported in other income (loss). Investment return on securities supporting insurance
contracts was $
(b)
INSURANCE CONTRACT LIABILITIES
Insurance contract liabilities are comprised of amounts related to the LRC, the 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
January 31, 2024
January 31, 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 months ended January 31, 2024, the Bank recognized insurance revenue of $
ended January 31, 2023 – $
finance 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 January 31, 2024 (October 31, 2023 –
% to
%).
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 72
NOTE 14: SHARE-BASED COMPENSATION
For the three months ended January 31, 2024, the Bank recognized compensation expense for stock option awards of $
January 31, 2023 – $
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 three months ended January 31, 2024 and January 31, 2023.
Assumptions Used for Estimating the Fair Value of Options
(in Canadian dollars, except as noted)
For the three months ended
January 31
January 31
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 15: 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 months ended January 31, 2024 and January 31, 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
January 31
January 31
January 31
January 31
January 31
January 31
2024
2023
2024
2023
2024
2023
Service cost – benefits earned
$
$
$
$
$
$
Net interest cost (income) on net defined benefit liability (asset)
(20 )
(25 )
Interest cost on asset limitation and minimum funding
requirement
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.
The following table summarizes expenses for the Bank’s defined contribution plans for the three months ended January 31, 2024 and January 31, 2023.
Defined Contribution Plan Expenses
(millions of Canadian dollars)
For the three months ended
January 31
January 31
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 73
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 months ended January 31, 2024 and January 31, 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
January 31
January 31
January 31
January 31
January 31
January 31
2024
2023
2024
2023
2024
2023
Remeasurement gain/(loss) – financial
$
(1,124 )
$
(382 )
$
(36 )
$
(24 )
$
(43 )
$
Remeasurement gain/(loss) – return on plan assets less
interest income
–
–
Change in asset limitation and minimum funding requirement
Total
$
(148 )
$
$
(36 )
$
(24 )
$
(43 )
$
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 16: 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. The earliest the legislation will be effective for the Bank is the fiscal year beginning on
November 1, 2024. On August 4, 2023, draft legislative proposals regarding Canada’s implementation of the Pillar Two rules were released for public comment
and updated proposals are expected to be issued in early 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. As at January 31, 2024, the CRA has reassessed the Bank for $
reassessed the Bank for $
Bank has been reassessed for $
that its tax filing positions were appropriate and filed a Notice of Appeal with the Tax Court of Canada on March 21, 2023.
NOTE 17: 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 months ended January 31, 2024 and January 31, 2023.
Basic and Diluted Earnings Per Share
1
(millions of Canadian dollars, except as noted)
For the three months ended
January 31
January 31
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 months ended January 31, 2023 have been restated for the adoption of IFRS 17. Refer to Note 2 for details.
2
of $
, as the option price was greater than the average market price of the Bank’s common shares. For the three months ended January 31, 2023, the computation of diluted
earnings per share excluded average options outstanding of
, as the option price was greater than the average market price
of the Bank’s common shares.
TD BANK GROUP • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 74
NOTE 18: 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 first quarter of 2024 to reduce its cost base and achieve greater efficiency. In connection with these
measures, the Bank incurred $291 million of restructuring charges. The 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 land and 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 January 31, 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 and certain of its subsidiaries have been responding to inquiries from, and cooperating with, the Securities and Exchange Commission (SEC) and the
Commodity Futures Trading Commission (CFTC) concerning compliance with records preservation requirements relating to business communications exchanged
on unapproved electronic channels. The Bank is engaged in settlement discussions with the SEC and CFTC and anticipates that resolution will include penalties.
The SEC and CFTC have conducted similar investigations at other financial institutions.
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 75
NOTE 19: 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 months ended January 31, 2024 and January 31, 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 January 31
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Net interest income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
Non-interest income (loss)
(594 )
Total revenue
(375 )
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
(860 )
(2,823 )
Provision for (recovery of)
income taxes
(5 )
(285 )
(222 )
Share of net income from
investment in Schwab
4,5
(53 )
(16 )
Net income (loss)
$
$
$
$
$
$
$
$
$
(628 )
$
(2,617 )
$
$
1
Amounts for the three months ended January 31, 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 January 31, 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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 76
NOTE 20: 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
January 31, 2024
January 31, 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
January 31, 2024
January 31, 2023
Measured at amortized cost
1
$
$
Measured or designated at FVTPL
Total
$
$
1
Interest expense is calculated using EIRM.
NOTE 21: 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 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 three months ended January 31, 2024.
The following table summarizes the Bank’s regulatory capital positions as at January 31, 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
January 31
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 • FIRST QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 77
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
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 February 29, 2024. The call will be audio webcast live through TD’s website at
8:30 a.m. ET. The call will feature presentations by TD executives on the Bank’s financial results for first 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 on
February 29, 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
February 29, 2024, until 11:59 p.m. ET on March 15, 2024, by calling 905-694-9451 or 1-800-408-3053 (toll free). The passcode is 7300743#.
Annual Meeting
Thursday, April 18, 2024
Toronto, Ontario