TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 1
TD Bank Group Reports Third Quarter 2024 Results
Report to Shareholders
Three and nine months ended July 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 with the presentation adopted in the current period.
Reported results conform with generally accepted accounting principles (GAAP), in accordance with IFRS. Adjusted measures are non-GAAP financial
measures. For additional information about the Bank’s use of non-GAAP financial measures, refer to “Significant and Subsequent Events” and “Non-GAAP and
Other Financial Measures” in the “How We Performed” section of this document.
THIRD QUARTER FINANCIAL HIGHLIGHTS, compared with the third quarter last year:
●
Reported diluted earnings (loss) per share were $(0.14), compared with $1.53.
●
Adjusted diluted earnings per share were $2.05, compared with $1.95.
●
Reported net income (loss) was $(181) million, compared with $2,881 million.
●
Adjusted net income was $3,646 million, compared with $3,649 million.
YEAR-TO-DATE FINANCIAL HIGHLIGHTS, nine months ended July 31, 2024, compared with the corresponding period last year:
●
Reported diluted earnings per share were $2.76, compared with $4.04.
●
Adjusted diluted earnings per share were $6.09, compared with $6.09.
●
Reported net income was $5,207 million, compared with $7,768 million.
●
Adjusted net income was $11,072 million, compared with $11,510 million.
THIRD QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The third quarter reported earnings figures included the following items of note:
●
Amortization of acquired intangibles of $64 million ($56 million after-tax or 3 cents per share), compared with $88 million ($75 million after-tax or
4 cents per share) in the third quarter last year.
●
Acquisition and integration charges related to the Schwab transaction of $21 million ($18 million after-tax or 1 cent per share), compared with
$54 million ($44 million after-tax or 2 cents per share) in the third quarter last year.
●
Restructuring charges of $110 million ($81 million after-tax or 5 cents per share).
●
Acquisition and integration charges related to the Cowen acquisition of $78 million ($60 million after-tax or 3 cents per share), compared with
$143 million ($105 million after-tax or 6 cents per share) in the third quarter last year.
●
Impact from the terminated First Horizon Corporation (FHN) acquisition-related capital hedging strategy of $62 million ($46 million after-tax or 3
cents per share), compared with $177 million ($134 million after-tax or 8 cents per share) in the third quarter last year.
●
Provision for investigations related to the Bank’s AML program of $3,566 million ($3,566 million after-tax or $2.04 per share).
TORONTO
, August 22, 2024 – TD Bank Group (“TD” or the “Bank”) today announced its financial results for the third quarter ended July 31, 2024. Reported
earnings were a loss of $181 million, compared with reported earnings of $2,881 million in the third quarter last year, and adjusted earnings were $3.6 billion,
relatively flat.
The Bank’s reported results include the impact of the US$2,600 million provision for investigations related to the Bank’s anti-money laundering (AML) program,
which, together with the provision taken last quarter in connection with this matter, reflects the Bank’s current estimate of the total fines related to this matter.
“TD delivered record revenue and net income in Canadian Personal and Commercial Banking, continued operating momentum in the U.S., and strong results
across our markets-driven businesses,” said Bharat Masrani, Group President and CEO, TD Bank Group. “We continued to invest in new and innovative
capabilities and expanded our product offerings to better serve our customers and clients.”
Canadian Personal and Commercial Banking delivered record net income and revenue supported by continued volume growth and strong operating
leverage
Canadian Personal and Commercial Banking net income was $1,872 million, an increase of 13% compared to the third quarter last year, reflecting higher revenue,
partially offset by higher non-interest expenses and provisions for credit losses. The segment delivered record revenue of $5,003 million, an increase of 9%,
primarily reflecting volume growth and margin expansion.
Canadian Personal and Commercial Banking grew its leading deposit franchise with another strong quarter for account openings. TD further expanded its market-
leading credit card business to reach a milestone of more than 8 million active accounts and delivered market share gains in Real Estate Secured Lending while
supporting its growing customer base. This quarter, TD added more value for New to Canada customers, including offers for both TD Direct Investing and the TD
Cash Back Visa Card. The Bank also enhanced its TD Student Line of Credit offering, supporting Canada’s next generation of doctors, dentists, and veterinarians.
In addition, Business Banking launched TD Innovation Partners, a full-service banking and financing solutions platform for technology and innovation companies.
The U.S. Retail Bank delivered operating momentum in a challenging environment
U.S. Retail reported net loss for the quarter was $2,275 million (US$1,658 million), compared with reported net income of $1,305 million (US$977 million) in the
third quarter last year. On an adjusted basis, net income was $1,291 million (US$942 million), a decrease of $77 million (US$83 million). Reported net income for
the quarter from the Bank’s investment in The Charles Schwab Corporation (“Schwab”) was $178 million (US$129 million), a decrease of $13 million
(US$13 million).
The U.S. Retail Bank, which excludes the Bank’s investment in Schwab, reported net loss was $2,453 million (US$1,787 million), compared with reported net
income of $1,114 million (US$835 million) in the third quarter last year, primarily reflecting the impact of the provision for investigations related to the Bank’s AML
program. On an adjusted basis net income was $1,113 million, a decrease of $64 million from the third quarter last year, primarily reflecting higher PCL and higher
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 2
non-interest expenses, partially offset by higher revenue. In U.S. dollars, adjusted net income was US$813 million, a decrease of US$70 million, reflecting higher
PCL and lower revenue.
This quarter, the U.S. Retail Bank continued to deliver strong operating momentum with stable deposits excluding Schwab sweep deposits, and year-over-year
peer-leading loan growth. The Commercial Banking Middle Market loan balances and lending fees grew 18% and 9% respectively year-over-year. In addition, TD
Bank, America’s Most Convenient Bank
®
1
, reflecting
investments in digital banking and continued enhancements to customer experience. For the fifth year in a row, TD Auto Finance ranked #1 in Dealer Satisfaction
among Non-Captive National Prime Automotive Finance Lenders in the J.D. Power 2024 U.S. Dealer Financing Satisfaction Study
2
.
Wealth Management and Insurance delivered record revenue while net income reflects impact from severe weather events
Wealth Management and Insurance net income was $430 million, relatively flat compared with the third quarter last year. Driven by strong business fundamentals,
Wealth Management and Insurance delivered record revenues of $3,349 million reflecting higher insurance premiums, asset growth, higher deposit margins, and
increased trades per day in the Direct Investing business. TD Insurance reported higher claims costs due to severe weather events in the Greater Toronto Area
and wildfires in Alberta, in addition to increased claims severity.
Wealth Management and Insurance continued to invest in client-centric innovation this quarter. TD Direct Investing was the first bank-owned brokerage in Canada
to launch partial shares trading, enabling investors to buy and sell a fraction of stocks and exchange-traded funds. TD Insurance supported customers and
communities in their moments of need by providing advice and assistance to those impacted by severe weather-related events this quarter.
Wholesale Banking continued its growth, with revenues up on broader and stronger capabilities
Wholesale Banking reported net income for the quarter was $317 million, an increase of $45 million compared with the third quarter last year, primarily reflecting
higher revenues, partially offset by higher PCL and non-interest expenses. On an adjusted basis, net income was $377 million, flat compared to the third quarter
last year. Revenue for the quarter was $1,795 million, an increase of $227 million, or 14%, compared with the third quarter last year, reflecting higher trading-
related revenue, lending revenue, advisory and underwriting fees.
This quarter, Wholesale Banking continued to gain momentum across its banking and markets businesses. In June, TD Securities colleagues across North
America participated in the annual TD Securities Underwriting Hope Campaign, which raised more than $2.1 million in support of children and youth-related
charities.
Update on TD’s AML remediation program
TD is undertaking a remediation of its U.S. AML Program. As part of this work, the Bank has been making investments in its risk and control infrastructure,
including onboarding leadership with deep subject matter expertise supported by increased staffing resources, implementing new cross-functional procedures for
preventing, detecting and reporting suspicious activity; and investing in data and technology, training and process design to enable improved transaction
monitoring and data analytics capabilities.
Capital
TD’s Common Equity Tier 1 Capital ratio was 12.8%.
Conclusion
“Looking ahead, TD is strong and well-positioned to navigate the macroeconomic environment, invest in both our AML remediation program and our business, and
continue to deepen our relationships with our nearly 28 million customers and clients,” added Masrani. “I want to thank TD bankers around the globe for their hard
work and commitment to the Bank and those we serve."
The foregoing contains forward-looking statements. Please refer to the “Caution Regarding Forward-Looking Statements” on page 4.
1
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TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 3
ENHANCED DISCLOSURE TASK FORCE
The Enhanced Disclosure Task Force (EDTF) was established by the Financial Stability Board in 2012 to identify fundamental disclosure principles,
recommendations and leading practices to enhance risk disclosures of banks. The index below includes the recommendations (as published by the EDTF) and
lists the location of the related EDTF disclosures presented in the third 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 third 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
Third
Quarter
2024
SFI
Third
Quarter
2024
SRD
Third
Quarter
2024
Annual Report
2023
General
1
Present all related risk information together in any particular report.
Refer to below for location of disclosures
2
The bank’s risk terminology and risk measures and present key parameter
values used.
83-88, 92, 97,
99-101, 112-114
3
Describe and discuss top and emerging risks.
76-82
4
Outline plans to meet each new key regulatory ratio once applicable rules
are finalized.
28, 41
72, 109
Risk
Governance
and Risk
Management
and
Business
Model
5
Summarize the bank’s risk management organization, processes, and key
functions.
84-87
6
Description of the bank’s risk culture and procedures applied to support the
culture.
83-84
7
Description of key risks that arise from the bank’s business models and
activities.
71, 83, 88-116
8
Description of stress testing within the bank’s risk governance and capital
frameworks.
70, 87, 95, 112
Capital
Adequacy
and Risk
Weighted
Assets
9
Pillar 1 capital requirements and the impact for global systemically important
banks.
26-28, 81
1-3, 6
67-69, 73,
219
10
Composition of capital and reconciliation of accounting balance sheet to the
regulatory balance sheet.
1-3, 5
67
11
Flow statement of the movements in regulatory capital.
4
12
Discussion of capital planning within a more general discussion of
management’s strategic planning.
68-70, 112
13
Analysis of how risk-weighted asset (RWA) relate to business activities and
related risks.
9-13
70-71
14
Analysis of capital requirements for each method used for calculating RWA.
13
89-92, 94-95
15
Tabulate credit risk in the banking book for Basel asset classes and major
portfolios.
35-52, 58-64
16
Flow statement reconciling the movements of RWA by risk type.
17-18
17
Discussion of Basel III back-testing requirements.
78
91, 95, 99
Liquidity
18
The bank’s management of liquidity needs and liquidity reserves.
33-35, 37-38
101-103,
105-106
Funding
19
Encumbered and unencumbered assets in a table by balance sheet
category.
36
104, 214
20
Tabulate consolidated total assets, liabilities and off-balance sheet
commitments by remaining contractual maturity at the balance sheet date.
41-43
109-111
21
Discussion of the bank’s funding sources and the bank’s funding strategy.
36-41
106-109
Market Risk
22
Linkage of market risk measures for trading and non-trading portfolio and
balance sheet.
30
93
23
Breakdown of significant trading and non-trading market risk factors.
30, 32
93, 96-97
24
Significant market risk measurement model limitations and validation
procedures.
31
94-97, 99
25
Primary risk management techniques beyond reported risk measures and
parameters.
31
94-97
Credit Risk
26
Provide information that facilitates users’ understanding of the bank’s credit
risk profile, including any significant credit risk concentrations.
23-26, 62-70
21-36
1-5, 13, 17,
19-78
54-66, 88-92,
171-178, 187,
190-191,
217-218
27
Description of the bank’s policies for identifying impaired loans.
70
62, 147-148,
154, 177
28
Reconciliation of the opening and closing balances of impaired loans in the
period and the allowance for loan losses.
24, 65-69
25, 29
60, 174-176
29
Analysis of the bank’s counterparty credit risks that arise from derivative
transactions.
53-54, 65-69
91, 159,
181-183, 187,
190-191
30
Discussion of credit risk mitigation, including collateral held for all sources of
credit risk.
91, 151, 159
Other Risks
31
Description of ‘other risk’ types based on management’s classifications and
discuss how each one is identified, governed, measured, and managed.
97-100, 112-116
32
Discuss publicly known risk events related to other risks.
79
81-82, 212-213,
221
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 4
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
4
Caution Regarding Forward-Looking Statements
46
Changes in Internal Control over Financial Reporting
5
Financial Highlights
47
Glossary
6
Significant and Subsequent Events
6
How We Performed
10
Financial Results Overview
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
14
How Our Businesses Performed
50
Interim Consolidated Balance Sheet
21
Quarterly Results
51
Interim Consolidated Statement of Income
22
Balance Sheet Review
52
Interim Consolidated Statement of Comprehensive Income
23
Credit Portfolio Quality
53
Interim Consolidated Statement of Changes in Equity
26
Capital Position
54
Interim Consolidated Statement of Cash Flows
29
Managing Risk
55
Notes to Interim Consolidated Financial Statements
44
Securitization and Off-Balance Sheet Arrangements
44
Accounting Policies and Estimates
82
SHAREHOLDER AND INVESTOR INFORMATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE
This MD&A is presented to enable readers to assess material changes in the financial condition and operating results of TD Bank Group (“TD” or the “Bank”) for
the three and nine months ended July 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 August 21, 2024. Unless otherwise indicated, all amounts are expressed in Canadian dollars
and have been primarily derived from the Bank’s 2023 Consolidated Financial Statements and related Notes or Interim Consolidated Financial Statements and
related Notes, prepared in accordance with IFRS as issued by the IASB. Note that certain comparative amounts have been revised to conform with the
presentation adopted in the current period. Additional information relating to the Bank, including the Bank’s 2023 Annual Information Form, is available on the
Bank’s website at http://www.td.com as well as on SEDAR+ at http://www.sedarplus.ca and on the SEC’s website at http://www.sec.gov (EDGAR filers section).
Caution Regarding Forward-Looking Statements
From time to time, the Bank (as defined in this document) makes written and/or oral forward-looking statements, including in this document, in other filings with Canadian regulators or the
United States (U.S.) Securities and Exchange Commission (SEC), and in other communications. In addition, representatives of the Bank may make forward-looking statements orally to
analysts, investors, the media, and others. All such statements are made pursuant to the “safe harbour” provisions of, and are intended to be forward-looking statements under, applicable
Canadian and U.S. securities legislation, including the
U.S. Private Securities Litigation Reform Act of 1995
. Forward-looking statements include, but are not limited to, statements made in
this document, the Management’s Discussion and Analysis (“2023 MD&A”) in the Bank’s 2023 Annual Report under the heading “Economic Summary and Outlook”, under the headings
“Key Priorities for 2024” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale
Banking segments, and under the heading “2023 Accomplishments and Focus for 2024” for the Corporate segment, and in other statements regarding the Bank’s objectives and priorities
for 2024 and beyond and strategies to achieve them, the regulatory environment in which the Bank operates, and the Bank’s anticipated financial performance. Forward-looking statements
can be identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “outlook”, “plan”, “possible”, “potential”, “predict”, “project”, “should”,
“target”, “will”, and “would” and similar expressions or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.
By their very nature, these forward-looking statements require the Bank to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in light
of the uncertainty related to the physical, financial, economic, political, and regulatory environments, such risks and uncertainties – many of which are beyond the Bank’s control and the
effects of which can be difficult to predict – may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Risk factors that could cause,
individually or in the aggregate, such differences include: strategic, credit, market (including equity, commodity, foreign exchange, interest rate, and credit spreads), operational (including
technology, cyber security, and infrastructure), model, insurance, liquidity, capital adequacy, legal, regulatory compliance and conduct, reputational, environmental and social, and other
risks. Examples of such risk factors include general business and economic conditions in the regions in which the Bank operat es; geopolitical risk; inflation, rising rates and recession;
regulatory oversight and compliance risk; the ability of the Bank to execute on long-term strategies, shorter-term key strategic priorities, including the successful completion of acquisitions
and dispositions and integration of acquisitions, the ability of the Bank to achieve its financial or strategic objectives with respect to its investments, business retention plans, and other
strategic plans; technology and cyber security risk (including cyber-attacks, data security breaches or technology failures) on the Bank’s technologies, systems and networks, those of the
Bank’s customers (including their own devices), and third parties providing services to the Bank; model risk; fraud activity; insider risk; the failure of third parties to comply with their
obligations to the Bank or its affiliates, including relating to the care and control of information, and other risks arising from the Bank’s use of third parties; the impact of new and changes to,
or application of, current laws, rules and regulations, including without limitation tax laws, capital guidelines and liquidity regulatory guidance; increased competition from incumbents and
new entrants (including Fintechs and big technology competitors); shifts in consumer attitudes and disruptive technology; environmental and social risk (including climate change);
exposure related to significant litigation and regulatory matters; ability of the Bank to attract, develop, and retain key talent; changes to the Bank’s credit ratings; changes in foreign
exchange rates, interest rates, credit spreads and equity prices; the interconnectivity of Financial Institutions including existing and potential international debt crises; increased funding
costs and market volatility due to market illiquidity and competition for funding; Interbank Offered Rate (IBOR) transition risk; critical accounting estimates and changes to accounting
standards, policies, and methods used by the Bank; the economic, financial, and other impacts of pandemics; and the occurrence of natural and unnatural catastrophic events and claims
resulting from such events. The Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank’s results. For more
detailed information, please refer to the “Risk Factors and Management” section of the 2023 MD&A, as may be updated in subsequently filed quarterly reports to shareholders and news
releases (as applicable) related to any events or transactions discussed under the heading “Significant Events” or “Significant and Subsequent Events” in the relevant MD&A, which
applicable releases may be found on www.td.com. All such factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, should
be considered carefully when making decisions with respect to the Bank. The Bank cautions readers not to place undue reliance on the Bank’s forward-looking statements.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2023 MD&A under the heading “Economic Summary and
Outlook”, under the headings “Key Priorities for 2024” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and
Insurance, and Wholesale Banking segments, and under the heading “2023 Accomplishments and Focus for 2024” for the Corporate segment, each as may be updated in subsequently
filed quarterly reports to shareholders.
Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s
shareholders and analysts in understanding the Bank’s financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates
presented, and may not be appropriate for other purposes. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to
time by or on its behalf, except as required under applicable law.
This document was reviewed by the Bank’s Audit Committee and was approved by the Bank’s Board of Directors, on the Audit Committee’s recommendation, prior to its release.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 5
TABLE 1: FINANCIAL HIGHLIGHTS
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Results of operations
Total revenue – reported
1
$
14,176
$
13,819
$
12,914
$
41,709
$
37,512
Total revenue – adjusted
1,2
14,238
13,883
13,148
41,892
38,795
Provision for (recovery of) credit losses
1,072
1,071
766
3,144
2,055
Insurance service expenses (ISE)
1
1,669
1,248
1,386
4,283
3,668
Non-interest expenses – reported
1
11,012
8,401
7,359
27,443
22,227
Non-interest expenses – adjusted
1,2
7,208
7,084
6,730
21,417
19,529
Net income (loss) – reported
1
(181)
2,564
2,881
5,207
7,768
Net income – adjusted
1,2
3,646
3,789
3,649
11,072
11,510
Financial position
(billions of Canadian dollars)
Total loans net of allowance for loan losses
$
938.3
$
928.1
$
867.8
$
938.3
$
867.8
Total assets
1,967.2
1,966.7
1,885.2
1,967.2
1,885.2
Total deposits
1,220.6
1,203.8
1,159.5
1,220.6
1,159.5
Total equity
111.6
112.0
112.6
111.6
112.6
Total risk-weighted assets
3
610.5
602.8
544.9
610.5
544.9
Financial ratios
Return on common equity (ROE) – reported
1,4
(1.0)
%
9.5
%
10.8
%
6.5
%
9.7
%
Return on common equity – adjusted
1,2
14.1
14.5
13.8
14.3
14.6
Return on tangible common equity (ROTCE)
1,2,4
(1.0)
13.0
14.6
8.9
13.1
Return on tangible common equity – adjusted
1,2
18.8
19.2
18.2
18.9
19.2
Efficiency ratio – reported
1,4
77.7
60.8
57.0
65.8
59.3
Efficiency ratio – adjusted, net of ISE
1,2,4,5
57.3
56.1
57.2
56.9
55.6
Provision for (recovery of) credit losses as a % of net
average loans and acceptances
0.46
0.47
0.35
0.46
0.32
Common share information – reported
(Canadian dollars)
Per share earnings (loss)
1
Basic
$
(0.14)
$
1.35
$
1.53
$
2.77
$
4.05
Diluted
(0.14)
1.35
1.53
2.76
4.04
Dividends per share
1.02
1.02
0.96
3.06
2.88
Book value per share
4
57.61
57.69
55.49
57.61
55.49
Closing share price
6
81.53
81.67
86.96
81.53
86.96
Shares outstanding (millions)
Average basic
1,747.8
1,762.8
1,834.8
1,762.4
1,827.9
Average diluted
1,748.6
1,764.1
1,836.3
1,763.6
1,829.9
End of period
1,747.9
1,759.3
1,827.5
1,747.9
1,827.5
Market capitalization (billions of Canadian dollars)
$
142.5
$
143.7
$
158.9
$
142.5
$
158.9
Dividend yield
4
5.3
%
5.1
%
4.7
%
5.1
%
4.5
%
Dividend payout ratio
4
n/m
7
75.6
62.6
110.4
71.0
Price-earnings ratio
1,4
19.2
13.8
11.4
19.2
11.4
Total shareholder return (1 year)
4
(1.4)
4.5
9.4
(1.4)
9.4
Common share information – adjusted
(Canadian dollars)
1,2
Per share earnings
1
Basic
$
2.05
$
2.04
$
1.95
$
6.09
$
6.10
Diluted
2.05
2.04
1.95
6.09
6.09
Dividend payout ratio
49.7
%
49.9
%
49.2
%
50.1
%
47.2
%
Price-earnings ratio
1
10.3
10.5
10.5
10.3
10.5
Capital ratios
3
Common Equity Tier 1 Capital ratio
12.8
%
13.4
%
15.2
%
12.8
%
15.2
%
Tier 1 Capital ratio
14.6
15.1
17.2
14.6
17.2
Total Capital ratio
16.3
17.1
19.6
16.3
19.6
Leverage ratio
4.1
4.3
4.6
4.1
4.6
TLAC ratio
29.1
30.6
35.0
29.1
35.0
TLAC Leverage ratio
8.3
8.7
9.3
8.3
9.3
1
Insurance Contracts
quarter 2024 Interim Consolidated Financial Statements for further details.
2
accordance with IFRS as the “reported” results. The Bank also utilizes non-GAAP financial measures such as “adjusted” results and non-GAAP ratios to assess each of its businesses
and to measure overall Bank performance. To arrive at adjusted results, the Bank adjusts reported results for “items of note”. Refer to “Significant and Subsequent Events” and “How We
Performed” sections of this document for further explanation, a list of the items of note, and a reconciliation of adjusted to reported results. Non-GAAP financial measures and ratios used
in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers.
3
(CAR), Leverage Requirements (LR), and Total Loss Absorbing Capacity (TLAC) guidelines. Refer to the “Capital Position” section of this document for further details.
4
5
Q3 2024: $12,569 million, Q2 2024: $12,635 million, Q3 2023: $11, 762 million, 2024 YTD: $37,609 million, 2023 YTD: $35,127 million. Effective the first quarter of 2024, the composition
of this non-GAAP ratio and the comparative amounts have been revised.
6
7
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 6
SIGNIFICANT AND SUBSEQUENT EVENTS
a) Investigations Related to the Bank’s AML Program
The Bank continues to actively pursue a global resolution of the civil and criminal investigations into its U.S.
Bank Secrecy Act
(the “AML Program”) by its U.S. prudential regulators, the Financial Crimes Enforcement Network (FinCEN), and the U.S. Department of Justice (DOJ). For
additional information about these matters, including provisions recorded in connection with such investigations, refer to Note 19 of the Bank’s third quarter
2024 Interim Consolidated Financial Statements.
As previously disclosed, the Bank is undertaking a remediation of its AML Program. This is a cross-functional undertaking, spanning business lines and control
functions, and is a priority for the Bank. As part of this work, the Bank has been making investments in its risk and controls infrastructure, including: (i) onboarding
leadership with deep subject matter expertise supported by increased staffing resources; (ii) implementing new cross-functional procedures for preventing,
detecting, and reporting suspicious activity; (iii) investing in training and process design; and (iv) investing in data and technology to enable improved transaction
monitoring and data analytics capabilities. The Bank has
established a dedicated program management infrastructure to monitor execution against the remediation
program
.
additional investments.
b)
Restructuring Charges
The Bank continued to undertake certain measures in the third quarter of 2024 to reduce its cost base and achieve greater efficiency. In connection with these
measures, the Bank incurred $110 million and $566 million, respectively, of restructuring charges for the three and nine months ended July 31, 2024, which
primarily relate to employee severance and other personnel-related costs and real estate optimization. The restructuring program has concluded.
c) Federal Deposit Insurance Corporation Special Assessment
On November 16, 2023, the FDIC announced a final rule that implements a special assessment to recover the losses to the Deposit Insurance Fund arising from
the protection of uninsured depositors during the U.S. bank failures in the spring of 2023. The special assessment resulted in the recognition of $411 million
(US$300 million) pre-tax in non-interest expenses in the first quarter of the Bank’s fiscal 2024.
On February 23, 2024, the FDIC notified all institutions subject to the special assessment that its estimate of total losses increased compared to the amount
communicated with the final rule in November 2023. Accordingly, the Bank recognized an additional expense for the special assessment of $103 million
(US$75 million)
in the second quarter of the Bank’s fiscal 2024. The final amount of the Bank’s special assessment may be further updated as the FDIC
determines the actual losses to the Deposit Insurance Fund.
d) Sale of Schwab Common Shares
On August 21, 2024, the Bank announced that it had sold 40.5 million shares of common stock of Schwab. The shares are sold for proceeds of approximately
$3.4 billion (US$2.5 billion). The share sale will reduce the Bank’s ownership interest in Schwab from 12.3% to 10.1%. The Bank is expected to recognize
approximately $1.0 billion (US$0.7 billion) as other income (net of $0.5 billion (US$0.4 billion) loss from accumulated other comprehensive income (AOCI)
reclassified to earnings), in the fourth quarter of fiscal 2024.
HOW WE PERFORMED
CORPORATE OVERVIEW
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (“TD” or the “Bank”). TD is the sixth largest bank in North America by
assets and serves more than 27.5 million customers in four key businesses operating in a number of locations in financial centres around the globe: Canadian
Personal and Commercial Banking, including TD Canada Trust and TD Auto Finance Canada; U.S. Retail, including TD Bank, America’s Most Convenient Bank
®
,
TD Auto Finance U.S., TD Wealth (U.S.), and an investment in The Charles Schwab Corporation; Wealth Management and Insurance, including TD Wealth
(Canada), TD Direct Investing, and TD Insurance; and Wholesale Banking, including TD Securities and TD Cowen. TD also ranks among the world’s leading
online financial services firms, with more than 17 million active online and mobile customers. TD had $1.97 trillion in assets on July 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
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 7
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, 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 third 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.
On May 4, 2023, the Bank and Schwab entered into an amended insured deposit account agreement (the “2023 Schwab IDA Agreement”), which replaced the
2019 Schwab IDA Agreement. Pursuant to the 2023 Schwab IDA Agreement, the Bank continues to make sweep deposit accounts available to clients of Schwab.
Schwab designates a portion of the deposits with the Bank as fixed-rate obligation amounts (FROA). Remaining deposits over FROA are designated as floating-
rate obligations. In comparison to the 2019 Schwab IDA Agreement, the 2023 Schwab IDA Agreement extends the initial expiration date by three years to
July 1, 2034 and provides for lower deposit balances in its first six years, followed by higher balances in the later years. Specifically, until September 2025, the
aggregate FROA will serve as the floor. Thereafter, the floor will be set at US$60 billion. In addition, Schwab has the option to buy down up to $6.8 billion
(US$5 billion) of FROA by paying the Bank certain fees in accordance with the 2023 Schwab IDA Agreement, subject to certain limits. Refer to the “Related Party
Transactions” section in the 2023 MD&A for further details.
During the first quarter of 2024, Schwab exercised its option to buy down the remaining $0.7 billion (US$0.5 billion) of the US$5 billion FROA buydown
allowance and paid $32 million (US$23 million) in termination fees to the Bank in accordance with the 2023 Schwab IDA Agreement. By the end of the first quarter
of 2024, Schwab had completed its buy down of the full US$5 billion FROA buydown allowance and had paid a total of $337 million (US$250 million) in termination
fees to the Bank. The fees were intended to compensate the Bank for losses incurred from discontinuing certain hedging relationships and for lost revenues. The
net impact was recorded in net interest income.
The following table provides the operating results on a reported basis for the Bank.
TABLE 2: OPERATING RESULTS – Reported
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Net interest income
$
7,579
$
7,465
$
7,289
$
22,532
$
22,450
Non-interest income
1
6,597
6,354
5,625
19,177
15,062
Total revenue
1
14,176
13,819
12,914
41,709
37,512
Provision for (recovery of) credit losses
1,072
1,071
766
3,144
2,055
Insurance service expenses
1
1,669
1,248
1,386
4,283
3,668
Non-interest expenses
1
11,012
8,401
7,359
27,443
22,227
Income before income taxes and share of net income from
investment in Schwab
1
423
3,099
3,403
6,839
9,562
Provision for (recovery of) income taxes
1
794
729
704
2,157
2,502
Share of net income from investment in Schwab
190
194
182
525
708
Net income (loss) – reported
1
(181)
2,564
2,881
5,207
7,768
Preferred dividends and distributions on other equity instruments
69
190
74
333
367
Net income (loss) attributable to common shareholders
1
$
(250)
$
2,374
$
2,807
$
4,874
$
7,401
1
Consolidated Financial Statements for further details.
TD BANK GROUP • THIRD 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 and Subsequent Events”
or “How We Performed” sections.
TABLE 3: NON-GAAP FINANCIAL MEASURES – Reconciliation of Adjusted to Reported Net Income
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Operating results – adjusted
Net interest income
1
$
7,641
$
7,529
$
7,364
$
22,715
$
22,836
Non-interest income
1,2,3
6,597
6,354
5,784
19,177
15,959
Total revenue
2
14,238
13,883
13,148
41,892
38,795
Provision for (recovery of) credit losses
1,072
1,071
766
3,144
2,055
Insurance service expenses
2
1,669
1,248
1,386
4,283
3,668
Non-interest expenses
2,4
7,208
7,084
6,730
21,417
19,529
Income before income taxes and share of net income from
investment in Schwab
4,289
4,480
4,266
13,048
13,543
Provision for income taxes
868
920
845
2,660
2,872
Share of net income from investment in Schwab
5
225
229
228
684
839
Net income – adjusted
2
3,646
3,789
3,649
11,072
11,510
Preferred dividends and distributions on other equity instruments
69
190
74
333
367
Net income available to common shareholders – adjusted
3,577
3,599
3,575
10,739
11,143
Pre-tax adjustments for items of note
Amortization of acquired intangibles
6
(64)
(72)
(88)
(230)
(221)
Acquisition and integration charges related to the Schwab transaction
4,5
(21)
(21)
(54)
(74)
(118)
Share of restructuring and other charges from investment in Schwab
5
–
–
–
(49)
–
Restructuring charges
4
(110)
(165)
–
(566)
–
Acquisition and integration-related charges
4
(78)
(102)
(143)
(297)
(237)
Charges related to the terminated FHN acquisition
4
–
–
(84)
–
(344)
Payment related to the termination of the FHN transaction
4
–
–
(306)
–
(306)
Impact from the terminated FHN acquisition-related
capital hedging strategy
1
(62)
(64)
(177)
(183)
(1,187)
Impact of retroactive tax legislation on payment card clearing services
3
–
–
(57)
–
(57)
Civil matter provision/Litigation settlement
3,4
–
(274)
–
(274)
(1,642)
FDIC special assessment
4
–
(103)
–
(514)
–
Provision for investigations related to the Bank’s AML program
4
(3,566)
(615)
–
(4,181)
–
Less: Impact of income taxes
Amortization of acquired intangibles
(8)
(10)
(13)
(33)
(33)
Acquisition and integration charges related to the Schwab transaction
(3)
(5)
(10)
(14)
(20)
Restructuring charges
(29)
(43)
–
(150)
–
Acquisition and integration-related charges
(18)
(22)
(38)
(64)
(53)
Charges related to the terminated FHN acquisition
–
–
(21)
–
(85)
Impact from the terminated FHN acquisition-related
capital hedging strategy
(16)
(16)
(43)
(46)
(292)
Impact of retroactive tax legislation on payment card clearing services
–
–
(16)
–
(16)
Civil matter provision/Litigation settlement
–
(69)
–
(69)
(456)
FDIC special assessment
–
(26)
–
(127)
–
Canada Recovery Dividend (CRD) and federal tax rate
increase for fiscal 2022
7
–
–
–
–
585
Total adjustments for items of note
(3,827)
(1,225)
(768)
(5,865)
(3,742)
Net income (loss) attributable to common shareholders – reported
$
(250)
$
2,374
$
2,807
$
4,874
$
7,401
1
Prior to May 4, 2023, the impact shown covers periods before the termination of the FHN transaction and includes the following components, reported in the Corporate segment: i) mark-to-market gains
(losses) on interest rate swaps recorded in non-interest income – Q3 2023: ($125) million, 2023 YTD: ($1,386) million ii) basis adjustment amortization related to de-designated fair value hedge
accounting relationships, recorded in net interest income – Q3 2023: $11 million, 2023 YTD: $262 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 – Q3 2023: $23 million, 2023 YTD: $585 million. After the termination of the merger agreement, the residual impact of
the strategy is reversed through net interest income – Q3 2024: ($62) million, Q2 2024: ($64) million, 2024 YTD: ($183) million, Q3 2023: ($63) million, 2023 YTD: ($63) million.
2
For the three and nine months ended July 31, 2023, certain amounts have been restated for the adoption of IFRS 17. Refer to Note 2 of the Bank’s third quarter 2024 Interim Consolidated Financial
Statements for further details.
3
i. Stanford litigation settlement – 2023 YTD: $39 million. This reflects the foreign exchange loss and is reported in the Corporate segment; and
ii. Impact of retroactive tax legislation on payment card clearing services – Q3 2023: $57 million, reported in the Corporate segment.
4
Adjusted non-interest expenses exclude the following items of note:
i. Amortization of acquired intangibles – Q3 2024: $34 million, Q2 2024: $42 million, 2024 YTD: $139 million, Q3 2023: $58 million, 2023 YTD: $131 million, reported in the Corporate segment;
ii. The Bank’s own acquisition and integration charges related to the Schwab transaction – Q3 2024: $16 million, Q2 2024: $16 million, 2024 YTD: $55 million, Q3 2023: $38 million, 2023 YTD:
$77 million, reported in the Corporate segment;
iii. Restructuring charges – Q3 2024: $110 million, Q2 2024: $165 million, 2024 YTD: $566 million, reported in the Corporate segment;
iv. Acquisition and integration-related charges – Q3 2024: $78 million, Q2 2024: $102 million, 2024 YTD: $297 million, Q3 2023: $143 million, 2023 YTD: $237 million, reported in the Wholesale
Banking segment;
v. Charges related to the terminated FHN acquisition – Q3 2023: $84 million, 2023 YTD: $344 million, reported in the U.S. Retail segment;
vi. Payment related to the termination of the First Horizon transaction – Q3 2023: $306 million, reported in the Corporate segment;
vii. Civil matter provision/Litigation settlement – Q2 2024: $274 million, 2024 YTD $274 million in respect of a civil matter, 2023 YTD: $1,603 million in respect of the Stanford litigation settlement,
reported in the Corporate segment;
viii. FDIC special assessment – Q2 2024: $103 million, 2024 YTD: $514 million, reported in the U.S. Retail segment; and
ix. Provision for investigations related to the Bank’s AML program – Q3 2024: $3,566 million, Q2 2024: $615 million, 2024 YTD: $4,181 million, reported in the U.S. Retail segment.
5
Adjusted share of net income from investment in Schwab excludes the following items of note on an after-tax basis. The earnings impact of these items is reported in the Corporate segment:
i. Amortization of Schwab-related acquired intangibles – Q3 2024: $30 million, Q2 2024: $30 million, 2024 YTD: $91 million, Q3 2023: $30 million, 2023 YTD: $90 million;
ii. The Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade – Q3 2024: $5 million, Q2 2024: $5 million, 2024 YTD: $19 million,
Q3 2023: $16 million, 2023 YTD: $41 million;
iii. The Bank’s share of restructuring charges incurred by Schwab – 2024 YTD: $27 million; and
iv. The Bank’s share of the FDIC special assessment charge incurred by Schwab – 2024 YTD: $22 million.
6
Amortization of acquired intangibles relates to intangibles acquired as a result of asset acquisitions and business combinations, including the after-tax amounts for amortization of acquired intangibles
relating to the Share of net income from investment in Schwab, reported in the Corporate segment. Refer to footnotes 4 and 5 for amounts.
7
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 9
TABLE 4: RECONCILIATION OF REPORTED TO ADJUSTED EARNINGS PER SHARE
1
(Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Basic earnings (loss) per share – reported
2
$
(0.14)
$
1.35
$
1.53
$
2.77
$
4.05
Adjustments for items of note
2.19
0.69
0.42
3.32
2.05
Basic earnings per share – adjusted
2
$
2.05
$
2.04
$
1.95
$
6.09
$
6.10
Diluted earnings (loss) per share – reported
2
$
(0.14)
$
1.35
$
1.53
$
2.76
$
4.04
Adjustments for items of note
2.19
0.69
0.42
3.32
2.05
Diluted earnings per share – adjusted
2
$
2.05
$
2.04
$
1.95
$
6.09
$
6.09
1
rounding.
2
Consolidated Financial Statements for further details.
TABLE 5: AMORTIZATION OF INTANGIBLES, NET OF INCOME TAXES
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Schwab
1
$
30
$
30
$
30
$
91
$
90
Wholesale Banking related intangibles
20
27
37
89
71
Other
6
5
8
17
27
Included as items of note
56
62
75
197
188
Software and asset servicing rights
115
104
90
315
272
Amortization of intangibles, net of income taxes
$
171
$
166
$
165
$
512
$
460
1
Return on Common Equity
The consolidated Bank ROE is calculated as reported net income available to common shareholders as a percentage of average common equity. The
consolidated Bank adjusted ROE is calculated as adjusted net income available to common shareholders as a percentage of average common equity. Adjusted
ROE is a non-GAAP financial ratio and can be utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated as the segment net income attributable to common shareholders as a percentage of average allocated capital. The
Bank’s methodology for allocating capital to its business segments is largely aligned with the common equity capital requirements under Basel III. Capital allocated
to the business segments was increased to 11.5% Common Equity Tier 1 (CET1) Capital effective the first quarter of 2024, compared with 11% in fiscal 2023.
TABLE 6: RETURN ON COMMON EQUITY
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Average common equity
$
100,677
$
101,137
$
102,750
$
100,523
$
101,832
Net income (loss) attributable to common shareholders – reported
1
(250)
2,374
2,807
4,874
7,401
Items of note, net of income taxes
3,827
1,225
768
5,865
3,742
Net income available to common shareholders – adjusted
1
$
3,577
$
3,599
$
3,575
$
10,739
$
11,143
Return on common equity – reported
1
(1.0)
%
9.5
%
10.8
%
6.5
%
9.7
%
Return on common equity – adjusted
1
14.1
14.5
13.8
14.3
14.6
1
Consolidated Financial Statements for further details.
Return on Tangible Common Equity
Tangible common equity (TCE) is calculated as common shareholders’ equity less goodwill, imputed goodwill and intangibles on the investments in Schwab and
other acquired intangible assets, net of related deferred tax liabilities. ROTCE is calculated as reported net income available to common shareholders after
adjusting for the after-tax amortization of acquired intangibles, which are treated as an item of note, as a percentage of average TCE. Adjusted ROTCE is
calculated using reported net income available to common shareholders, adjusted for all items of note, as a percentage of average TCE. TCE, ROTCE, and
adjusted ROTCE can be utilized in assessing the Bank’s use of equity. TCE is a non-GAAP financial measure, and ROTCE and adjusted ROTCE are non-GAAP
ratios.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 10
TABLE 7: RETURN ON TANGIBLE COMMON EQUITY
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Average common equity
$
100,677
$
101,137
$
102,750
$
100,523
$
101,832
Average goodwill
18,608
18,380
18,018
18,403
17,788
Average imputed goodwill and intangibles on
investments in Schwab
6,087
6,051
6,058
6,066
6,123
Average other acquired intangibles
1
544
574
683
578
569
Average related deferred tax liabilities
(228)
(228)
(132)
(230)
(165)
Average tangible common equity
75,666
76,360
78,123
75,706
77,517
Net income (loss) attributable to common shareholders – reported
2
(250)
2,374
2,807
4,874
7,401
Amortization of acquired intangibles, net of income taxes
56
62
75
197
188
Net income (loss) attributable to common shareholders adjusted for
amortization of acquired intangibles, net of income taxes
2
(194)
2,436
2,882
5,071
7,589
Other items of note, net of income taxes
3,771
1,163
693
5,668
3,554
Net income available to common shareholders – adjusted
2
$
3,577
$
3,599
$
3,575
$
10,739
$
11,143
Return on tangible common equity
2
(1.0)
%
13.0
%
14.6
%
8.9
%
13.1
%
Return on tangible common equity – adjusted
2
18.8
19.2
18.2
18.9
19.2
1
2
Consolidated Financial Statements for further details.
IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
The following table reflects the estimated impact of foreign currency translation on key U.S. Retail segment income statement items. The impact is calculated as
the difference in translated earnings using the average U.S. to Canadian dollars exchange rates in the periods noted.
TABLE 8: IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31, 2024 vs.
July 31, 2024 vs.
July 31, 2023
July 31, 2023
Increase (Decrease)
Increase (Decrease)
U.S. Retail Bank
Total revenue – reported
$
92
$
109
Total revenue – adjusted
1
92
109
Non-interest expenses – reported
143
155
Non-interest expenses – adjusted
1
50
59
Net income (loss) – reported, after-tax
(63)
(60)
Net income – adjusted, after-tax
1
29
34
Share of net income from investment in Schwab
2
3
4
U.S. Retail segment net income (loss) – reported, after-tax
(60)
(56)
U.S. Retail segment net income – adjusted, after-tax
1
32
38
Earnings (loss) per share
(Canadian dollars)
Basic – reported
$
(0.03)
$
(0.03)
Basic – adjusted
1
0.02
0.02
Diluted – reported
(0.03)
(0.03)
Diluted – adjusted
1
0.02
0.02
Average foreign exchange rate (equivalent of CAD $1.00)
For the three months ended
For the nine months ended
July 31
July 31
July 31
July 31
2024
2023
2024
2023
U.S. dollar
$
0.730
$
0.750
$
0.735
$
0.743
1
document.
2
FINANCIAL RESULTS OVERVIEW
Performance Summary
Outlined below is an overview of the Bank’s performance for the third quarter of 2024. Shareholder performance indicators help guide and benchmark the Bank’s
accomplishments. For the purposes of this analysis, the Bank utilizes adjusted earnings, which excludes items of note from the reported results that are prepared
in accordance with IFRS. Reported and adjusted results and items of note are explained in “Non-GAAP and Other Financial Measures” in the “How We Performed”
section of this document.
●
●
●
3
average of +14.3%.
Net Income
Quarterly comparison – Q3 2024 vs. Q3 2023
Reported net loss for the quarter was $181 million, compared with reported net income of $2,881 million in the third quarter last year, primarily reflecting the impact
of the provision for investigations related to the Bank’s AML program in U.S. Retail, higher non-interest expenses, higher PCL, and higher insurance service
expenses, partially offset by higher revenues and the prior year payment related to the termination of the First Horizon transaction in the Corporate segment. On
an adjusted basis, net income for the quarter was $3,646 million, relatively flat compared with the third quarter last year.
3
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 11
By segment, the decrease in reported net income reflects decreases in U.S. Retail of $3,580 million and in Wealth Management and Insurance of $1 million,
partially offset by increases in the Corporate segment of $257 million, in Canadian Personal and Commercial Banking of $217 million, and in Wholesale Banking of
$45 million.
Quarterly comparison – Q3 2024 vs. Q2 2024
Reported net loss for the quarter was $181 million, compared with reported net income of $2,564 million in the prior quarter, primarily reflecting the impact of the
provision for investigations related to the Bank’s AML program in U.S. Retail and higher insurance service expenses, partially offset by higher revenues and the
prior quarter impact of a civil matter provision in the Corporate segment. Adjusted net income for the quarter decreased $143 million, or 4%.
By segment, the decrease in reported net income reflects decreases in U.S. Retail of $2,855 million, in Wealth Management and Insurance of $191 million, and
in Wholesale Banking of $44 million, partially offset by increases in the Corporate segment of $212 million and in Canadian Personal and Commercial Banking of
$133 million.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Reported net income of $5,207 million decreased $2,561 million, or 33%, compared with the same period last year. The decrease reflects the impact of the
provision for investigations related to the Bank’s AML program in U.S. Retail, higher non-interest expenses, and higher PCL, partially offset by higher revenues,
and the prior period impacts of the Stanford litigation settlement and the terminated FHN acquisition-related capital hedging strategy in the Corporate segment.
Adjusted net income was $11,072 million, a decrease of $438 million, or 4%.
By segment, the decrease in reported net income reflects a decrease in U.S. Retail of $5,083 million, partially offset by increases in the Corporate segment of
$1,908 million, in Canadian Personal and Commercial Banking of $387 million, in Wholesale Banking of $130 million, and in Wealth Management and Insurance of
$97 million.
Net Interest Income
Quarterly comparison – Q3 2024 vs. Q3 2023
Reported net interest income for the quarter was $7,579 million, an increase of $290 million, or 4%, compared with the third quarter last year, primarily reflecting
volume growth and higher deposit margins in Canadian Personal and Commercial Banking
, t
he prior period impact of the terminated FHN acquisition-related
capital hedging strategy in the Corporate segment, and higher loan volumes in U.S. Retail, partially offset by lower net interest income in Wholesale Banking. On
an adjusted basis, net interest income was $7,641 million, an increase of $277 million, or 4%.
By segment, the increase in reported net interest income reflects increases in Canadian Personal and Commercial Banking of $423 million, in U.S. Retail of
$59 million, in Wealth Management and Insurance of $58 million, and in the Corporate segment of $46 million, partially offset by a decrease in Wholesale Banking
of $296 million.
Quarterly comparison – Q3 2024 vs. Q2 2024
Reported net interest income for the quarter increased $114 million, or 2%, compared with the prior quarter, primarily reflecting volume growth in Canadian
Personal and Commercial Banking, and the impact of fewer days in the prior quarter, partially offset by lower net interest income in Wholesale Banking. On an
adjusted basis, net interest income increased $112 million, or 1%.
By segment, the increase in reported net interest income reflects increases in Canadian Personal and Commercial Banking of $182 million, in U.S. Retail of
$95 million, in the Corporate segment of $40 million, and in Wealth Management and Insurance of $12 million, partially offset by a decrease in Wholesale Banking
of $215 million.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Reported net interest income was $22,532 million, an increase of $82 million, compared with the same period last year, reflecting volume growth and higher
deposit margins in Canadian Personal and Commercial Banking, higher loan volumes in U.S. Retail, and higher deposit margins in Wealth Management, partially
offset by lower net interest income in Wholesale Banking, lower deposit volumes in U.S. Retail, and
t
he prior period impact of the terminated FHN acquisition-
related capital hedging strategy in the Corporate segment
. O
n an adjusted basis, net interest income was $22,715 million, a decrease of $121 million, or 1%.
By segment, the increase in reported net interest income reflects increases in Canadian Personal and Commercial Banking of $1,152 million, in the Corporate
segment of $158 million, and in Wealth Management and Insurance of $106 million, partially offset by decreases in Wholesale Banking of $932 million and in
U.S. Retail of $402 million.
Non-Interest Income
Quarterly comparison – Q3 2024 vs. Q3 2023
Reported non-interest income for the quarter was $6,597 million, an increase of $972 million, or 17%, compared with the third quarter last year, primarily reflecting
higher trading-related revenue, lending revenue, advisory fees, and underwriting fees in Wholesale Banking and higher insurance premiums. On an adjusted
basis, non-interest income was $6,597 million, an increase of $813 million, or 14%.
By segment, the increase in reported non-interest income reflects increases in Wholesale Banking of $523 million, in Wealth Management and Insurance of
$333 million, in the Corporate segment of $96 million, in U.S. Retail of $10 million, and in Canadian Personal and Commercial Banking of $10 million.
Quarterly comparison – Q3 2024 vs. Q2 2024
Non-interest income for the quarter increased $243 million, or 4%, compared with the prior quarter, primarily reflecting higher trading-related revenue in Wholesale
Banking and seasonally higher insurance premiums, partially offset by the net change in fair value of loan underwriting commitments recorded in the prior quarter
in Wholesale Banking.
By segment, the increase in non-interest income reflects increases in Wealth Management and Insurance of $223 million, Wholesale Banking of $70 million, and
in U.S. Retail of $10 million, partially offset by decreases in the Corporate segment of $42 million and in Canadian Personal and Commercial Banking of
$18 million.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Reported non-interest income was $19,177 million, an increase of $4,115 million, or 27%, compared with the same period last year, primarily reflecting higher
interest rate and credit trading-related revenue, lending revenue, advisory, and underwriting fees in Wholesale Banking, the prior period impact of the terminated
FHN acquisition-related capital hedging strategy in the Corporate segment, higher insurance premiums, and fee-based revenue commensurate with market growth
and transaction revenue in Wealth Management. Adjusted non-interest income was $19,177 million, an increase of $3,218 million, or 20%.
By segment, the increase in reported non-interest income reflects increases in Wholesale Banking of $2,117 million, in the Corporate segment of $1,032 million,
in Wealth Management and Insurance of $818 million, in U.S. Retail of $137 million, and in Canadian Personal and Commercial Banking of $11 million.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 12
Provision for Credit Losses
Quarterly comparison – Q3 2024 vs. Q3 2023
PCL for the quarter was $1,072 million, an increase of $306 million compared with the third quarter last year. PCL – impaired was $920 million, an increase of
$257 million, or 39%, largely reflecting credit migration in the consumer and Wholesale lending portfolios. PCL – performing was $152 million, an increase of
$49 million. The performing provisions this quarter largely reflect current credit conditions including some further credit migration in the commercial and Canadian
consumer lending portfolios. Total PCL for the quarter as an annualized percentage of credit volume was 0.46%.
By segment, PCL was higher by $129 million in U.S. Retail, by $93 million in Wholesale Banking, by $56 million in Canadian Personal and Commercial
Banking, and by $28 million in the Corporate segment.
Quarterly comparison – Q3 2024 vs. Q2 2024
PCL for the quarter was $1,072 million, an increase of $1 million compared with the prior quarter. PCL – impaired was $920 million, an increase of $50 million, or
6%, largely reflecting credit migration in the Wholesale segment, partially offset by lower provisions in the Canadian commercial and consumer lending portfolios.
PCL – performing was $152 million, a decrease of $49 million. The performing provisions this quarter largely reflect current credit conditions including some further
credit migration in the commercial and Canadian consumer lending portfolios. Total PCL for the quarter as an annualized percentage of credit volume was 0.46%.
By segment, PCL was higher by $63 million in Wholesale Banking, and lower by $32 million in Canadian Personal and Commercial Banking, by $28 million in
the Corporate segment, and by $2 million in U.S. Retail.
Year-to-date comparison – Q3 2024 vs. Q3 2023
PCL was $3,144 million, an increase of $1,089 million compared with the same period last year. PCL – impaired was $2,724 million, an increase of $957 million,
reflecting credit migration in the consumer, commercial, and Wholesale lending portfolios. PCL – performing was $420 million, an increase of $132 million. The
current year performing provisions reflect credit conditions including credit migration, and volume growth. Total PCL as an annualized percentage of credit volume
was 0.46%.
By segment, PCL was higher in U.S. Retail by $504 million, in Canadian Personal and Commercial Banking by $372 million, in Wholesale Banking by
$114 million, in the Corporate segment by $100 million, and lower in Wealth Management and Insurance by $1 million.
TABLE 9: PROVISION FOR CREDIT LOSSES
1
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Provision for (recovery of) credit losses – Stage 3 (impaired)
Canadian Personal and Commercial Banking
$
338
$
397
$
285
$
1,099
$
739
U.S. Retail
331
311
259
1,019
657
Wealth Management and Insurance
–
–
–
–
1
Wholesale Banking
109
(1)
10
113
16
Corporate
2
142
163
109
493
354
Total provision for (recovery of) credit losses – Stage 3
920
870
663
2,724
1,767
Provision for (recovery of) credit losses – Stage 1
and Stage 2 (performing)
Canadian Personal and Commercial Banking
97
70
94
226
214
U.S. Retail
47
69
(10)
124
(18)
Wealth Management and Insurance
–
–
–
–
–
Wholesale Banking
9
56
15
70
53
Corporate
2
(1)
6
4
–
39
Total provision for (recovery of) credit losses – Stage 1
and Stage 2
152
201
103
420
288
Total provision for (recovery of) credit losses
$
1,072
$
1,071
$
766
$
3,144
$
2,055
-
1
2
Insurance Service Expenses
Quarterly comparison – Q3 2024 vs. Q3 2023
Insurance service expenses for the quarter were $1,669 million, an increase of $283 million, or 20%, compared with the third quarter last year, primarily reflecting
increased claims severity, less favourable prior years’ claims development and larger impact of severe weather-related events.
Quarterly comparison – Q3 2024 vs. Q2 2024
Insurance service expenses for the quarter increased $421 million, or 34%, compared with the prior quarter, reflecting more severe weather-related events,
increased claims severity, seasonally higher claims and less favourable prior years’ claims development.
Yearto-date comparison – Q3 2024 vs. Q3 2023
Insurance service expenses were $4,283 million, an increase of $615 million, or 17%, compared with the same period last year, primarily reflecting increased
claims severity, less favourable prior years’ claims development and larger impact of severe weather-related events.
Non-Interest Expenses and Efficiency Ratio
Quarterly comparison – Q3 2024 vs. Q3 2023
Reported non-interest expenses were $11,012 million, an increase of $3,653 million, or 50%, compared with the third quarter last year, primarily reflecting the
impact of the provision for investigations related to the Bank’s AML program in U.S. Retail, investments in risk and control infrastructure, higher employee-related
expenses, and restructuring charges, partially offset by a prior year payment related to termination of the First Horizon transaction in the Corporate segment. On
an adjusted basis, non-interest expenses were $7,208 million, an increase of $478 million, or 7%.
By segment, the increase in reported non-interest expenses reflects increases in U.S. Retail of $3,526 million, in Wealth Management and Insurance of
$125 million, in Canadian Personal and Commercial Banking of $72 million, and in Wholesale Banking of $63 million, partially offset by a decrease in the
Corporate segment of $133 million.
The Bank’s reported efficiency ratio was 77.7%, compared to 57.0% in the third quarter last year. The Bank’s adjusted efficiency ratio, net of ISE was 57.3%,
compared with 57.2% in the third quarter last year.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 13
Quarterly comparison – Q3 2024 vs. Q2 2024
Reported non-interest expenses increased $2,611 million, or 31%, compared with the prior quarter, primarily reflecting the impact of the provision for investigations
related to the Bank’s AML program in U.S. Retail and higher investments in risk and control infrastructure, partially offset by the prior quarter impact of a civil
matter provision in the Corporate segment and lower employee-related expenses. Adjusted non-interest expenses increased $124 million, or 2%.
By segment, the increase in reported non-interest expenses reflects increases in U.S. Retail of $2,901 million, in Wealth Management and Insurance of
$77 million, and in Canadian Personal and Commercial Banking of $10 million, partially offset by decreases in the Corporate segment of $257 million and in
Wholesale Banking of $120 million.
The Bank’s reported efficiency ratio was 77.7%, compared with 60.8% in the prior quarter. The Bank’s adjusted efficiency ratio, net of ISE was 57.3%,
compared with 56.1% in the prior quarter.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Reported non-interest expenses of $27,443 million increased $5,216 million, or 23%, compared with the same period last year, primarily reflecting the impact of
the provision for investigations related to the Bank’s AML program in U.S. Retail, higher employee-related expenses, including TD Cowen, restructuring charges in
the Corporate segment, FDIC special assessment in U.S. Retail, and investments in risk and control infrastructure in the current period, partially offset by the prior
period impacts of the Stanford litigation settlement and payment related to termination of the First Horizon transaction in the Corporate segment. On an adjusted
basis, non-interest expenses were $21,417 million, an increase of $1,888 million, or 10%.
By segment, the increase in reported non-interest expenses reflects increases in U.S. Retail of $4,471 million, in Wholesale Banking of $921 million, in
Canadian Personal and Commercial Banking of $247 million, and in Wealth Management and Insurance of $227 million, partially offset by a decrease in the
Corporate segment of $650 million.
The Bank’s reported efficiency ratio was 65.8%, compared with 59.3% in the same period last year. The Bank’s adjusted efficiency ratio, net of ISE was 56.9%,
compared with 55.6% in the same period last year.
Income Taxes
The Bank’s effective income tax rate on a reported basis was 187.7% for the current quarter, compared with 20.7% in the third quarter last year and 23.5% in the
prior quarter. The high rate in the current quarter reflects the tax impact of the non-deductible provision for investigations related to the Bank’s AML program.
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 20.2% for the current quarter, compared with 19.8% in the
third quarter last year and 20.5% in the prior quarter. The year-over-year increase primarily reflects lower tax exempt dividend income in the current quarter and
the recognition of historical tax losses at a higher Canadian tax rate in the prior year. The quarter over quarter change primarily reflects earnings mix.
TABLE 10: INCOME TAXES – Reconciliation of Reported to Adjusted Provision for Income Taxes
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Income taxes at Canadian statutory income
tax rate
$
118
27.8
%
$
861
27.8
%
$
944
27.7
%
$
1,899
27.8
%
$
2,653
27.7
%
Increase (decrease) resulting from:
Dividends received
(3)
(0.8)
(3)
(0.1)
(28)
(0.8)
(25)
(0.4)
(81)
(0.8)
Rate differentials on international operations
1
698
165.2
(124)
(4.0)
(267)
(7.8)
303
4.4
(711)
(7.4)
Other
(19)
(4.5)
(5)
(0.2)
55
1.6
(20)
(0.3)
641
6.7
Provision for income taxes and effective
income tax rate – reported
2
$
794
187.7
%
$
729
23.5
%
$
704
20.7
%
$
2,157
31.5
%
$
2,502
26.2
%
Total adjustments for items of note
74
191
141
503
370
Provision for income taxes and effective
income tax rate – adjusted
2
$
868
20.2
%
$
920
20.5
%
$
845
19.8
%
$
2,660
20.4
%
$
2,872
21.2
%
1
2
Financial Statements for further details.
Canadian Tax Measures
Bill C-59 was substantively enacted on May 28, 2024 and received royal assent on June 20, 2024. The legislation advances certain tax measures originally
introduced in the Canadian Federal budget presented on March 28, 2023. In particular, Bill C-59 denies the dividend received deduction in respect of dividends
received by certain financial institutions on shares that are mark-to-market property, subject to a minor carve out for dividends on certain preferred shares, as well
as imposes a 2% tax on the net value of share repurchases by public corporations in Canada. These measures are effective and have been implemented by the
Bank as of January 1, 2024.
International Tax Reform – Pillar Two Global Minimum Tax
The Organisation for Economic Co-operation and Development (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 was enacted in Canada on June 20, 2024 under Bill C-69, which includes the
Global Minimum Tax Act
Two model rules. The rules will be effective for the Bank for the fiscal year beginning on November 1, 2024. Similar legislation has also passed in other
jurisdictions in which the Bank operates. The Bank is currently assessing the impact of the new legislation.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 14
ECONOMIC SUMMARY AND OUTLOOK
The global economy remains on track to slow modestly in calendar 2024, reflecting the impact of past interest rate increases. Inflation across the G-7 has cooled
as a result, and many central banks have started to lower interest rates. However, TD Economics expects future interest rate reductions to be gradual, with central
banks vigilant on inflation risks. In addition, the evolution of geopolitical risks maintains a degree of uncertainty on both the economic outlook and the inflation
trajectory.
The U.S. economy has downshifted from a rapid 4% annualized pace of growth in the second half of calendar 2023 to a solid 2% pace in the first half of 2024.
Slower growth is largely a result of cooler consumer spending, as elevated borrowing costs and slower growth in real income pinch consumers. In contrast,
business investment has gained momentum through the first half of calendar 2024.
Based on the July 2024 data, a softening U.S. job market has lifted the unemployment rate to 4.3%. However, this can still be characterized as a normalization
following tight conditions that persisted for longer than expected after the pandemic. So far, the U.S. economy carries the markings of a “soft landing” that is
allowing inflation pressures to gradually drift lower, which should pave the way for interest rate cuts in September.
TD Economics expects the U.S. Federal Reserve will lower interest rates from the current restrictive level of 5.25-5.50% to 4.50-4.75% by the end of calendar
2024. This means that interest rates are still expected to weigh on demand through the year.
In contrast, Canada’s economy had slowed notably in calendar 2023, but strong population growth has lifted economic growth in the first half of 2024. Strong
population growth has also contributed to labour force growth outpacing job creation, taking the unemployment rate higher and cooling labour market conditions.
The unemployment rate was 6.4% in July, above its pre-pandemic level, but still below its long-run average. TD Economics expects economic momentum to pick
up in the second half of the year boosted by demographics and lower interest rates, but to remain modest overall.
As a result of favourable inflation dynamics alongside a softening economy, the Bank of Canada has cut interest rates twice, taking the overnight rate to 4.50%
in July. TD Economics expects the Bank of Canada to lower interest rates gradually, to 3.75% by the end of calendar 2024. With interest rates differentials
between Canada and the U.S. holding roughly steady, TD Economics expects the Canadian dollar will hover in the 72 to 76 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 $27 million, compared with
$4 million in the prior quarter and $40 million in the third quarter last year.
Share of net income from investment in Schwab is reported in the U.S. Retail segment. Amounts for amortization of acquired intangibles, the acquisition and
integration charges related to the Schwab transaction, and the Bank’s share of restructuring and other charges incurred by Schwab are recorded in the Corporate
segment.
TABLE 11: CANADIAN PERSONAL AND COMMERCIAL BANKING
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Net interest income
$
3,994
$
3,812
$
3,571
$
11,639
$
10,487
Non-interest income
1,009
1,027
999
3,087
3,076
Total revenue
5,003
4,839
4,570
14,726
13,563
Provision for (recovery of) credit losses – impaired
338
397
285
1,099
739
Provision for (recovery of) credit losses – performing
97
70
94
226
214
Total provision for (recovery of) credit losses
435
467
379
1,325
953
Non-interest expenses
1,967
1,957
1,895
5,908
5,661
Provision for (recovery of) income taxes
729
676
641
2,097
1,940
Net income
$
1,872
$
1,739
$
1,655
$
5,396
$
5,009
Selected volumes and ratios
Return on common equity
1
34.1
%
32.9
%
35.4
%
33.9
%
37.5
%
Net interest margin (including on securitized assets)
2
2.81
2.84
2.74
2.83
2.76
Efficiency ratio
39.3
40.4
41.5
40.1
41.7
Number of Canadian retail branches
1,060
1,062
1,060
1,060
1,060
Average number of full-time equivalent staff
28,465
29,053
29,172
28,929
28,925
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 15
Quarterly comparison – Q3 2024 vs. Q3 2023
Canadian Personal and Commercial Banking net income for the quarter was $1,872 million, an increase of $217 million, or 13%, compared with the third quarter
last year, reflecting higher revenue, partially offset by higher non-interest expenses and PCL. The annualized ROE for the quarter was 34.1%, compared with
35.4% in the third quarter last year.
Revenue for the quarter was $5,003 million, an increase of $433 million, or 9%, compared with the third quarter last year. Net interest income was
$3,994 million, an increase of $423 million, or 12%, primarily reflecting volume growth and higher deposit margins. Average loan volumes increased $33 billion, or
6%, reflecting 6% growth in personal loans and 7% growth in business loans. Average deposit volumes increased $22 billion, or 5%, reflecting 7% growth in
personal deposits and 2% growth in business deposits. Net interest margin was 2.81%, an increase of 7 basis points (bps), primarily due to higher margins on
deposits, partially offset by lower margins on loans and changes to balance sheet mix reflecting the transition of Bankers’ Acceptances to Canadian Overnight
Repo Rate Average (CORRA)-based loans. Non-interest income was $1,009 million, an increase of $10 million, or 1%, compared with the third quarter last year.
PCL for the quarter was $435 million, an increase of $56 million compared with the third quarter last year. PCL – impaired was $338 million, an increase of
$53 million, or 19%, largely related to credit migration in the consumer lending portfolios. PCL – performing was $97 million, an increase of $3 million. The
performing provisions this quarter largely reflect credit conditions, including credit migration in the commercial and consumer lending portfolios, and volume
growth. Total PCL as an annualized percentage of credit volume was 0.30%, an increase of 2 bps compared with the third quarter last year.
Non-interest expenses for the quarter were $1,967 million, an increase of $72 million, or 4%, compared with the third quarter last year, reflecting higher spend
supporting business growth, including higher employee-related expenses and technology costs.
The efficiency ratio for the quarter was 39.3%, compared with 41.5% in the third quarter last year.
Quarterly comparison – Q3 2024 vs. Q2 2024
Canadian Personal and Commercial Banking net income for the quarter was $1,872 million, an increase of $133 million, or 8%, compared with the prior quarter,
primarily reflecting higher revenue. The annualized ROE for the quarter was 34.1%, compared with 32.9% in the prior quarter.
Revenue increased $164 million, or 3%, compared with the prior quarter. Net interest income increased $182 million, or 5%, reflecting volume growth and two
more days in the third quarter
.
Average deposit volumes increased $8 billion, or 2%, reflecting 1% growth in personal deposits and 3% growth in business deposits. Net interest margin was
2.81%, a decrease of 3 bps, primarily due to balance sheet mix, reflecting the transition of Bankers’ Acceptances to CORRA-based loans. Non-interest income
decreased $18 million, or 2%, compared with the prior quarter, reflecting lower fee revenue.
PCL for the quarter was $435 million, a decrease of $32 million compared with the prior quarter. PCL – impaired was $338 million, a decrease of $59 million, or
15%, reflecting lower provisions in both the commercial and consumer lending portfolios. PCL – performing was $97 million, an increase of $27 million. The
performing provisions this quarter largely reflect credit conditions, including credit migration in the commercial and consumer lending portfolios, and volume
growth. Total PCL as an annualized percentage of credit volume was 0.30%, a decrease of 4 bps compared with the prior quarter.
Non-interest expenses increased $10 million, or 1% compared with the prior quarter, primarily reflecting higher technology costs, partially offset by lower
employee-related expenses
.
The efficiency ratio was 39.3%, compared with 40.4% in the prior quarter.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Canadian Personal and Commercial Banking net income for the nine months ended July 31, 2024, was $5,396 million, an increase of $387 million, or 8%,
compared with the same period last year, reflecting higher revenue, partially offset by higher PCL and non-interest expenses. The annualized ROE for the period
was 33.9%, compared with 37.5%, in the same period last year.
Revenue for the period was $14,726 million, an increase of $1,163 million, or 9%, compared with the same period last year. Net interest income was
$11,639 million, an increase of $1,152 million, or 11%, reflecting volume growth and higher deposit margins. Average loan volumes increased $35 billion, or 7%,
reflecting 6% growth in personal loans and 7% growth in business loans. Average deposit volumes increased $17 billion, or 4%, reflecting 6% growth in personal
deposits and business deposits were relatively flat compared with the same period last year. Net interest margin was 2.83%, an increase of 7 bps, primarily due to
higher margins on deposits, partially offset by changes to balance sheet mix reflecting the transition of Bankers’ Acceptances to CORRA-based loans and lower
margins on loans. Non-interest income was $3,087 million, relatively flat compared with the same period last year.
PCL was $1,325 million, an increase of $372 million compared with the same period last year. PCL – impaired was $1,099 million, an increase of $360 million,
or 49%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was $226 million, an increase of $12 million. The current
year performing provisions largely reflect current credit conditions, including credit migration in the consumer and commercial lending portfolios, and volume
growth. Total PCL as an annualized percentage of credit volume was 0.31%, an increase of 7 bps compared with the same period last year.
Non-interest expenses were $5,908 million, an increase of $247 million, or 4%, compared with the same period last year, reflecting higher spend supporting
business growth, including higher employee-related expenses and technology costs
,
partially offset by higher non-credit provisions in the second quarter last year.
The efficiency ratio was 40.1%, compared with 41.7%, for the same period last year.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 16
TABLE 12: U.S. RETAIL
(millions of dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
Canadian Dollars
2024
2024
2023
2024
2023
Net interest income
$
$
$
$
$
Non-interest income
Total revenue
Provision for (recovery of) credit losses – impaired
Provision for (recovery of) credit losses – performing
(10)
(18)
Total provision for (recovery of) credit losses
Non-interest expenses – reported
Non-interest expenses – adjusted
1,2
Provision for (recovery of) income taxes – reported
Provision for (recovery of) income taxes – adjusted
1
U.S. Retail Bank net income (loss) – reported
(2,453)
(1,343)
U.S. Retail Bank net income – adjusted
1
Share of net income from investment in Schwab
3,4
Net income (loss) – reported
$
(2,275)
$
$
$
(788)
$
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
(8)
(14)
Total provision for (recovery of) credit losses
Non-interest expenses – reported
Non-interest expenses – adjusted
1,2
Provision for (recovery of) income taxes – reported
Provision for (recovery of) income taxes – adjusted
1
U.S. Retail Bank net income (loss) – reported
(1,787)
(964)
U.S. Retail Bank net income – adjusted
1
Share of net income from investment in Schwab
3,4
Net income (loss) – reported
$
(1,658)
$
$
$
(555)
$
Net income – adjusted
1
Selected volumes and ratios
Return on common equity – reported
5
(19.8)
%
%
%
(2.3)
%
%
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 – Q3 2023: $84 million or US$63 million ($63 million or US$48 million after-tax), 2023 YTD: $344 million or US$254 million
($259 million or US$192 million after-tax);
ii. FDIC special assessment – Q2 2024: $103 million or US$75 million ($77 million or US$56 million after-tax), 2024 YTD: $514 million or US$375 million ($387 million or
US$282 million after-tax); and
iii. Provision for investigations related to the Bank’s AML program – Q3 2024: $3,566 million or US$2,600 million (before and after tax), Q2 2024: $615 million or US$450 million (before
and after tax), 2024 YTD: $4,181 million or US$3,050 million (before and after tax).
3
The Bank’s share of Schwab’s earnings is reported with a one-month lag. Refer to Note 7 of the Bank’s third quarter 2024 Interim Consolidated Financial Statements for further details.
4
The after-tax amounts for amortization of acquired intangibles, the Bank’s share of acquisition and integration charges associated with Schwab’s acquisition of TD Ameritrade, the Bank’s
share of Schwab’s restructuring charges, and the Bank’s share of Schwab’s FDIC special assessment charge are recorded in the Corporate segment.
5
Capital allocated to the business segment was increased to 11 .5% CET1 Capital effective the first quarter of 2024, compared with 11% in the prior year.
6
Net interest margin is calculated by dividing U.S. Retail segment’s net interest income by average interest -earning assets. For the U.S. Retail segment, this calculation excludes the
impact related to sweep deposits arrangements, intercompany deposits, and cash collateral. The value of tax-exempt interest income is adjusted to its equivalent before-tax value. For
investment securities, the adjustment to fair value is included in the calculation of average interest-earning assets. Management believes this calculation better reflects segment
performance. Net interest income and average interest-earning assets used in the calculation are non-GAAP financial measures.
7
For additional information about this metric, refer to the Glossary of this document.
8
Refer to “How Our Businesses Performed” section regarding alignment of certain asset management businesses from the U.S. Retail segment to the Wealth Management and Insurance
segment.
Quarterly comparison – Q3 2024 vs. Q3 2023
U.S. Retail reported net loss for the quarter was $2,275 million (US$1,658 million), compared with reported net income of $1,305 million (US$977 million) in the
third quarter last year. On an adjusted basis, net income for the quarter was $1,291 million (US$942 million), a decrease of $77 million (US$83 million), or
6% (8% in U.S. dollars). The reported and adjusted annualized ROE for the quarter were (19.8)% and 11.3%, respectively, compared with 12.7% and 13.3%,
respectively, in the third 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 $178 million (US$129 million), a decrease of $13 million (US$13 million), or 7% (9% in U.S. dollars), compared with the third
quarter last year.
U.S. Retail Bank reported net loss was $2,453 million (US$1,787 million), compared with reported net income of $1,114 million (US$835 million) in the third
quarter last year, primarily reflecting the impact of the provision for investigations related to the Bank’s AML program. U.S. Retail Bank adjusted net income was
$1,113 million, a decrease of $64 million, or 5%, compared with the third quarter last year, reflecting higher PCL and higher non-interest expenses, partially offset
by higher revenue. In U.S. dollars, U.S. Retail Bank adjusted net income was US$813 million, a decrease of US$70 million, or 8%, compared with the third quarter
last year, reflecting higher PCL and lower revenue.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 17
Revenue for the quarter was US$2,594 million, a decrease of US$15 million, or 1%, compared with the third quarter last year. Net interest income of
US$2,144 million, decreased US$11 million, or 1%, driven by lower deposit volumes and loan margins, partially offset by higher loan volumes. Net interest margin
of 3.02% increased 2 bps due to higher deposit margins. Non-interest income of US$450 million decreased US$4 million, or 1%, compared with the third quarter
last year.
Average loan volumes increased US$10 billion, or 5%, compared with the third quarter last year. Personal loans increased 8%, reflecting strong mortgage and
auto originations and lower prepayments in the higher rate environment. Business loans increased 3%, reflecting good originations from new customer growth and
slower payment rates. Average deposit volumes decreased US$17 billion, or 5%, reflecting a 17% decrease in sweep deposits, a 3% decrease in business
deposits, partially offset by a 3% increase in personal deposit volumes. Excluding sweep deposits, average deposits remained relatively stable.
Assets under administration (AUA) were US$41 billion as at July 31, 2024, an increase of US$1 billion, or 3%, compared with the third quarter last year,
reflecting net asset growth. Assets under management (AUM) were US$8 billion as at July 31, 2024, flat compared with the third quarter last year.
PCL for the quarter was US$276 million, an increase of US$91 million compared with the third quarter last year. PCL – impaired was US$242 million, an
increase of US$49 million, or 25%, largely reflecting credit migration in the consumer lending portfolios. PCL – performing was US$34 million compared with a
recovery of US$8 million in the prior year. The performing provisions this quarter were largely recorded in the commercial lending portfolio, reflecting credit
conditions, including credit migration. 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 0.58%, an increase of 17 bps, compared with the third quarter last year.
Reported non-interest expenses for the quarter were US$4,011 million, compared with US$1,478 million in the third quarter last year, reflecting the impact of the
provision for investigations related to the Bank’s AML program, partially offset by the impact of acquisition and integration-related charges for the terminated First
Horizon transaction in the third quarter last year. On an adjusted basis, non-interest expenses were US$1,411 million, relatively flat compared with the third quarter
last year, primarily due to higher operating expenses, offset by ongoing productivity initiatives.
The reported and adjusted efficiency ratios for the quarter were 154.6% and 54.4%, respectively, compared with 56.7% and 54.2%, respectively, in the third
quarter last year.
Quarterly comparison – Q3 2024 vs. Q2 2024
U.S. Retail reported net loss was $2,275 million (US$1,658 million), compared with reported net income of $580 million (US$433 million) in the prior quarter. On an
adjusted basis, net income for the quarter was $1,291 million (US$942 million), an increase of $19 million (US$3 million), or 1% (relatively flat in U.S. dollars). The
reported and adjusted annualized ROE for the quarter were (19.8)% and 11.3%, respectively, compared with 5.4% and 11.7%, respectively, in the prior quarter.
The contribution from Schwab of $178 million (US$129 million) decreased $5 million (US$7 million), or 3% (5% in U.S. dollars), compared with the prior quarter.
U.S. Retail Bank reported net loss was $2,453 million (US$1,787 million), compared with reported net income of $397 million (US$297 million) in the prior
quarter, primarily reflecting the impact of higher provision for investigations related to the Bank’s AML program, partially offset by the impact of the FDIC special
assessment charge in the prior quarter and higher net interest income. U.S. Retail Bank adjusted net income was $1,113 million (US$813 million), an increase of
$24 million (US$10 million), or 2% (1% in U.S. dollars), primarily reflecting higher revenue, partially offset by higher non-interest expenses.
Revenue increased US$54 million, or 2%, compared with the prior quarter. Net interest income of US$2,144 million increased US$50 million, or 2%, reflecting
higher deposit margins and loan volumes, partially offset by lower deposit volumes. Net interest margin of 3.02% increased 3 bps quarter over quarter due to
higher deposit margins. Non-interest income of US$450 million increased US$4 million or 1%, primarily reflecting fee income growth from increased customer
activity.
Average loan volumes were relatively flat compared with the prior quarter with personal loans increase of 1%. Business loans were relatively flat. Average
deposit volumes decreased US$7 billion, or 2%, compared with the prior quarter, reflecting a 6% decrease in sweep deposits and a 2% decrease in business
deposits. Personal deposits were relatively flat.
AUA were US$41 billion as at July 31, 2024, an increase of $1 billion, or 3%, compared with the prior quarter. AUM were US$8 billion, an increase of $1 billion,
or 14%, compared with the prior quarter.
PCL for the quarter was US$276 million, a decrease of US$4 million compared with the prior quarter. PCL – impaired was US$242 million, an increase of
US$13 million, or 6%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was US$34 million, a decrease of
US$17 million. The performing provisions this quarter were largely recorded in the commercial lending portfolio, reflecting credit conditions, including credit
migration. 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 0.58%, a
decrease of 2 bps, compared with the prior quarter.
Reported non-interest expenses for the quarter were US$4,011 million, compared with reported non-interest expenses of US$1,909 million in the prior quarter,
primarily reflecting the impact of a higher provision for investigations related to the Bank’s AML program, and higher operating expenses, partially offset by the
impact of FDIC special assessment charge in the prior quarter. On an adjusted basis, non-interest expenses increased US$27 million, or 2%, due to higher
operating expenses.
The reported and adjusted efficiency ratios for the quarter were 154.6% and 54.4%, respectively, compared with 75.2% and 54.5%, respectively, in the prior
quarter.
Year-to-date comparison – Q3 2024 vs. Q3 2023
U.S. Retail reported net loss for the nine months ended July 31, 2024, was $788 million (US$555 million), compared with reported net income of $4,295 million
(US$3,190 million) in the same period last year. On an adjusted basis, net income for the period was $3,780 million (US$2,777 million), a decrease of $774 million
(US$605 million), or 17% (18% in U.S. dollars). The reported and adjusted annualized ROE for the period were (2.3)% and 11.4%, respectively, compared with
14.1% and 15.0%, respectively, in the same period last year.
The contribution from Schwab of $555 million (US$409 million), decreased $187 million (US$140 million), or 25% (26% in U.S. dollars), compared with the
same period last year.
U.S. Retail Bank reported net loss for the period was $1,343 million (US$964 million), compared with reported net income of $3,553 million (US$2,641 million)
in the same period last year, reflecting the impact of the provision for investigations related to the Bank’s AML program, the impact of the FDIC special assessment
charge, higher PCL and lower net interest income, partially offset by acquisition and integration-related charges for the terminated First Horizon transaction in the
same period last year. U.S. Retail Bank adjusted net income was $3,225 million (US$2,368 million), a decrease of $587 million (US$465 million), or 15% (16% in
U.S. dollars), primarily reflecting higher PCL and non-interest expenses, and lower net interest income.
Revenue for the period was US$7,721 million, a decrease of US$279 million, or 3%, compared with the same period last year. Net interest income of
US$6,379 million decreased US$365 million, or 5%, primarily reflecting lower deposit margins and volumes, partially offset by higher loan volumes. Net interest
margin of 3.01%, decreased 17 bps, due to lower deposit margins reflecting higher deposit costs. Non-interest income of US$1,342 million increased
US$86 million, or 7%, primarily reflecting fee income growth from increased customer activity.
Average loan volumes increased US$13 billion, or 7%, compared with the same period last year. Personal loans increased 9% and business loans increased
5%, reflecting good originations and slower payment rates across portfolios. Average deposit volumes decreased US$24 billion, or 7%, reflecting a 19% decrease
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 18
in sweep deposits and a 3% decrease in business deposits, partially offset by 1% increase in personal deposit volumes. Excluding sweep deposits, average
deposits decreased 1%.
PCL was US$841 million, an increase of US$367 million compared with the same period last year. PCL – impaired was US$750 million, an increase of
US$262 million, or 54%, reflecting credit migration in the consumer and commercial lending portfolios. PCL – performing was US$91 million, compared with a
recovery of US$14 million in the prior year. The current year performing provisions largely reflect current credit conditions, including credit migration, and volume
growth. U.S. Retail PCL including only the Bank’s share of PCL in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.59%, an
increase of 23 bps, compared with the same period last year.
Reported non-interest expenses for the period were US$7,699 million, an increase of US$3,216 million, or 72%, compared with the same period last year,
primarily reflecting the impact of the provision for investigations related to the Bank’s AML program, the impact of the FDIC special assessment charge, and higher
operating expenses, partially offset by the impact of acquisition and integration-related charges for the terminated First Horizon transaction in the same period last
year. On an adjusted basis, non-interest expenses increased US$45 million, or 1%, reflecting higher operating expenses, partially offset by ongoing productivity
initiatives.
The reported and adjusted efficiency ratios for the quarter were 99.7% and 55.4%, respectively, compared with 56.0% and 52.9%, respectively, for the same
period last year.
THE CHARLES SCHWAB CORPORATION
Refer to Note 7, Investment in Associates and Joint Ventures of the Bank’s third quarter 2024 Interim Consolidated Financial Statements for further information on
Schwab.
TABLE 13: WEALTH MANAGEMENT AND INSURANCE
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Net interest income
$
316
$
304
$
258
$
905
$
799
Non-interest income
1
3,033
2,810
2,700
8,693
7,875
Total revenue
3,349
3,114
2,958
9,598
8,674
Provision for (recovery of) credit losses – impaired
–
–
–
–
1
Provision for (recovery of) credit losses – performing
–
–
–
–
–
Total provision for (recovery of) credit losses
–
–
–
–
1
Insurance service expenses
1
1,669
1,248
1,386
4,283
3,668
Non-interest expenses
1
1,104
1,027
979
3,178
2,951
Provision for (recovery of) income taxes
146
218
162
531
545
Net income
$
430
$
621
$
431
$
1,606
$
1,509
Selected volumes and ratios
Return on common equity
1,2
27.1
%
40.8
%
29.0
%
35.0
%
35.5
%
Efficiency ratio
1
33.0
33.0
33.1
33.1
34.0
Efficiency ratio, net of ISE
1,3
65.7
55.0
62.3
59.8
58.9
Assets under administration (billions of Canadian dollars)
4
$
632
$
596
$
559
$
632
$
559
Assets under management (billions of Canadian dollars)
523
489
460
523
460
Average number of full-time equivalent staff
14,887
15,163
16,002
15,145
16,283
1
Consolidated Financial Statements for further details.
2
3
Q3 2023: $1,572 million, 2024 YTD: $5,315 million, 2023 YTD: $5,006 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 – Q3 2024 vs. Q3 2023
Wealth Management and Insurance net income for the quarter was $430 million, relatively flat compared with the third quarter last year, reflecting higher insurance
service expenses and non-interest expenses, offset by higher revenue. The annualized ROE for the quarter was 27.1%, compared with 29.0% in the third quarter
last year.
Revenue for the quarter was $3,349 million, an increase of $391 million, or 13%, compared with the third quarter last year. Non-interest income was
$3,033 million, an increase of $333 million, or 12%, reflecting higher insurance premiums, fee-based revenue, and transaction revenue. Net interest income was
$316 million, an increase of $58 million, or 22%, compared with the third quarter last year, reflecting higher deposit margins.
AUA were $632 billion as at July 31, 2024, an increase of $73 billion, or 13%, and AUM were $523 billion as at July 31, 2024, an increase of $63 billion, or 14%,
compared with the third quarter last year, both reflecting market appreciation and net asset growth.
Insurance service expenses for the quarter were $1,669 million, an increase of $283 million, or 20%, compared with the third quarter last year, primarily
reflecting increased claims severity, less favourable prior years’ claims development and larger impact of severe weather-related events.
Non-interest expenses for the quarter were $1,104 million, an increase of $125 million, or 13%, compared with the third quarter last year, reflecting provisions
related to ongoing litigation matters and higher variable compensation.
The efficiency ratio for the quarter was 33.0%, compared with 33.1% in the third quarter last year. The efficiency ratio, net of ISE for the quarter was 65.7%,
compared with 62.3% in the third quarter last year.
Quarterly comparison – Q3 2024 vs. Q2 2024
Wealth Management and Insurance net income for the quarter was $430 million, a decrease of $191 million, or 31%, compared with the prior quarter, primarily
reflecting higher insurance service expenses and non-interest expenses, partially offset by higher revenue. The annualized ROE for the quarter was 27.1%,
compared with 40.8% in the prior quarter.
Revenue increased $235 million, or 8%, compared with the prior quarter. Non-interest income increased $223 million, or 8%, reflecting seasonally higher
insurance premiums and higher fee-based revenue. Net interest income increased $12 million, or 4%, reflecting higher deposit margins.
AUA increased $36 billion, or 6%, and AUM increased $34 billion, or 7%, compared with the prior quarter, both reflecting market appreciation and net asset
growth.
Insurance service expenses for the quarter increased $421 million, or 34%, compared with the prior quarter, reflecting more severe weather-related events,
increased claims severity, seasonally higher claims, and less favourable prior years’ claims development.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 19
Non-interest expenses increased $77 million, or 7%, compared with the prior quarter, primarily reflecting provisions related to ongoing litigation matters.
The efficiency ratio for the quarter was 33.0%, flat, compared with the prior quarter. The efficiency ratio, net of ISE for the quarter was 65.7%, compared with
55.0% in the prior quarter.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Wealth Management and Insurance net income for the nine months ended July 31, 2024, was $1,606 million, an increase of $97 million, or 6%, compared with the
same period last year, reflecting higher revenue, partially offset by higher insurance service expenses and non-interest expenses. The annualized ROE for the
period was 35.0%, compared with 35.5%, in the same period last year.
Revenue for the period was $9,598 million, an increase of $924 million, or 11%, compared with same period last year. Non-interest income increased
$818 million, or 10%, reflecting higher insurance premiums, fee-based revenue, and transaction revenue. Net interest income increased $106 million, or 13%,
reflecting higher deposit margins and higher investment income in the insurance business, partially offset by lower deposit volumes in the wealth management
business.
Insurance service expenses were $4,283 million, an increase of $615 million, or 17%, compared with the same period last year, primarily reflecting increased
claims severity, less favourable prior years’ claims development and larger impact of severe weather-related events.
Non-interest expenses were $3,178 million, an increase of $227 million, or 8%, compared with the same period last year, reflecting higher variable
compensation and provisions related to ongoing litigation matters.
The efficiency ratio for the period was 33.1%, compared with 34.0% for the same period last year. The efficiency ratio, net of ISE for the period was 59.8%,
compared with 58.9% in the same period last year.
TABLE 14: WHOLESALE BANKING
1
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Net interest income (loss) (TEB)
$
(26)
$
189
$
270
$
361
$
1,293
Non-interest income
1,821
1,751
1,298
5,154
3,037
Total revenue
1,795
1,940
1,568
5,515
4,330
Provision for (recovery of) credit losses – impaired
109
(1)
10
113
16
Provision for (recovery of) credit losses – performing
9
56
15
70
53
Total provision for (recovery of) credit losses
118
55
25
183
69
Non-interest expenses – reported
1,310
1,430
1,247
4,240
3,319
Non-interest expenses – adjusted
2,3
1,232
1,328
1,104
3,943
3,082
Provision for (recovery of) income taxes (TEB) – reported
50
94
24
209
189
Provision for (recovery of) income taxes (TEB) – adjusted
2
68
116
62
273
242
Net income – reported
$
317
$
361
$
272
$
883
$
753
Net income – adjusted
2
377
441
377
1,116
937
Selected volumes and ratios
Trading-related revenue (TEB)
4
$
726
$
693
$
626
$
2,149
$
1,770
Average gross lending portfolio (billions of Canadian dollars)
5
97.4
96.3
93.8
96.6
95.3
Return on common equity – reported
6
7.8
%
9.2
%
7.4
%
7.5
%
7.1
%
Return on common equity – adjusted
2,6
9.4
11.3
10.3
9.4
8.9
Efficiency ratio – reported
73.0
73.7
79.5
76.9
76.7
Efficiency ratio – adjusted
2
68.6
68.5
70.4
71.5
71.2
Average number of full-time equivalent staff
7,018
7,077
7,233
7,065
7,081
1
2
document.
3
Q2 2024: $102 million ($80 million after-tax), 2024 YTD: $297 million ($233 million after-tax), Q3 2023: $143 million ($105 million after-tax), 2023 YTD: $237 million ($184 million after-
tax).
4
$1,058 million (Q2 2024: $811 million, 2024 YTD: $2,653 million, Q3 2023: $618 million, 2023 YTD: $1,216 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 – Q3 2024 vs. Q3 2023
Wholesale Banking reported net income for the quarter was $317 million, an increase of $45 million, or 17%, compared with the third quarter last year, primarily
reflecting higher revenues, partially offset by higher PCL, and non-interest expenses. On an adjusted basis, net income was $377 million, flat to the third quarter
last year.
Revenue for the quarter was $1,795 million, an increase of $227 million, or 14%, compared with the third quarter last year. Higher revenue primarily reflects
higher trading-related revenue, lending revenue, advisory fees, and underwriting fees.
PCL for the quarter was $118 million, an increase of $93 million compared with the third quarter last year. PCL – impaired was $109 million, an increase of
$99 million compared to the prior year, primarily reflecting a few new impairments across various industries. PCL – performing was $9 million, a decrease of
$6 million.
Reported non-interest expenses for the quarter were $1,310 million, an increase of $63 million, or 5%, compared with the third quarter last year, primarily
reflecting higher variable compensation commensurate with higher revenues, partially offset by lower acquisition and integration-related costs. On an adjusted
basis, non-interest expenses were $1,232 million, an increase of $128 million, or 12%.
Quarterly comparison – Q3 2024 vs. Q2 2024
Wholesale Banking reported net income for the quarter was $317 million, a decrease of $44 million, or 12%, compared with the prior quarter, primarily reflecting
lower revenues and higher PCL, partially offset by lower non-interest expenses. On an adjusted basis, net income was $377 million, a decrease of $64 million, or
15%.
Revenue for the quarter decreased $145 million, or 7%, compared with the prior quarter. Lower revenue primarily reflects lower interest rate and credit trading-
related revenue, underwriting fees, and the net change in fair value of loan underwriting commitments recorded in the prior quarter, partially offset by higher foreign
exchange trading-related revenue and equity trading-related revenue.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 20
PCL for the quarter was $118 million, an increase of $63 million compared with the prior quarter. PCL – impaired was $109 million, an increase of $110 million,
primarily reflecting a few new impairments across various industries. PCL – performing was $9 million, a decrease of $47 million.
Reported non-interest expenses for the quarter decreased $120 million, or 8%, compared with the prior quarter, primarily reflecting lower variable compensation
commensurate with lower revenues, and lower acquisition and integration-related costs. On an adjusted basis, non-interest expenses decreased $96 million, or
7%.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Wholesale Banking reported net income for the nine months ended July 31, 2024, was $883 million, an increase of $130 million, or 17%, compared with the same
period last year, reflecting higher revenues, partially offset by higher non-interest expenses, and PCL. On an adjusted basis, net income was $1,116 million, an
increase of $179 million, or 19%.
Revenue, including TD Cowen, was $5,515 million, an increase of $1,185 million, or 27%, compared with the same period last year. Higher revenue primarily
reflects higher interest rate and credit trading-related revenue, lending revenue, advisory, and underwriting fees.
PCL was $183 million, an increase of $114 million compared with the same period last year. PCL – impaired was $113 million, an increase of $97 million,
primarily reflecting a few new impairments across various industries. PCL – performing was $70 million, an increase of $17 million. The current year performing
provisions largely reflect current credit conditions, including credit migration.
Reported non-interest expenses were $4,240 million, an increase of $921 million, or 28%, compared with the same period last year, reflecting higher variable
compensation commensurate with higher revenues, TD Cowen and the associated acquisition and integration-related costs, as well as a provision taken in
connection with the U.S. record keeping matter. On an adjusted basis, non-interest expenses were $3,943 million, an increase of $861 million or 28%.
TABLE 15: CORPORATE
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Net income (loss) – reported
$
(525)
$
(737)
$
(782)
$
(1,890)
$
(3,798)
Adjustments for items of note
Amortization of acquired intangibles
64
72
88
230
221
Acquisition and integration charges related to the Schwab transaction
21
21
54
74
118
Share of restructuring and other charges from investment in Schwab
–
–
–
49
–
Restructuring charges
110
165
–
566
–
Payment related to the termination of the FHN transaction
–
–
306
–
306
Impact from the terminated FHN acquisition-related capital hedging strategy
62
64
177
183
1,187
Impact of retroactive tax legislation on payment card clearing services
–
–
57
–
57
Civil matter provision/Litigation settlement
–
274
–
274
1,642
Less: impact of income taxes
CRD and federal tax rate increase for fiscal 2022
–
–
–
–
(585)
Other items of note
56
143
82
312
817
Net income (loss) – adjusted
1
$
(324)
$
(284)
$
(182)
$
(826)
$
(499)
Decomposition of items included in net income (loss) – adjusted
Net corporate expenses
2
$
(426)
$
(411)
$
(333)
$
(1,091)
$
(715)
Other
102
127
151
265
216
Net income (loss) – adjusted
1
$
(324)
$
(284)
$
(182)
$
(826)
$
(499)
Selected volumes
Average number of full-time equivalent staff
22,881
23,270
23,486
23,196
22,686
-
1
document.
2
Quarterly comparison – Q3 2024 vs. Q3 2023
Corporate segment’s reported net loss for the quarter was $525 million, compared with a reported net loss of $782 million in the third quarter last year. The lower
net loss primarily reflects the prior year payment related to the termination of the First Horizon transaction and impact from the terminated FHN acquisitionrelated
capital hedging strategy, partially offset by the current quarter’s higher investments in risk and control infrastructure and restructuring charges. Net corporate
expenses increased $93 million compared to the prior year, primarily reflecting investments in risk and control infrastructure, partially offset by litigation expenses
in the prior year. The adjusted net loss for the quarter was $324 million, compared with an adjusted net loss of $182 million in the third quarter last year.
Quarterly comparison – Q3 2024 vs. Q2 2024
Corporate segment’s reported net loss for the quarter was $525 million, compared with a reported net loss of $737 million in the prior quarter. The lower net loss
primarily reflects the prior quarter impact of a civil matter provision and the current quarter’s lower restructuring charges. Net corporate expenses increased
$15 million compared to the prior quarter, primarily reflecting higher investments in risk and control infrastructure. The adjusted net loss for the quarter was
$324 million, compared with an adjusted net loss of $284 million in the prior quarter.
Year-to-date comparison – Q3 2024 vs. Q3 2023
Corporate segment’s reported net loss for the nine months ended July 31, 2024 was $1,890 million, compared with a reported net loss of $3,798 million in the
same period last year. The lower net loss primarily reflects the prior period impacts of the Stanford litigation settlement, the terminated FHN acquisition-related
capital hedging strategy and provision for income taxes in connection with the CRD and federal tax rate increase for fiscal 2022, partially offset by restructuring
charges and higher investments in risk and control infrastructure in the current period. The adjusted net loss for the nine months ended July 31, 2024 was
$826 million, compared with an adjusted net loss of $499 million in the same period last year.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 21
QUARTERLY RESULTS
The following table provides summary information related to the Bank’s eight most recently completed quarters.
TABLE 16: QUARTERLY RESULTS
(millions of Canadian dollars, except as noted)
For the three months ended
2024
2023
2022
Jul. 31
Apr. 30
Jan. 31
Oct. 31
Jul. 31
Apr. 30
Jan. 31
Oct. 31
Net interest income
$
7,579
$
7,465
$
7,488
$
7,494
$
7,289
$
7,428
$
7,733
$
7,630
Non-interest income
1
6,597
6,354
6,226
5,684
5,625
4,969
4,468
7,933
Total revenue
1
14,176
13,819
13,714
13,178
12,914
12,397
12,201
15,563
Provision for (recovery of) credit losses
1,072
1,071
1,001
878
766
599
690
617
Insurance service expenses
1
1,669
1,248
1,366
1,346
1,386
1,118
1,164
723
Non-interest expenses
1
11,012
8,401
8,030
7,628
7,359
6,756
8,112
6,545
Provision for (recovery of) income taxes
1
794
729
634
616
704
859
939
1,297
Share of net income from investment in Schwab
190
194
141
156
182
241
285
290
Net income (loss) – reported
1
(181)
2,564
2,824
2,866
2,881
3,306
1,581
6,671
Pre-tax adjustments for items of note
2
Amortization of acquired intangibles
64
72
94
92
88
79
54
57
Acquisition and integration charges related to the
Schwab transaction
21
21
32
31
54
30
34
18
Share of restructuring and other charges from
investment in Schwab
–
–
49
35
–
–
–
–
Restructuring charges
110
165
291
363
–
–
–
–
Acquisition and integration-related charges
78
102
117
197
143
73
21
18
Charges related to the terminated FHN acquisition
–
–
–
–
84
154
106
67
Payment related to the termination of the
FHN transaction
–
–
–
–
306
–
–
–
Impact from the terminated FHN acquisition-related
capital hedging strategy
62
64
57
64
177
134
876
(2,319)
Impact of retroactive tax legislation on payment card
clearing services
–
–
–
–
57
–
–
–
Civil matter provision/Litigation settlement
–
274
–
–
–
39
1,603
–
FDIC special assessment
–
103
411
–
–
–
–
–
Provision for investigations related to the
Bank’s AML program
3,566
615
–
–
–
–
–
–
Gain on sale of Schwab shares
3
–
–
–
–
–
–
–
(997)
Total pre-tax adjustments for items of note
3,901
1,416
1,051
782
909
509
2,694
(3,156)
Less: Impact of income taxes
2,4
74
191
238
163
141
108
121
(550)
Net income – adjusted
1,2
3,646
3,789
3,637
3,485
3,649
3,707
4,154
4,065
Preferred dividends and distributions on other
equity instruments
69
190
74
196
74
210
83
107
Net income available to common
shareholders – adjusted
1,2
$
3,577
$
3,599
$
3,563
$
3,289
$
3,575
$
3,497
$
4,071
$
3,958
(Canadian dollars, except as noted)
Basic earnings (loss) per share
1
Reported
$
(0.14)
$
1.35
$
1.55
$
1.48
$
1.53
$
1.69
$
0.82
$
3.62
Adjusted
2
2.05
2.04
2.01
1.82
1.95
1.91
2.24
2.18
Diluted earnings (loss) per share
1
Reported
(0.14)
1.35
1.55
1.48
1.53
1.69
0.82
3.62
Adjusted
2
2.05
2.04
2.00
1.82
1.95
1.91
2.23
2.18
Return on common equity – reported
(1.0)
%
9.5
%
10.9
%
10.5
%
10.8
%
12.4
%
5.9
%
26.5
%
Return on common equity – adjusted
1,2
14.1
14.5
14.1
12.9
13.8
14.0
16.1
16.0
(billions of Canadian dollars, except as noted)
Average total assets
$
1,968
$
1,938
$
1,934
$
1,910
$
1,898
$
1,944
$
1,931
$
1,893
Average interest-earning assets
5
1,778
1,754
1,729
1,715
1,716
1,728
1,715
1,677
Net interest margin – reported
1.70
%
1.73
%
1.72
%
1.73
%
1.69
%
1.76
%
1.79
%
1.81
%
Net interest margin – adjusted
2
1.71
1.75
1.74
1.75
1.70
1.81
1.82
1.80
1
Insurance Contracts
(
IFRS 4).
2
“How We Performed” section of this document as well as footnote 3.
3
i. The Bank sold 28.4 million non-voting common shares of Schwab and recognized a gain on the sale. The amount is reported in the Corporate segment.
4
5
Performed” section and the Glossary of this document for additional information about these metrics.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 22
BALANCE SHEET REVIEW
TABLE 17: SELECTED INTERIM CONSOLIDATED BALANCE SHEET ITEMS
(millions of Canadian dollars)
As at
July 31, 2024
October 31, 2023
Assets
Cash and Interest-bearing deposits with banks
$
99,396
$
105,069
Trading loans, securities, and other
173,175
152,090
Non-trading financial assets at fair value through profit or loss
5,600
7,340
Derivatives
69,827
87,382
Financial assets designated at fair value through profit or loss
5,771
5,818
Financial assets at fair value through other comprehensive income
75,841
69,865
Debt securities at amortized cost, net of allowance for credit losses
281,320
308,016
Securities purchased under reverse repurchase agreements
212,918
204,333
Loans, net of allowance for loan losses
938,325
895,947
Investment in Schwab
10,031
8,907
Other
1
94,977
110,372
Total assets
1
$
1,967,181
$
1,955,139
Liabilities
Trading deposits
$
32,021
$
30,980
Derivatives
60,113
71,640
Financial liabilities designated at fair value through profit or loss
196,078
192,130
Deposits
1,220,550
1,198,190
Obligations related to securities sold under repurchase agreements
182,813
166,854
Subordinated notes and debentures
9,913
9,620
Other
1
154,117
173,654
Total liabilities
1
1,855,605
1,843,068
Total equity
1
111,576
112,071
Total liabilities and equity
1
$
1,967,181
$
1,955,139
1
details.
Total assets
appreciation in the Canadian dollar decreased total assets by $5 billion.
The increase in total assets reflects an increase in loans, net of allowances for loan losses of $42 billion, trading loans, securities, and other of $21 billion,
securities purchased under reverse repurchase agreements of $9 billion, financial assets at fair value through other comprehensive income of $6 billion and
investment in Schwab of $1 billion. The increase was partially offset by a decrease in debt securities at amortized cost, net of allowance for credit losses of
$27 billion, derivative assets of $17 billion, other assets of $15 billion, cash and interest-bearing deposits with banks of $6 billion and non-trading financial assets at
fair value through profit or loss of $2 billion.
Cash and interest-bearing deposits with banks
decreased $6 billion primarily reflecting cash management activities.
Trading loans, securities, and other
increased $21 billion primarily in equity securities, securitized mortgages and commodities held for trading, partially offset
by government securities held for trading.
Non-trading financial assets at fair value through profit or loss
decreased $2 billion reflecting maturities and sales.
Derivative
assets
decreased $17 billion primarily reflecting changes in mark-to-market values of foreign exchange and interest rate contracts.
Financial assets at fair value through other comprehensive income
sales.
Debt securities at amortized cost, net of allowance for credit losses
exchange translation, partially offset by new investments and the impact of risk management activities.
Securities purchased under reverse repurchase agreements
increased $9 billion
primarily
reflecting an increase in volume, partially offset by the impact of
foreign exchange translation.
Loans, net of allowance for loan losses
bankers’ acceptances to business and government loans following the cessation of the Canadian Dollar Offered Rate (CDOR), and volume growth in residential
real estate 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
government loans following the cessation of CDOR, partially offset by an increase in amounts receivable from brokers, dealers, and clients due to higher volumes
of pending trades.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 23
Total liabilities
appreciation in the Canadian dollar decreased total liabilities by $5 billion.
The increase in total liabilities reflects an increase in deposits of $22 billion, obligations related to securities sold under repurchase agreements of $16 billion,
financial liabilities designated at fair value through profit or loss of $4 billion and trading deposits of $1 billion. The increase was partially offset by a decrease in
other liabilities of $19 billion and derivative liabilities of $11 billion
Trading deposits
increased $1 billion primarily reflecting new issuances.
Derivative
liabilities
decreased $11 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
Deposits
increased $22 billion primarily reflecting a volume increase in business and government and personal deposits, partially offset by the impact of foreign
exchange translation.
Obligations related to securities sold under repurchase agreements
increased $16 billion primarily reflecting an increase in volume.
Other
and clients and obligations related to securities sold short, partially offset by a volume increase in securitization liabilities at fair value, liabilities related to structured
entities, and increase in provision for investigations related to the Bank’s AML program.
Equity
was $112 billion as at July 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. The retained earnings decreased primarily from dividends paid and the premium on the repurchase of
common shares, partially offset by net income.
CREDIT PORTFOLIO QUALITY
Quarterly comparison – Q3 2024 vs. Q3 2023
Gross impaired loans excluding acquired credit-impaired (ACI) loans were $4,170 million as at July 31, 2024, an increase of $1,190 million, or 40%, compared with
the third quarter last year. Canadian Personal and Commercial Banking gross impaired loans increased $367 million, or 28%, compared with the third quarter last
year, reflecting formations outpacing resolutions in the commercial and consumer lending portfolios. U.S. Retail gross impaired loans increased $689 million, or
44%, compared with the third quarter last year, reflecting formations outpacing resolutions in the commercial and consumer lending portfolios, and the impact of
foreign exchange. Wholesale gross impaired loans increased $133 million, compared with the third quarter last year, largely related to a few new formations in the
current quarter, across various industries. Net impaired loans were $2,905 million as at July 31, 2024, an increase of $909 million, or 46%, compared with the third
quarter last year.
The allowance for credit losses of $8,838 million as at July 31, 2024 was comprised of Stage 3 allowance for impaired loans of $1,278 million, Stage 2 allowance
of $4,647 million and Stage 1 allowance of $2,909 million, and the allowance for debt securities of $4 million. The Stage 1 and 2 allowances are for performing
loans and off-balance sheet instruments.
The Stage 3 allowance for loan losses increased $289 million, or 29%, reflective of credit migration in the Canadian Personal and Commercial Banking,
Wholesale, and U.S. consumer lending portfolios, and the impact of foreign exchange. The Stage 1 and Stage 2 allowance for loan losses increased $773 million,
or 11%, reflecting current credit conditions, including credit migration, volume growth, and the impact of foreign exchange. The allowance change included an
increase of $96 million attributable to the retailer program partners’ share of the U.S. strategic cards portfolio.
The allowance for debt securities increased by $2 million, compared with the third 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 third 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 third quarter 2024 Interim Consolidated
Financial Statements for additional details.
The Bank calculates allowances for ECLs on debt securities measured at amortized cost and fair value through other comprehensive income (FVOCI). The Bank
has $354 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 debt
securities at amortized cost (DSAC) and debt securities at FVOCI was $3 million and $1 million, respectively.
Quarterly comparison – Q3 2024 vs. Q2 2024
Gross impaired loans increased $275 million, or 7%, compared with the prior quarter, largely related to new formations outpacing resolutions in the Wholesale and
U.S. Commercial lending portfolios. Impaired loans net of allowance increased $161 million, or 6%, compared with the prior quarter.
The allowance for credit losses of $8,838 million as at July 31, 2024 was comprised of Stage 3 allowance for impaired loans of $1,278 million, Stage 2 allowance
of $4,647 million and Stage 1 allowance of $2,909 million, and the allowance for debt securities of $4 million. The Stage 1 and 2 allowances are for performing
loans and off-balance sheet instruments. The Stage 3 allowance for loan losses increased $116 million, or 10%, compared with the prior quarter, largely driven by
credit migration in the Wholesale lending portfolio. The Stage 1 and Stage 2 allowance for loan losses increased $171 million, or 2%, compared with the prior
quarter.
The allowance for debt securities increased by $1 million, compared to the prior quarter.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 24
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 third quarter 2024 Interim Consolidated Financial Statements.
TABLE 18: CHANGES IN GROSS IMPAIRED LOANS AND ACCEPTANCES
1,2,3
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
Personal, Business, and Government Loans
Impaired loans as at beginning of period
$
3,895
$
3,709
$
2,659
$
3,299
$
2,503
Classified as impaired during the period
2,056
1,937
1,599
5,998
4,208
Transferred to performing during the period
(264)
(261)
(224)
(840)
(668)
Net repayments
(541)
(465)
(324)
(1,314)
(1,019)
Disposals of loans
–
–
–
(10)
–
Amounts written off
(979)
(1,080)
(687)
(2,976)
(1,991)
Exchange and other movements
3
55
(43)
13
(53)
Impaired loans as at end of period
$
4,170
$
3,895
$
2,980
$
4,170
$
2,980
1
2
3
TABLE 19: ALLOWANCE FOR CREDIT LOSSES
(millions of Canadian dollars, except as noted)
As at
July 31
April 30
July 31
2024
2024
2023
Allowance for loan losses for on-balance sheet loans
Stage 1 allowance for loan losses
$
2,481
$
2,479
$
2,618
Stage 2 allowance for loan losses
4,065
3,915
3,179
Stage 3 allowance for loan losses
1,265
1,151
987
Total allowance for loan losses for on-balance sheet loans
1
7,811
7,545
6,784
Allowance for off-balance sheet instruments
Stage 1 allowance for loan losses
428
423
469
Stage 2 allowance for loan losses
582
568
517
Stage 3 allowance for loan losses
13
11
2
Total allowance for off-balance sheet instruments
1,023
1,002
988
Allowance for loan losses
8,834
8,547
7,772
Allowance for debt securities
4
3
2
Allowance for credit losses
$
8,838
$
8,550
$
7,774
Impaired loans, net of allowance
2
$
2,905
$
2,744
$
1,996
Net impaired loans as a percentage of net loans
2
0.31
%
0.29
%
0.22
%
Total allowance for credit losses as a percentage of gross loans and acceptances
0.93
0.91
0.87
Provision for (recovery of) credit losses as a percentage of net average loans and acceptances
0.46
0.47
0.35
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
July 31, 2024
Total
$
271,325
$
88,543
$
359,868
$
32,655
$
392,523
October 31, 2023
Total
$
263,733
$
86,943
$
350,676
$
30,675
$
381,351
1
allowance is recorded.
2
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 25
TABLE 21: REAL ESTATE SECURED LENDING
1,2
(millions of Canadian dollars, except as noted)
As at
Residential mortgages
Home equity lines of credit
Total
Insured
3
Uninsured
Insured
3
Uninsured
Insured
3
Uninsured
July 31, 2024
Canada
Atlantic provinces
$
2,475
0.9
%
$
4,685
1.7
%
$
163
0.1
%
$
2,119
1.7
%
$
2,638
0.7
%
$
6,804
1.7
%
British Columbia
4
8,404
3.1
47,809
17.6
832
0.7
22,464
18.5
9,236
2.4
70,273
17.9
Ontario
4
22,134
8.2
124,831
46.0
2,828
2.3
66,403
54.9
24,962
6.3
191,234
48.7
Prairies
4
17,929
6.6
21,685
8.0
1,566
1.4
12,257
10.1
19,495
5.0
33,942
8.6
Québec
6,808
2.5
14,565
5.4
527
0.4
12,039
9.9
7,335
1.9
26,604
6.8
Total Canada
57,750
21.3
%
213,575
78.7
%
5,916
4.9
%
115,282
95.1
%
63,666
16.3
%
328,857
83.7
%
United States
1,500
56,437
–
11,117
1,500
67,554
Total
$
59,250
$
270,012
$
5,916
$
126,399
$
65,166
$
396,411
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
July 31, 2024
Canada
0.8
%
2.7
%
6.1
%
15.4
%
32.2
%
27.6
%
1.9
%
13.3
%
100.0
%
United States
2.4
1.3
3.4
7.7
12.8
71.3
0.6
0.5
100.0
Total
1.1
%
2.4
%
5.6
%
14.0
%
28.8
%
35.4
%
1.6
%
11.1
%
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 July 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
July 31, 2024
October 31, 2023
Canada
Atlantic provinces
68
%
66
%
67
%
69
%
67
%
68
%
British Columbia
6
66
62
64
65
59
63
Ontario
6
67
62
65
66
60
63
Prairies
6
73
69
71
72
69
71
Québec
70
69
69
69
67
68
Total Canada
68
63
66
67
62
65
United States
76
61
70
75
63
72
Total
69
%
63
%
66
%
68
%
62
%
66
%
1
2
3
4
5
6
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 26
Sovereign Risk
The table below provides a summary of the Bank’s direct credit exposures outside of Canada and the U.S. (Europe excludes United Kingdom).
TABLE 24: Total Net Exposure by Region and Counterparty
(millions of Canadian dollars)
As at
Loans and commitments
1
Derivatives, repos, and securities lending
2
Trading and investment portfolio
3
Total
Corporate
Sovereign
Financial
Total
Corporate
Sovereign
Financial
Total
Corporate
Sovereign
Financial
Total
Exposure
4
July 31, 2024
Region
Europe
$
8,214
$
8
$
5,439
$
13,661
$
4,502
$
2,311
$
8,806
$
15,619
$
1,053
$
25,202
$
2,524
$
28,779
$
58,059
United Kingdom
8,665
2,997
2,495
14,157
3,282
784
15,997
20,063
958
1,017
671
2,646
36,866
Asia
239
29
2,371
2,639
365
745
2,667
3,777
492
9,029
910
10,431
16,847
Other
5
205
–
601
806
340
544
3,348
4,232
176
991
2,989
4,156
9,194
Total
$
17,323
$
3,034
$
10,906
$
31,263
$
8,489
$
4,384
$
30,818
$
43,691
$
2,679
$
36,239
$
7,094
$
46,012
$
120,966
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 July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 27
The following table provides details of the Bank’s regulatory capital position.
TABLE 25: CAPITAL STRUCTURE AND RATIOS – Basel III
(millions of Canadian dollars, except as noted)
As at
July 31
October 31
July 31
2024
2023
2023
Common Equity Tier 1 Capital
Common shares plus related contributed surplus
$
25,369
$
25,522
$
26,026
Retained earnings
69,316
73,044
74,659
Accumulated other comprehensive income
6,015
2,750
735
Common Equity Tier 1 Capital before regulatory adjustments
100,700
101,316
101,420
Common Equity Tier 1 Capital regulatory adjustments
Goodwill (net of related tax liability)
(18,504)
(18,424)
(17,641)
Intangibles (net of related tax liability)
(2,842)
(2,606)
(2,545)
Deferred tax assets excluding those arising from temporary differences
(121)
(207)
(114)
Cash flow hedge reserve
3,285
5,571
5,116
Shortfall of provisions to expected losses
–
–
–
Gains and losses due to changes in own credit risk on fair valued liabilities
(204)
(379)
(229)
Defined benefit pension fund net assets (net of related tax liability)
(908)
(908)
(1,001)
Investment in own shares
(8)
(21)
(16)
Non-significant investments in the capital of banking, financial, and insurance entities, net of eligible
short positions (amount above 10% threshold)
(2,982)
(1,976)
(2,000)
Significant investments in the common stock of banking, financial, and insurance entities
that are outside the scope of regulatory consolidation, net of eligible short positions
(amount above 10% threshold)
–
–
–
Equity investments in funds subject to the fall-back approach
(51)
(49)
(37)
Other deductions or regulatory adjustments to CET1 as determined by OSFI
12
–
–
Total regulatory adjustments to Common Equity Tier 1 Capital
(22,323)
(18,999)
(18,467)
Common Equity Tier 1 Capital
78,377
82,317
82,953
Additional Tier 1 Capital instruments
Directly issued qualifying Additional Tier 1 instruments plus stock surplus
10,876
10,791
11,244
Additional Tier 1 Capital instruments before regulatory adjustments
10,876
10,791
11,244
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)
(6)
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)
(356)
Additional Tier 1 Capital
10,521
10,435
10,888
Tier 1 Capital
88,898
92,752
93,841
Tier 2 Capital instruments and provisions
Directly issued qualifying Tier 2 instruments plus related stock surplus
9,716
9,424
11,067
Collective allowances
1,378
1,964
2,150
Tier 2 Capital before regulatory adjustments
11,094
11,388
13,217
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
(332)
(196)
(194)
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
(19)
(136)
(125)
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
(511)
(492)
(479)
Tier 2 Capital
10,583
10,896
12,738
Total Capital
$
99,481
$
103,648
$
106,579
Risk-weighted assets
$
610,482
$
571,161
$
544,880
Capital Ratios and Multiples
Common Equity Tier 1 Capital (as percentage of risk-weighted assets)
12.8
%
14.4
%
15.2
%
Tier 1 Capital (as percentage of risk-weighted assets)
14.6
16.2
17.2
Total Capital (as percentage of risk-weighted assets)
16.3
18.1
19.6
Leverage ratio
2
4.1
4.4
4.6
1
10% of the issued common share capital of the entity.
2
The impact to CET1 capital upon adoption of IFRS 17 is immaterial to the Bank.
As at July 31, 2024, the Bank’s CET1, Tier 1, and Total Capital ratios were 12.8%, 14.6%, and 16.3%, respectively. The decrease in the Bank’s CET1 Capital ratio
from 14.4% as at October 31, 2023, was primarily attributable to the provision for investigations related to the Bank’s AML program, common shares repurchased
for cancellation, and RWA growth across various segments. CET1 was also impacted by regulatory changes related to the Fundamental Review of the Trading
Book and Negatively amortizing mortgages and the FDIC special assessment booked in the fiscal year. The impact of the foregoing items was partially offset by
internal capital generation, the sale of TD’s common share holdings in First Horizon, and the issuance of common shares pursuant to the Bank’s dividend
reinvestment plan.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 28
As at July 31, 2024, the Bank’s leverage ratio was 4.1%. The decrease in the Bank’s leverage ratio from 4.4% as at October 31, 2023 was primarily attributable to
the provision for investigations related to the Bank’s AML program, exposure increases across various segments, and common shares repurchased for
cancellation. The impact of the foregoing items was partially offset by internal capital generation and the issuance of common shares pursuant to the Bank’s
dividend reinvestment plan.
Future Regulatory Capital Developments
Future regulatory capital developments, in addition to those described in the “Future Regulatory Capital Developments” section of the Bank’s 2023 Annual Report,
are noted below.
On July 5, 2024, OSFI announced a one-year delay to the increase of the capital floor level. With this delay, the floor is expected to be fully transitioned in fiscal
2027. The capital floor subjects banks using internal model-based approaches to a floor, where the floor is calculated as a percentage of RWA under the
standardized approach.
TABLE 26: EQUITY AND OTHER SECURITIES
1
(millions of shares/units and millions of Canadian dollars, except as noted)
As at
July 31, 2024
October 31, 2023
Number of
Number of
shares/units
Amount
shares/units
Amount
Common shares
Common shares outstanding
1,748.3
$
25,222
1,791.4
$
25,434
Treasury – common shares
(0.4)
(35)
(0.7)
(64)
Total common shares
1,747.9
$
25,187
1,790.7
$
25,370
Stock options
Vested
5.7
5.1
Non-vested
9.3
9.0
Preferred shares – Class A
Series 1
20.0
$
500
20.0
$
500
Series 3
2
–
–
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
3
–
–
14.0
350
Series 24
4
–
–
18.0
450
Series 27
0.8
850
0.8
850
Series 28
0.8
800
0.8
800
91.6
$
3,900
143.6
$
5,200
Other equity instruments
5
Limited Recourse Capital Notes Series 1
1.8
1,750
1.8
1,750
Limited Recourse Capital Notes Series 2
1.5
1,500
1.5
1,500
Limited Recourse Capital Notes Series 3
6,7
1.7
2,403
1.7
2,403
Limited Recourse Capital Notes Series 4
7,8
0.7
1,023
–
–
Perpetual Subordinated Capital Notes AT1
9
0.1
312
–
–
97.4
$
10,888
148.6
$
10,853
Treasury – preferred shares and other equity instruments
(0.5)
(17)
(0.1)
(65)
Total preferred shares and other equity instruments
96.9
$
10,871
148.5
$
10,788
1
2
Preferred Shares”), at a redemption price of $25.00 per Series 3 Preferred Share, for a total redemption cost of approximately $500 million.
3
redemption price of $25.00 per Series 22 Preferred Share, for a total redemption cost of $350 million.
4
redemption price of $25.00 per Series 24 Preferred Share, for a total redemption cost of approximately $450 million.
5
6
7
8
annually, payable quarterly, for the initial period ending on, but excluding, July 31, 2029. Thereafter, the interest rate on the LRCNs will reset every five years at a rate equal to the prevailing U.S.
Treasury Rate plus 2.977 per cent. The LRCNs will mature on July 31, 2084. Concurrently with the issuance of the LRCNs, the Bank will issue 750,000 Non-Cumulative 7.250% Fixed Rate Reset
Preferred Shares, Series 31 NVCC (“Preferred Shares Series 31”). The Preferred Shares Series 31 are eliminated on the Bank’s consolidated financial statements.
9
Notes will bear interest at a rate of 5.700 per cent annually, payable semi-annually, for the initial period ending on, but excluding, July 31, 2029. Thereafter, the interest rate on the AT1 Perpetual Notes
will reset every five years at a rate equal to the prevailing 5-year SORA-OIS Rate plus 2.652 per cent. The AT1 Perpetual Notes have no scheduled maturity or redemption date. With the prior written
approval of OSFI, the Bank may redeem the AT1 Perpetual Notes on July 31, 2029 and every January 31st and July 31st thereafter, in whole or in part, on not less than 10 nor more than 60 days’ prior
notice to holders. For AT1 Perpetual Notes, the amount represents the Canadian dollar equivalent of the Singapore dollar notional amount.
DIVIDENDS
On August 21, 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 October 31, 2024, payable on and after October 31, 2024, to shareholders of record at the close of business on October 10, 2024.
DIVIDEND REINVESTMENT PLAN
The Bank offers a dividend reinvestment plan for its common shareholders. Participation in the plan is optional and under the terms of the plan, cash dividends on
common shares are used to purchase additional common shares. At the option of the Bank, the common shares may be issued from treasury at an average
market price based on the last five trading days before the date of the dividend payment, with a discount of between 0% to 5% at the Bank’s discretion or
purchased from the open market at market price.
During the three and nine months ended July 31, 2024, the Bank issued 1.6 million and 4.9 million common shares, respectively, from treasury with no discount.
During the three months ended July 31, 2023, the Bank issued 2.0 million common shares from treasury with no discount and during the nine months ended
July 31, 2023 the Bank issued 2.0 million common shares from treasury with no discount and 16.8 million common shares from treasury with a 2% discount.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 29
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 July 31, 2024, the Bank repurchased
13.3 million common shares under the NCIB at an average price of $76.68 per share for a total amount of $1.0 billion. During the nine months ended
July 31, 2024, the Bank repurchased 49.4 million common shares under the NCIB, at an average price of $80.15 per share for a total amount of $4.0 billion. From
the commencement of the NCIB to July 31, 2024, the Bank repurchased 71.4 million shares under the program.
NON-VIABILITY CONTINGENT CAPITAL PROVISION
If an 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 0.8 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 1.3 billion in aggregate.
For all other NVCC subordinated notes and debentures including Additional Tier 1 Perpetual Notes, if an NVCC trigger event were to occur, the maximum
number of common shares that could be issued, assuming there is no accrued and unpaid interest on the respective subordinated notes and debentures, would be
3.5 billion in aggregate.
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 July 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, non-trading securities, derivatives,
and certain other repo-style transactions. Off-balance sheet exposures consist primarily of undrawn commitments, guarantees, and certain other repo-style
transactions.
Gross credit risk exposures for the two approaches the Bank uses to measure credit risk are included in the following table.
TABLE 27: GROSS CREDIT RISK EXPOSURE – Standardized and Internal Ratings-Based (IRB) Approaches
1
(millions of Canadian dollars)
As at
July 31, 2024
October 31, 2023
Standardized
IRB
Total
Standardized
IRB
Total
Retail
Residential secured
$
4,238
$
531,257
$
535,495
$
4,815
$
515,152
$
519,967
Qualifying revolving retail
846
176,068
176,914
810
169,183
169,993
Other retail
3,588
102,832
106,420
3,368
99,253
102,621
Total retail
8,672
810,157
818,829
8,993
783,588
792,581
Non-retail
Corporate
2,091
696,513
698,604
3,496
654,369
657,865
Sovereign
123
500,388
500,511
116
527,423
527,539
Bank
4,527
155,854
160,381
5,272
171,180
176,452
Total non-retail
6,741
1,352,755
1,359,496
8,884
1,352,972
1,361,856
Gross credit risk exposures
$
15,413
$
2,162,912
$
2,178,325
$
17,877
$
2,136,560
$
2,154,437
1
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 30
MARKET RISK
Market risk capital is calculated using the Standardized Approach. The Bank continues to use Value-at-Risk (VaR) as an internal management metric to monitor
and control market risk.
Market Risk Linkage to the Balance Sheet
The following table provides a breakdown of the Bank’s balance sheet assets and liabilities exposed to trading and non-trading market risks. Market risk of assets
and liabilities included in the calculation of VaR and metrics used for regulatory market risk capital purposes is classified as trading market risk.
TABLE 28: MARKET RISK LINKAGE TO THE BALANCE SHEET
(millions of Canadian dollars)
As at
July 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
$
92,151
$
112
$
92,039
$
–
$
98,348
$
327
$
98,021
$
–
Interest rate
Trading loans, securities, and other
173,175
171,956
1,219
–
152,090
151,011
1,079
–
Interest rate
Non-trading financial assets at
fair value through profit or loss
5,600
–
5,600
–
7,340
–
7,340
–
Equity,
foreign exchange,
interest rate
Derivatives
69,827
63,539
6,288
–
87,382
81,526
5,856
–
Equity,
foreign exchange,
interest rate
Financial assets designated at
fair value through profit or loss
5,771
–
5,771
–
5,818
–
5,818
–
Interest rate
Financial assets at fair value through
other comprehensive income
75,841
–
75,841
–
69,865
–
69,865
–
Equity,
foreign exchange,
interest rate
Debt securities at amortized cost,
net of allowance for credit losses
281,320
–
281,320
–
308,016
–
308,016
–
Foreign exchange,
interest rate
Securities purchased under
reverse repurchase agreements
212,918
10,438
202,480
–
204,333
9,649
194,684
–
Interest rate
Loans, net of allowance for
loan losses
938,325
–
938,325
–
895,947
–
895,947
–
Interest rate
Customers’ liability under
acceptances
19
–
19
–
17,569
–
17,569
–
Interest rate
Investment in Schwab
10,031
–
10,031
–
8,907
–
8,907
–
Equity
Other assets
1,2
2,007
–
2,007
–
1,956
–
1,956
–
Interest rate
Assets not exposed to
100,196
–
–
100,196
97,568
–
–
97,568
Total Assets
$
1,967,181
$
246,045
$
1,620,940
$
100,196
$
1,955,139
$
242,513
$
1,615,058
$
97,568
Liabilities subject to market risk
Trading deposits
$
32,021
$
27,387
$
4,634
$
–
$
30,980
$
27,059
$
3,921
$
–
Equity, interest rate
Derivatives
60,113
58,908
1,205
–
71,640
70,382
1,258
–
Equity,
foreign exchange,
interest rate
Securitization liabilities at fair value
18,382
18,382
–
–
14,422
14,422
–
–
Interest rate
Financial liabilities designated at
fair value through profit or loss
196,078
2
196,076
–
192,130
2
192,128
–
Interest rate
Deposits
1,220,550
–
1,220,550
–
1,198,190
–
1,198,190
–
Interest rate,
foreign exchange
Acceptances
19
–
19
–
17,569
–
17,569
–
Interest rate
Obligations related to securities
sold short
40,556
39,206
1,350
–
44,661
43,993
668
–
Interest rate
Obligations related to securities sold
under repurchase agreements
182,813
13,612
169,201
–
166,854
12,641
154,213
–
Interest rate
Securitization liabilities at amortized
cost
12,374
–
12,374
–
12,710
–
12,710
–
Interest rate
Subordinated notes and debentures
9,913
–
9,913
–
9,620
–
9,620
–
Interest rate
Other liabilities
1,2
30,869
–
30,869
–
27,062
–
27,062
–
Equity, interest rate
Liabilities and Equity not
exposed to market risk
163,493
–
–
163,493
169,301
–
–
169,301
Total Liabilities and Equity
$
1,967,181
$
157,497
$
1,646,191
$
163,493
$
1,955,139
$
168,499
$
1,617,339
$
169,301
1
2
details.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 31
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
5/1/2024
5/6/2024
5/11/2024
5/16/2024
5/21/2024
5/26/2024
5/31/2024
6/5/2024
6/10/2024
6/15/2024
6/20/2024
6/25/2024
6/30/2024
7/5/2024
7/10/2024
7/15/2024
7/20/2024
7/25/2024
7/30/2024
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
one-day
period is used for GMR calculation.
IDSR measures idiosyncratic (single-name) credit spread risk for credit exposures in the trading portfolio using Monte Carlo simulation. The IDSR model is
based on the historical behaviour of five-year idiosyncratic credit spreads. Similar to GMR, IDSR is computed as the threshold level that portfolio losses are not
expected to exceed more than
one
ten-day
The following graph discloses daily one-day VaR usage and trading net revenue, reported on a TEB, within Wholesale Banking. Trading net revenue includes
trading income and net interest income related to positions within the Bank’s market risk capital trading books. For the quarter ended July 31, 2024, there were
% of the trading days, reflecting normal trading activity. Losses in the year did not exceed VaR
on any trading day.
VaR is a valuable risk measure but it should be used in the context of its limitations, for example:
●
●
●
The Bank continuously improves its VaR methodologies and incorporates new risk measures in line with market conventions, industry best practices, and
regulatory requirements.
To mitigate some of the shortcomings of VaR, the Bank uses additional metrics designed for risk management purposes. This includes Stress Testing as well
as sensitivities to various market risk factors.
The following table presents the end of quarter, average, high, and low usage of TD’s VaR metric.
TABLE 29: PORTFOLIO MARKET RISK MEASURES
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
April 30
July 31
July 31
July 31
2024
2024
2023
2024
2023
As at
Average
High
Low
Average
Average
Average
Average
Interest rate risk
$
$
$
$
$
$
$
$
Credit spread risk
Equity risk
Foreign exchange risk
Commodity risk
Idiosyncratic debt specific risk
Diversification effect
1
(47.5 )
(53.1 )
n/m
2
n/m
(52.8 )
(64.6 )
(52.4 )
(64.5 )
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
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 32
Average VaR increased quarter-over-quarter due to changes in fixed income positions. Average VaR decreased year-over-year due to changes in interest rate
positions and due to narrower credit spreads.
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.
TABLE 30: STRUCTURAL INTEREST RATE SENSITIVITY MEASURES
(millions of Canadian dollars)
As at
July 31, 2024
April 30, 2024
July 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
$
(605 )
$
(1,880 )
$
(2,485 )
$
$
$
$
(2,312 )
$
$
(1,415 )
$
(475 )
(602 )
(1,077 )
(1,053 )
(1,155 )
1
Represents the twelve-month net interest income (NII) exposure to an immediate and sustained shock in rates.
As at July 31, 2024, an immediate and sustained 100 bps increase in interest rates would have had a negative impact to the Bank’s EVE of $
increase of $
sustained 100 bps decrease in interest rates would have had a positive impact to the Bank’s EVE of $
and a negative impact to the Bank’s NII of $
primarily attributed to growth in fixed rate assets funded by equity, mainly in Canada. The quarter-over-quarter NII Sensitivity is relatively stable.
TD BANK GROUP • THIRD 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. The Bank’s funding program emphasizes maximizing deposits as a core source of funding and maintaining access to wholesale
funding markets across diversified terms, counterparties, funding types, and currencies that is designed to ensure low exposure to a sudden contraction of
wholesale funding capacity and to minimize structural liquidity gaps. The Bank also maintains a contingency funding plan to enhance preparedness for recovery
from potential liquidity stress events. The Bank’s strategies and actions comprise an integrated liquidity risk management program that is designed to ensure low
exposure to liquidity risk and compliance with regulatory requirements.
LIQUIDITY RISK MANAGEMENT RESPONSIBILITY
The Bank’s ALCO oversees the Bank’s liquidity risk management program. It ensures there are effective management structures and practices in place to properly
measure and manage liquidity risk. The Global Liquidity & Funding Committee, a subcommittee of the ALCO comprised of senior management from Treasury,
Risk Management and Wholesale Banking, identifies and monitors the Bank’s liquidity risks. The management of liquidity risk is the responsibility of the SET
member responsible for Treasury, while oversight and challenge are provided by the ALCO and independently by Risk Management. The Risk Committee
regularly reviews the Bank’s liquidity position and approves the Bank’s Liquidity Risk Management Framework biennially and the related policies annually.
The Bank’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 minimal 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 34
TABLE 31: SUMMARY OF LIQUID ASSETS BY TYPE AND CURRENCY
1,2
(millions of Canadian dollars, except as noted)
As at
Securities
received as
collateral from
securities
financing and
Bank-owned
derivative
Total
% of
Encumbered
Unencumbered
liquid assets
transactions
liquid assets
total
liquid assets
liquid assets
July 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 32: SUMMARY OF UNENCUMBERED LIQUID ASSETS BY BANK, SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
As at
July 31
October 31
2024
2023
The Toronto-Dominion Bank (Parent)
$
$
Bank subsidiaries
Foreign branches
Total
$
$
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 35
The Bank’s monthly average liquid assets (excluding those held in insurance subsidiaries) for the quarters ended July 31, 2024 and April 30, 2024, are
summarized in the following table.
TABLE 33: SUMMARY OF AVERAGE LIQUID ASSETS BY TYPE AND CURRENCY
1,2
(millions of Canadian dollars, except as noted)
Average for the three months ended
Securities
received as
collateral from
securities
financing and
Total
Bank-owned
derivative
liquid
% of
Encumbered
Unencumbered
liquid assets
transactions
assets
Total
liquid assets
liquid assets
July 31, 2024
Cash and central bank reserves
$
21,916
$
–
$
21,916
2
%
$
693
$
21,223
Canadian government obligations
20,404
83,721
104,125
12
50,612
53,513
NHA MBS
41,786
50
41,836
5
1,686
40,150
Obligations of provincial governments, public sector
entities and multilateral development banks
3
43,412
25,626
69,038
8
37,146
31,892
Corporate issuer obligations
9,972
5,654
15,626
2
5,273
10,353
Equities
12,679
2,287
14,966
2
10,614
4,352
Total Canadian dollar-denominated
150,169
117,338
267,507
31
106,024
161,483
Cash and central bank reserves
75,032
–
75,032
9
213
74,819
U.S. government obligations
65,944
60,995
126,939
15
71,522
55,417
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
78,283
13,830
92,113
11
28,028
64,085
Obligations of other sovereigns, public sector entities and
multilateral development banks
3
64,844
36,408
101,252
12
39,918
61,334
Corporate issuer obligations
78,116
15,548
93,664
11
27,440
66,224
Equities
54,676
38,205
92,881
11
52,469
40,412
Total non-Canadian dollar-denominated
416,895
164,986
581,881
69
219,590
362,291
Total
$
567,064
$
282,324
$
849,388
100
%
$
325,614
$
523,774
April 30, 2024
Cash and central bank reserves
$
21,416
$
–
$
21,416
2
%
$
662
$
20,754
Canadian government obligations
22,788
89,436
112,224
13
54,659
57,565
NHA MBS
41,280
17
41,297
5
1,397
39,900
Obligations of provincial governments, public sector
entities and multilateral development banks
3
42,126
23,814
65,940
8
35,200
30,740
Corporate issuer obligations
20,600
5,514
26,114
3
5,741
20,373
Equities
13,240
3,267
16,507
2
12,554
3,953
Total Canadian dollar-denominated
161,450
122,048
283,498
33
110,213
173,285
Cash and central bank reserves
61,498
–
61,498
7
228
61,270
U.S. government obligations
75,101
63,416
138,517
16
75,230
63,287
U.S. federal agency obligations, including U.S.
federal agency mortgage-backed obligations
79,294
12,670
91,964
10
27,618
64,346
Obligations of other sovereigns, public sector entities and
multilateral development banks
3
65,033
36,777
101,810
12
39,427
62,383
Corporate issuer obligations
79,427
14,078
93,505
11
25,515
67,990
Equities
52,723
38,939
91,662
11
51,440
40,222
Total non-Canadian dollar-denominated
413,076
165,880
578,956
67
219,458
359,498
Total
$
574,526
$
287,928
$
862,454
100
%
$
329,671
$
532,783
1
2
3
Average unencumbered liquid assets held in The Toronto-Dominion Bank and multiple domestic and foreign subsidiaries (excluding insurance subsidiaries) and
branches are summarized in the following table.
TABLE 34: SUMMARY OF AVERAGE UNENCUMBERED LIQUID ASSETS BY BANK, SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
Average for the three months ended
July 31
April 30
2024
2024
The Toronto-Dominion Bank (Parent)
$
215,465
$
227,812
Bank subsidiaries
286,944
278,667
Foreign branches
21,365
26,304
Total
$
523,774
$
532,783
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 36
TABLE 35: ENCUMBERED AND UNENCUMBERED ASSETS
(millions of Canadian dollars)
As at
Total Assets
Encumbered
1
Unencumbered
Securities
received as
securities
financing and
Bank-owned
derivative
Total
Pledged as
Available as
assets
transactions
2
Assets
Collateral
3
Other
4
Collateral
5
Other
6
July 31, 2024
Cash and due from banks
$
7,245
$
–
$
7,245
$
–
$
–
$
–
$
7,245
Interest-bearing deposits with
banks
92,151
–
92,151
5,634
–
83,266
3,251
Securities, trading loans, and other
7
541,707
441,244
982,951
396,856
18,734
531,104
36,257
Derivatives
69,827
–
69,827
–
–
–
69,827
Securities purchased under reverse
repurchase agreements
8
212,918
(212,918)
–
–
–
–
–
Loans, net of allowance for loan
losses
9
938,325
(13,787)
924,538
62,835
85,029
59,818
716,856
Customers’ liabilities under
acceptances
19
–
19
–
–
–
19
Other assets
10
104,989
–
104,989
164
–
–
104,825
Total assets
$
1,967,181
$
214,539
$
2,181,720
$
465,489
$
103,763
$
674,188
$
938,280
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 37
TABLE 36: CREDIT RATINGS
1
As at
July 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
Legacy Subordinated Debt – non-NVCC
A2
A
A
AA (low)
Tier 2 Subordinated Debt – NVCC
A2 (hyb)
A-
A
A
AT1 Perpetual Debt – NVCC
Baa1 (hyb)
BBB
BBB+
–
Limited Recourse Capital Notes – NVCC
Baa1 (hyb)
BBB
BBB+
A (low)
Preferred Shares – NVCC
Baa1 (hyb)
BBB
BBB+
Pfd-2 (high)
Short-Term Debt (Deposits)
P-1
A-1+
F1+
R-1 (high)
Outlook
Stable
Negative
Negative
Stable
1
recommendations to purchase, sell, or hold a financial obligation in as much as they do not comment on market price or suitability for a particular investor. Ratings are subject to revision
or withdrawal at any time by the rating organization.
2
3
4
The Bank regularly reviews the level of increased collateral its trading counterparties would require in the event of a downgrade of TD’s credit rating. The Bank
holds liquid assets to ensure it is able to provide additional collateral required by trading counterparties in the event of a three-notch downgrade in the Bank’s
senior debt ratings. The following table presents the additional collateral that could have been contractually required to be posted to over-the-counter (OTC)
derivative counterparties as of the reporting date in the event of one, two, and three-notch downgrades of the Bank’s credit ratings.
TABLE 37: ADDITIONAL COLLATERAL REQUIREMENTS FOR RATING DOWNGRADES
1
(millions of Canadian dollars)
Average for the three months ended
July 31
April 30
2024
2024
One-notch downgrade
$
175
$
166
Two-notch downgrade
250
242
Three-notch downgrade
987
934
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 38
The following table summarizes the Bank’s average daily LCR as of the relevant dates.
TABLE 38: AVERAGE LIQUIDITY COVERAGE RATIO
1
(millions of Canadian dollars, except as noted)
Average for the three months ended
July 31, 2024
Total unweighted
Total weighted
value (average)
2
value (average)
3
High-quality liquid assets
Total high-quality liquid assets
$
n/a
4
$
337,631
Cash outflows
Retail deposits and deposits from small business customers, of which:
$
484,934
$
31,021
Stable deposits
262,642
7,879
Less stable deposits
222,292
23,142
Unsecured wholesale funding, of which:
358,913
176,405
Operational deposits (all counterparties) and deposits in networks of cooperative banks
128,024
30,343
Non-operational deposits (all counterparties)
205,057
120,230
Unsecured debt
25,832
25,832
Secured wholesale funding
n/a
49,478
Additional requirements, of which:
343,817
103,324
Outflows related to derivative exposures and other collateral requirements
53,239
43,636
Outflows related to loss of funding on debt products
10,459
10,459
Credit and liquidity facilities
280,119
49,229
Other contractual funding obligations
21,826
11,209
Other contingent funding obligations
804,626
12,476
Total cash outflows
$
n/a
$
383,913
Cash inflows
Secured lending
$
253,324
$
34,261
Inflows from fully performing exposures
24,314
11,638
Other cash inflows
75,706
75,706
Total cash inflows
$
353,344
$
121,605
Average for the three months ended
July 31, 2024
April 30, 2024
Total adjusted
Total adjusted
value
value
Total high-quality liquid assets
$
337,631
$
332,676
Total net cash outflows
262,308
264,950
Liquidity coverage ratio
129
%
126
%
1
2
3
4
The Bank’s average LCR was 129% representing a surplus of $75 billion for the quarter ended July 31, 2024 and continues to meet regulatory requirements.
The Bank holds a variety of liquid assets commensurate with the liquidity needs of the organization majority of which also qualify as HQLA under the OSFI LAR
guideline. The average HQLA of the Bank for the quarter ended July 31, 2024 was $338 billion (April 30, 2024 – $333 billion), with Level 1 assets representing
84% (April 30, 2024 – 83%). The Bank’s reported HQLA excludes excess HQLA from the U.S. Retail operations, reflecting liquidity transfer limitations from
U.S. Retail and its affiliates which adheres to OSFI LAR and Federal Reserve Board guidelines.
As described in the “How TD Manages Liquidity Risk” section of the Bank’s 2023 Annual Report, the Bank manages its HQLA and other liquidity buffers to the
higher of TD’s internal 90-day surplus requirement and its target buffers over regulatory requirements from including the LCR, NSFR, and the Net Cumulative
Cash Flow metrics.
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 39
TABLE 39: NET STABLE FUNDING RATIO
(millions of Canadian dollars, except as noted)
As at
July 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
$
111,253
$
n/a
$
n/a
$
9,435
$
120,688
Regulatory capital
111,253
n/a
n/a
9,435
120,688
Other capital instruments
n/a
n/a
n/a
–
–
Retail deposits and deposits from small business customers:
441,755
82,129
30,205
32,134
545,006
Stable deposits
248,989
32,014
13,040
16,265
295,606
Less stable deposits
192,766
50,115
17,165
15,869
249,400
Wholesale funding:
251,015
374,937
97,314
239,696
449,287
Operational deposits
105,063
2,454
–
–
53,759
Other wholesale funding
145,952
372,483
97,314
239,696
395,528
Liabilities with matching interdependent assets
3
–
1,611
2,137
24,816
–
Other liabilities:
52,345
91,906
2,800
NSFR derivative liabilities
n/a
3,460
All other liabilities and equity not included in the above categories
52,345
84,523
2,247
1,676
2,800
Total Available Stable Funding
$
1,117,781
Required Stable Funding Item
Total NSFR high-quality liquid assets
$
$
$
$
$
53,701
Deposits held at other financial institutions for operational purposes
–
–
–
–
–
Performing loans and securities
114,096
263,165
118,227
677,088
773,590
Performing loans to financial institutions secured by Level 1 HQLA
–
89,902
10,233
–
12,748
Performing loans to financial institutions secured by non-Level 1
HQLA and unsecured performing loans to financial institutions
302
53,693
9,536
14,117
25,014
Performing loans to non-financial corporate clients, loans to retail
and small business customers, and loans to sovereigns, central
banks and PSEs, of which:
38,874
60,817
43,344
297,347
341,252
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
n/a
–
–
–
–
Performing residential mortgages, of which:
32,569
52,712
47,846
301,349
296,680
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
32,569
52,712
47,846
301,349
296,680
Securities that are not in default and do not qualify as HQLA,
including exchange-traded equities
42,351
6,041
7,241
64,276
97,896
Assets with matching interdependent liabilities
3
–
1,958
2,410
24,195
–
Other assets:
76,854
139,958
112,577
Physical traded commodities, including gold
12,661
11,136
Assets posted as initial margin for derivative contracts and
contributions to default funds of CCPs
17,832
15,157
NSFR derivative assets
8,180
4,720
NSFR derivative liabilities before deduction of variation margin
posted
19,430
972
All other assets not included in the above categories
64,193
86,494
2,113
5,909
80,592
Off-balance sheet items
821,235
29,786
Total Required Stable Funding
$
969,654
Net Stable Funding Ratio
115
%
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
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.
The Bank’s NSFR for the quarter ended July 31, 2024 is at 115% (October 31, 2023 – 117%) representing a surplus of $148 billion and adheres to regulatory
requirements. The NSFR remained relatively stable to the previous quarter (April 30, 2024 – 114%), as the Bank’s funding programs continued to meet funding
requirements in the quarter.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 40
FUNDING
The Bank has access to a variety of unsecured and secured funding sources. The Bank’s funding activities are conducted in accordance with liquidity risk
management policies that require assets be funded to the appropriate term and to a prudent diversification profile.
The
following table illustrates the Bank’s base of personal and commercial, wealth, and Schwab sweep deposits (collectively, “P&C deposits”) that make up
approximately
% (October 31, 2023 –
%) of the Bank’s total funding.
TABLE 40: SUMMARY OF DEPOSIT FUNDING
(millions of Canadian dollars)
As at
July 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 July 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)
U.K. Financial Conduct Authority (FCA) Registered
Legislative Covered Bond Program ($100 billion)
FCA Registered Global Medium-Term Note Program
(US$40 billion)
The following table presents a breakdown of the Bank’s term debt by currency and funding type. Term funding as at July 31, 2024, was $178.2 billion
(October 31, 2023 – 173.3 billion).
Note that Table 41: Long-Term Funding and Table 42: Wholesale Funding do not include any funding accessed via repurchase transactions or securities financing.
TABLE 41: LONG-TERM FUNDING
1
As at
July 31
October 31
Long-term funding by currency
2024
2023
Canadian dollar
25
%
27
%
U.S. dollar
34
35
Euro
29
27
British pound
6
5
Other
6
6
Total
100
%
100
%
Long-term funding by type
Senior unsecured medium-term notes
54
%
61
%
Covered bonds
38
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 41
The following table represents the remaining maturity of various sources of funding outstanding as at July 31, 2024 and October 31, 2023.
TABLE 42: WHOLESALE FUNDING
1
(millions of Canadian dollars)
As at
July 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
$
594
$
172
$
64
$
149
$
979
$
–
$
–
$
979
$
2,095
Bearer deposit notes
340
956
130
188
1,614
–
–
1,614
1,804
Certificates of deposit
10,396
27,435
20,037
40,042
97,910
3,471
–
101,381
113,476
Commercial paper
8,823
21,122
16,125
13,233
59,303
–
–
59,303
40,515
Covered bonds
–
–
450
11,919
12,369
12,897
42,930
68,196
54,006
Mortgage securitization
3
35
1,064
1,640
2,290
5,029
4,039
21,688
30,756
27,131
Legacy senior unsecured medium-term
notes
4
–
–
–
–
–
239
–
239
3,162
Senior unsecured medium-term notes
5
–
6,426
7,802
7,324
21,552
20,486
52,965
95,003
100,492
Subordinated notes and debentures
6
–
–
–
196
196
–
9,717
9,913
9,620
Term asset-backed securitization
–
737
368
3,767
4,872
139
955
5,966
2,204
Other
7
28,717
2,455
11,309
6,412
48,893
923
1,060
50,876
44,348
Total
$
48,905
$
60,367
$
57,925
$
85,520
$
252,717
$
42,194
$
129,315
$
424,226
$
398,853
Of which:
Secured
$
35
$
1,801
$
11,424
$
22,804
$
36,064
$
17,076
$
65,577
$
118,717
$
92,361
Unsecured
48,870
58,566
46,501
62,716
216,653
25,118
63,738
305,509
306,492
Total
$
48,905
$
60,367
$
57,925
$
85,520
$
252,717
$
42,194
$
129,315
$
424,226
$
398,853
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 $19.3 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 and nine months ended
July 31, 2024 was $0.8 billion and $1.6 billion, respectively (three and nine months ended July 31, 2023 - $0.3 billion and $1.0 billion, respectively) and other
asset-backed securities issued for the three and nine months ended July 31, 2024 was $0.9 billion and $0.9 billion, respectively (three and nine months ended
July 31, 2023 – nil and $0.4 billion, respectively). The Bank also issued $1.3 billion and $9.5 billion, respectively of unsecured medium-term notes for the three and
nine months ended July 31, 2024 (three and nine months ended July 31, 2023 - $10.1 billion and $23.9 billion, respectively) and $5.6 billion and $20.5 billion,
respectively of covered bonds for the three and nine months ended July 31, 2024 (three and nine months ended July 31, 2023 - $6.3 billion and $15.7 billion,
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 42
TABLE 43: REMAINING CONTRACTUAL MATURITY
(millions of Canadian dollars)
As at
July 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 allowances for credit losses
(2 )
Securities purchased under
reverse repurchase agreements
2
Loans
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Total loans
Allowance for loan losses
(7,811 )
(7,811 )
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
$
$
$
$
$
$
$
$
$
$
1,967,181
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
$
$
$
$
$
$
$
$
$
$
1,967,181
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
$
6
7
8
.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 43
TABLE 43: REMAINING CONTRACTUAL MATURITY
(continued)
(millions of Canadian dollars)
As at
October 31, 2023
No
Less than
1 to 3
3 to 6
6 to 9
9 months
Over 1 to
Over 2 to
Over
specific
1 month
months
months
months
to 1 year
2 years
5 years
5 years
maturity
Total
Assets
Cash and due from banks
$
$
$
$
$
$
$
$
$
$
Interest-bearing deposits with banks
Trading loans, securities, and other
1
Non-trading financial assets at fair value through
profit or loss
Derivatives
Financial assets designated at fair value through
profit or loss
Financial assets at fair value through other comprehensive
income
Debt securities at amortized cost, net of allowance
for credit losses
(2 )
Securities purchased under reverse repurchase
agreements
2
Loans
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Total loans
Allowance for loan losses
(7,136 )
(7,136 )
Loans, net of allowance for loan losses
Customers’ liability under acceptances
Investment in Schwab
Goodwill
3
Other intangibles
3
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
3
Deferred tax assets
4
Amounts receivable from brokers, dealers, and clients
Other assets
4
Total assets
4
$
$
$
$
$
$
$
$
$
$
Liabilities
Trading deposits
$
$
$
$
$
$
$
$
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at
fair value through profit or loss
Deposits
5,6
Personal
Banks
Business and government
Total deposits
Acceptances
Obligations related to securities sold short
1
Obligations related to securities sold under repurchase
agreements
2
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance contract liabilities
4
Other liabilities
4
Subordinated notes and debentures
Equity
4
Total liabilities and equity
4
$
$
$
$
$
$
$
$
$
$
Off-balance sheet commitments
Credit and liquidity commitments
7,8
$
$
$
$
$
$
$
$
$
$
Other commitments
9
Unconsolidated structured entity commitments
Total off-balance sheet commitments
$
$
$
$
$
$
$
$
$
$
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
3
4
details.
5
6
2 years’, $
7
8
9
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 44
REGULATORY AND STANDARD SETTER DEVELOPMENTS CONCERNING ENVIRONMENTAL AND SOCIAL (E&S) RISK (INCLUDING CLIMATE)
On March 7, 2023, OSFI issued Final Guideline B-15: Climate Risk Management (Guideline B-15), which sets out OSFI’s expectations related to the management
and disclosure of climate-related risks and opportunities. Subsequently, on March 20, 2024, OSFI released updates to Guideline B-15 which align disclosure
expectations with the International Sustainability Standards Board’s final IFRS S2 Climate-related Disclosures standard. Components of Guideline B-15 are initially
effective for D-SIBs for fiscal year-end 2024, where annual disclosures are required to be made publicly available no later than 180 days after fiscal year-end. The
Bank has completed its initial assessment of Guideline B-15 and is working towards implementing the requirements.
ISSB – IFRS S1 and IFRS S2
On June 26, 2023, the International Sustainability Standards Board (ISSB) under the IFRS Foundation, issued its first two sustainability standards, IFRS S1,
General Requirements for Disclosures of Sustainability-related Financial Information
Climate-related Disclosures
disclosure requirements for financially material information about sustainability-related risks and opportunities to meet investor information needs, and S2
specifically sets the disclosure requirement for climate-related risks and opportunities. The effective date for the standards is subject to Canadian jurisdiction’s
endorsement. The International Organization of Securities Commissions has endorsed IFRS S1 and S2 on July 23, 2023, and is now calling its member
jurisdictions to consider ways they may adopt or apply the ISSB standards. The Bank is currently assessing the impact of adopting these standards.
SECURITIZATION AND OFF-BALANCE SHEET ARRANGEMENTS
The Bank enters into securitization and off-balance sheet arrangements in the normal course of operations. The Bank is involved with structured entities (SEs) that
it sponsors, as well as entities sponsored by third parties. Refer to “Securitization and Off-Balance Sheet Arrangements” section, Note 9: Transfers of Financial
Assets and Note 10: Structured Entities of the Bank’s 2023 Annual Report for further details. There have been no significant changes to the Bank’s securitization
and off-balance sheet arrangements during the quarter ended July 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 July 31, 2024 (October 31, 2023 – $15.2 billion). As at July 31, 2024, the Bank had funded exposure of $13.8 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 third 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 third 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 • THIRD 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 on the Interim Consolidated Balance Sheet and the net results from reinsurance contracts held are presented in Other income (loss) on the Interim
Consolidated Statement of Income. Refer to Note 14 of the Bank’s third quarter 2024 Interim Consolidated Financial Statements 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
$
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
IFRS 9
) and was applied without a restatement of comparatives. The reclassification
resulted in 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 judgments, estimates, and assumptions in the assessment of the current and forward-looking economic environment.
There remains elevated economic uncertainty, and management continues to exercise expert credit judgment in assessing if an exposure has experienced
significant increase in credit risk since initial recognition and in determining the amount of ECLs at each reporting date. To the extent that certain effects are not
fully incorporated into the model calculations, temporary quantitative and qualitative adjustments have been applied.
Insurance Contracts
The assumptions used in establishing the Bank’s insurance claims and policy benefit liabilities are based on best estimates of possible outcomes.
For property and casualty insurance contracts, the ultimate cost of LIC is estimated using a range of standard actuarial claims projection techniques in
accordance with Canadian accepted actuarial practices. Additional qualitative judgment is used to assess the extent to which past trends may or may not apply in
the future, in order to arrive at the estimated ultimate claims cost amounts that present the most likely outcome taking into account all the uncertainties involved.
For life and health insurance contracts, actuarial liabilities consider all future policy cash flows, including premiums, claims, and expenses required to administer
the policies. Critical assumptions used in the measurement of life and health insurance contract liabilities are determined by the appointed actuary.
Further information on insurance risk assumptions is provided in Note 14 of the Bank’s third quarter 2024 Interim Consolidated Financial Statements.
Interest Rate Benchmark Reform
As part of the interest rate benchmark reform, the remaining tenors of the Canadian Dollar Offered Rate (CDOR) (one-month, two-month, and three-month) have
ceased following a final publication on June 28, 2024. Consistent with its transition plan, the Bank’s exposure to financial instruments referencing CDOR is no
longer significant to its Interim Consolidated Financial Statements as at July 31, 2024.
For further details regarding interest rate benchmark reform, refer to Note 3 of the Bank’s 2023 Annual Consolidated Financial Statements.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 46
FUTURE CHANGES IN ACCOUNTING POLICIES
The following standard and amendments have been issued, but are not yet effective on the date of issuance of the Bank’s Interim Consolidated Financial
Statements.
Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18,
Presentation and Disclosure in Financial Statements
Presentation of
Financial Statements
statements. IFRS 18 focuses on the presentation of financial performance in the statement of profit or loss. It will be effective for the Bank’s annual period
beginning November 1, 2027. Early application is permitted. The Bank is currently assessing the impact of adopting this standard.
Amendments to the Classification and Measurement of Financial Instruments
In May 2024, the IASB issued
Amendments to the Classification and Measurement of Financial Instruments,
which amended IFRS 9 and IFRS 7,
Financial
Instruments: Disclosures.
The amendments address matters identified during the post-implementation review of the classification and measurement requirements
of IFRS 9. The amendments clarify how to assess the contractual cash flow characteristics of financial assets that include environmental, social, and governance
linked features and other similar contingent features. The amendments also clarify the treatment of non-recourse assets and contractually linked instruments.
Furthermore, the amendments clarify that a financial liability is derecognized on the settlement date and provide an accounting policy choice to derecognize a
financial liability settled using an electronic payment system before the settlement date if certain conditions are met. Finally, the amendments introduce additional
disclosure requirements for financial instruments with contingent features and equity instruments classified at fair value through other comprehensive income
(FVOCI).
The amendments will be effective for the Bank’s annual period beginning November 1, 2026. Early adoption is permitted, with an option to early adopt the
amendments for contingent features only. The Bank is required to apply the amendments retrospectively, but is not required to restate prior periods. The Bank is
currently assessing the impact of adopting these amendments.
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 third quarter 2024 Interim Consolidated Financial Statements for further information regarding the Bank’s changes to accounting
policies, procedures, and estimates.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 47
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 48
Enhanced Disclosure Task Force (EDTF):
Established by the Financial
Stability Board in May 2012, comprised of banks, analysts, investors, and
auditors, with the goal of enhancing the risk disclosures of banks and other
financial institutions.
Expected Credit Losses (ECLs):
ECLs are the probability-weighted present
value of expected cash shortfalls over the remaining expected life of the
financial instrument and considers reasonable and supportable information
about past events, current conditions, and forecasts of future events and
economic conditions that impact the Bank’s credit risk assessment.
Fair Value:
a liability in an orderly transaction between market participants at the
measurement date, under current market conditions.
Fair value through other comprehensive income (FVOCI):
Under IFRS 9, if
the asset passes the contractual cash flows test (named SPPI), the business
model assessment determines how the instrument is classified. If the instrument
is being held to collect contractual cash flows, that is, if it is not expected to be
sold, it is measured as amortized cost. If the business model for the instrument
is to both collect contractual cash flows and potentially sell the asset, it is
measured at FVOCI.
Fair value through profit or loss (FVTPL):
Under IFRS 9, the classification is
dependent on two tests, a contractual cash flow test (named SPPI) and a
business model assessment. Unless the asset meets the requirements of both
tests, it is measured at fair value with all changes in fair value reported in profit
or loss.
Federal Deposit Insurance Corporation (FDIC):
A U.S. government
corporation which provides deposit insurance guaranteeing the safety of a
depositor’s accounts in member banks. The FDIC also examines and
supervises certain financial institutions for safety and soundness, performs
certain consumer-protection functions, and manages banks in receivership
(failed banks).
Forward Contracts:
one party to the contract to buy and the other party to sell an asset for a fixed
price at a future date.
Futures:
price on a specified future date.
Hedging:
exposure to fluctuations in interest rates, foreign currency exchange rates, or
other market factors. The elimination or reduction of such exposure is
accomplished by engaging in capital markets activities to establish offsetting
positions.
Impaired Loans:
deterioration of credit quality to the extent that the Bank no longer has
reasonable assurance as to the timely collection of the full amount of principal
and interest.
Loss Given Default (LGD):
incur when a borrower defaults on a loan, which is expressed as a percentage
of exposure at default.
Mark-to-Market (MTM):
balance sheet date for financial instruments that are carried at fair value.
Master Netting Agreements:
multiple derivative contracts with each other that provide for the net settlement
of all contracts through a single payment, in a single currency, in the event of
default or termination of any one contract.
Net Corporate Expenses:
Non-interest expenses related to corporate service
and control groups which are not allocated to a business segment.
Net Interest Margin:
percentage of average interest-earning assets to measure performance. This
metric is an indicator of the profitability of the Bank’s earning assets less the
cost of funding. Adjusted net interest margin is calculated in the same manner
using adjusted net interest income.
Non-Viability Contingent Capital (NVCC):
Instruments (preferred shares and
subordinated debt) that contain a feature or a provision that allows the financial
institution to either permanently convert these instruments into common shares
or fully write-down the instrument, in the event that the institution is no longer
viable.
Notional:
instruments are based.
Office of the Superintendent of Financial Institutions Canada (OSFI):
The
regulator of Canadian federally chartered financial institutions and federally
administered pension plans.
Options:
right, but not the obligation, to buy or to sell a security, exchange rate, interest
rate, or other financial instrument or commodity at a predetermined price at or
by a specified future date.
Price-Earnings Ratio
:
A
ratio calculated by dividing the closing share price by
EPS based on a trailing four quarters to indicate market performance. Adjusted
price-earnings ratio is calculated in the same manner using adjusted EPS.
Probability of Default (PD):
to meet its scheduled repayments.
Provision for Credit Losses (PCL):
losses to bring it to a level that management considers adequate to reflect
expected credit-related losses on its portfolio.
Return on Common Equity (ROE):
as net income available to common shareholders as a percentage of average
common shareholders’ equity, utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated as the segment net income
attributable to common shareholders as a percentage of average allocated
capital. Adjusted ROE is calculated in the same manner using adjusted net
income.
Return on Risk-weighted Assets:
Net income available to common
shareholders as a percentage of average risk-weighted assets.
Return on Tangible Common Equity (ROTCE):
measure calculated as reported net income available to common shareholders
after adjusting for the after-tax amortization of acquired intangibles, which are
treated as an item of note, as a percentage of average Tangible common
equity. Adjusted ROTCE is calculated in the same manner using adjusted net
income. Both measures can be utilized in assessing the Bank’s use of equity.
Risk-Weighted Assets (RWA):
Assets calculated by applying a regulatory
risk-weight factor to on and off-balance sheet exposures. The risk-weight
factors are established by the OSFI to convert on and off-balance sheet
exposures to a comparable risk level.
Securitization:
transferred to structures, which normally issue a series of asset-backed
securities to investors to fund the purchase of loans.
Solely Payments of Principal and Interest (SPPI):
following criteria be met in order for a financial instrument to be classified at
amortized cost:
●
bank trading activity), and, as such, an asset is held with the intention of
collecting its contractual cash flows; and
●
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 49
Swaps:
payment obligations and currencies on a notional principal for a specified period
of time.
Tangible common equity (TCE):
common shareholders’ equity less goodwill, imputed goodwill, and intangibles
on an investment in Schwab and TD Ameritrade and other acquired intangible
assets, net of related deferred tax liabilities. It can be utilized in assessing the
Bank’s use of equity.
Taxable Equivalent Basis (TEB):
that increases revenues and the provision for income taxes on certain tax-
exempt securities to an equivalent before-tax basis to facilitate comparison of
net interest income from both taxable and tax-exempt sources.
Tier 1 Capital Ratio:
capital, consisting primarily of common shareholders’ equity, retained earnings,
preferred shares and innovative instruments. Tier 1 Capital ratio is calculated as
Tier 1 Capital divided by RWA.
Total Capital Ratio:
Capital. Total Capital ratio is calculated as Total Capital divided by RWA.
Total Shareholder Return (TSR):
TD’s common shares. The return measures the change in shareholder value,
assuming dividends paid are reinvested in additional shares.
Trading-Related Revenue:
trading income (loss), net interest income on trading positions, and income
(loss) from financial instruments designated at FVTPL that are managed within a
trading portfolio. Trading-related revenue (TEB) in the Wholesale Banking
segment is also a non-GAAP financial measure and is calculated in the same
manner, including TEB adjustments. Both are used for measuring trading
performance.
Value-at-Risk (VaR):
and to calculate the regulatory capital required for market risk in trading
activities. VaR measures the adverse impact that potential changes in market
rates and prices could have on the value of a portfolio over a specified period of
time.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 50
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
INTERIM CONSOLIDATED BALANCE SHEET
(unaudited)
(As at and in millions of Canadian dollars)
July 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
(7,811 )
(7,136 )
Loans, net of allowance for loan losses
Other
Customers’ liability under acceptances
Investment in Schwab
Goodwill
Other intangibles
Land, buildings, equipment, other depreciable assets and right-of-use assets
Deferred tax assets
1
Amounts receivable from brokers, dealers, and clients
Other assets
1
Total assets
1
$
$
LIABILITIES
Trading deposits
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at fair value through profit or loss
Deposits (Notes 4, 10)
Personal
Banks
Business and government
Other
Acceptances
Obligations related to securities sold short
Obligations related to securities sold under repurchase agreements
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance contract liabilities
1
Other liabilities
1
Subordinated notes and debentures (Notes 4, 12)
Total liabilities
1
EQUITY
Shareholders’ Equity
Common shares
Preferred shares and other equity instruments
Treasury – common shares
(35 )
(64 )
Treasury – preferred shares and other equity instruments
(17 )
(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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 51
INTERIM CONSOLIDATED STATEMENT OF INCOME (LOSS)
(unaudited)
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
July 31
July 31
July 31
2024
2023
2024
2023
Interest income
1
Loans
$
$
$
$
Reverse repurchase agreements
Securities
Interest
Dividends
Deposits with banks
Interest expense (Note 21)
Deposits
Securitization liabilities
Subordinated notes and debentures
Repurchase agreements and short sales
Other
Net interest income
Non-interest income
Investment and securities services
Credit fees
Trading income (loss)
Service charges
2
Card services
Insurance revenue
2
Other income (loss)
2
(19 )
(184 )
(1,433 )
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 (loss)
2
(181 )
Preferred dividends and distributions on other equity instruments
Net income (loss) attributable to common shareholders
2
$
(250 )
$
$
$
Earnings (loss) per share
Basic
2
$
(0.14 )
$
$
$
Diluted
2
(0.14 )
Dividends per common share
1
$
2
The accompanying Notes are an integral part of these Interim Consolidated Financial Statements.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 52
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
July 31
July 31
July 31
2024
2023
2024
2023
Net income (loss)
1
$
(181 )
$
$
$
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)
(19 )
Reclassification to earnings of net loss/(gain)
(7 )
(16 )
(10 )
Changes in allowance for credit losses recognized in earnings
(1 )
(1 )
Income taxes relating to:
Change in unrealized gain/(loss)
(35 )
(108 )
(104 )
Reclassification to earnings of net loss/(gain)
(2 )
Net change in unrealized foreign currency translation gain/(loss) on
investments in foreign operations, net of hedging activities
Unrealized gain/(loss)
(2,984 )
(531 )
(3,507 )
Reclassification to earnings of net loss/(gain)
Net gain/(loss) on hedges
(200 )
Reclassification to earnings of net loss/(gain) on hedges
(17 )
(15 )
Income taxes relating to:
Net gain/(loss) on hedges
(461 )
(78 )
(770 )
Reclassification to earnings of net loss/(gain) on hedges
(1,789 )
(343 )
(2,533 )
Net change in gain/(loss) on derivatives designated as cash flow hedges
Change in gain/(loss)
(4,821 )
(1,069 )
Reclassification to earnings of loss/(gain)
(546 )
Income taxes relating to:
Change in gain/(loss)
(747 )
(687 )
Reclassification to earnings of loss/(gain)
(825 )
(173 )
(503 )
(1,463 )
Share of other comprehensive income (loss) from investment in Schwab
(224 )
Items that will not be subsequently reclassified to net income
Remeasurement gain/(loss) on employee benefit plans
Gain/(loss)
(135 )
(88 )
Income taxes
(90 )
(19 )
(97 )
(80 )
Change in net unrealized gain/(loss) on equity securities designated at
fair value through other comprehensive income
Change in net unrealized gain/(loss)
(60 )
(10 )
Income taxes
(29 )
(47 )
(42 )
(9 )
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)
(18 )
(146 )
Income taxes
(8 )
(8 )
(13 )
(107 )
Total other comprehensive income (loss)
(3,470 )
(1,333 )
Total comprehensive income (loss)
1
$
$
(589 )
$
$
Attributable to:
Common shareholders
1
$
$
(663 )
$
$
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 53
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Common shares (Note 13)
Balance at beginning of period
$
$
$
$
Proceeds from shares issued on exercise of stock options
Shares issued as a result of dividend reinvestment plan
Purchase of shares for cancellation and other
(190 )
(200 )
(702 )
(200 )
Balance at end of period
Preferred shares and other equity instruments (Note 13)
Balance at beginning of period
Issuance of shares and other equity instruments
Redemption of shares and other equity instruments
(950 )
(1,300 )
Balance at end of period
Treasury – common shares (Note 13)
Balance at beginning of period
(24 )
(99 )
(64 )
(91 )
Purchase of shares
(2,745 )
(1,965 )
(7,995 )
(6,016 )
Sale of shares
Balance at end of period
(35 )
(35 )
Treasury – preferred shares and other equity instruments (Note 13)
Balance at beginning of period
(8 )
(10 )
(65 )
(7 )
Purchase of shares and other equity instruments
(147 )
(46 )
(398 )
(372 )
Sale of shares and other equity instruments
Balance at end of period
(17 )
(11 )
(17 )
(11 )
Contributed surplus
Balance at beginning of period
Net premium (discount) on sale of treasury instruments
(3 )
Issuance of stock options, net of options exercised
Other
(2 )
(23 )
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 (loss) attributable to equity instrument holders
1
(181 )
Common dividends
(1,779 )
(1,758 )
(5,381 )
(5,258 )
Preferred dividends and distributions on other equity instruments
(69 )
(74 )
(333 )
(367 )
Share and other equity instrument issue expenses
(7 )
(7 )
Net premium on repurchase of common shares and redemption of preferred shares and other
equity instruments
(871 )
(981 )
(3,301 )
(981 )
Remeasurement gain/(loss) on employee benefit plans
(97 )
(80 )
Realized gain/(loss) on equity securities designated at fair value through
other comprehensive income
(243 )
(249 )
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
(194 )
(191 )
(413 )
(476 )
Impact of reclassification of securities supporting insurance operations
related to the adoption of IFRS 17
2
Other comprehensive income (loss)
(2 )
Allowance for credit losses
(1 )
(1 )
Balance at end of period
(92 )
(193 )
(92 )
(193 )
Net unrealized gain/(loss) on equity securities designated at fair value through
other comprehensive income:
Balance at beginning of period
(104 )
(127 )
Other comprehensive income (loss)
(125 )
(258 )
Reclassification of loss/(gain) to retained earnings
(86 )
(86 )
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 )
(16 )
(38 )
Other comprehensive income (loss)
(13 )
(107 )
Balance at end of period
(16 )
(29 )
(16 )
(29 )
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)
(1,789 )
(343 )
(2,533 )
Balance at end of period
Net gain/(loss) on derivatives designated as cash flow hedges:
Balance at beginning of period
(4,790 )
(3,617 )
(5,472 )
(5,717 )
Other comprehensive income (loss)
(1,463 )
Balance at end of period
(3,197 )
(5,080 )
(3,197 )
(5,080 )
Share of accumulated other comprehensive income (loss) from investment in Schwab
(3,025 )
(3,492 )
(3,025 )
(3,492 )
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 54
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
July 31
July 31
July 31
2024
2023
2024
2023
Cash flows from (used in) operating activities
Net income (loss)
1
$
(181 )
$
$
$
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)
(7 )
Share of net income from investment in Schwab
(190 )
(182 )
(525 )
(708 )
Deferred taxes
1
(175 )
(285 )
(972 )
(986 )
Changes in operating assets and liabilities
Interest receivable and payable
Securities sold under repurchase agreements
(9,426 )
Securities purchased under reverse repurchase agreements
(7,196 )
(3,441 )
(8,585 )
(39,057 )
Securities sold short
(3,643 )
(4,105 )
(2,229 )
Trading loans, securities, and other
(6,829 )
(1,066 )
(21,085 )
(11,847 )
Loans net of securitization and sales
(11,261 )
(18,950 )
(45,550 )
(38,765 )
Deposits
(26,627 )
(66,837 )
Derivatives
Non-trading financial assets at fair value through profit or loss
Financial assets and liabilities designated at fair value through profit or loss
(18,077 )
Securitization liabilities
Current taxes
Brokers, dealers, and clients amounts receivable and payable
(5,433 )
(1,658 )
(7,700 )
(8,495 )
Other, including unrealized foreign currency translation loss/(gain)
1
(2,965 )
(2,513 )
Net cash from (used in) operating activities
(9,926 )
(30,801 )
(24,757 )
(79,820 )
Cash flows from (used in) financing activities
Issuance of subordinated notes and debentures
Redemption or repurchase of subordinated notes and debentures
(1,483 )
(14 )
(1,525 )
Common shares issued, net
Repurchase of common shares
(1,061 )
(1,181 )
(4,003 )
(1,181 )
Preferred shares and other equity instruments issued, net
Redemption of preferred shares and other equity instruments
(950 )
(1,300 )
Sale of treasury shares and other equity instruments
Purchase of treasury shares and other equity instruments
(2,892 )
(2,011 )
(8,393 )
(6,388 )
Dividends paid on shares and distributions paid on other equity instruments
(1,719 )
(2,908 )
(5,316 )
(4,032 )
Repayment of lease liabilities
(181 )
(160 )
(506 )
(480 )
Net cash from (used in) financing activities
(4,065 )
(4,134 )
(9,397 )
(5,484 )
Cash flows from (used in) investing activities
Interest-bearing deposits with banks
(4,202 )
Activities in financial assets at fair value through other comprehensive income
Purchases
(8,236 )
(4,715 )
(21,862 )
(20,045 )
Proceeds from maturities
Proceeds from sales
Activities in debt securities at amortized cost
Purchases
(2,723 )
(3,761 )
(8,423 )
(21,851 )
Proceeds from maturities
Proceeds from sales
Net purchases of land, buildings, equipment, other depreciable assets, and other intangibles
(568 )
(514 )
(1,464 )
(1,290 )
Net cash acquired from (paid for) divestitures and acquisitions
(122 )
(624 )
Net cash from (used in) investing activities
Effect of exchange rate changes on cash and due from banks
(134 )
(25 )
(162 )
Net increase (decrease) in cash and due from banks
(1,136 )
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 55
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1: NATURE OF OPERATIONS
CORPORATE INFORMATION
The Toronto-Dominion Bank is a bank chartered under the
Bank Act (Canada)
. The shareholders of a bank are not, as shareholders, liable for any liability, act, or
default of the bank except as otherwise provided under the
Bank Act (Canada)
. The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Group (“TD” or the “Bank”). The Bank was formed through the amalgamation on February 1, 1955, of The Bank of Toronto (chartered in 1855) and The
Dominion Bank (chartered in 1869). The Bank is incorporated and domiciled in Canada with its registered and principal business offices located at 66 Wellington
Street West, Toronto, Ontario. TD serves customers in four business segments operating in a number of locations in key financial centres around the globe:
Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking.
BASIS OF PREPARATION
The accompanying Interim Consolidated Financial Statements and accounting principles followed by the Bank have been prepared in accordance with
International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), including the accounting requirements of
the Office of the Superintendent of Financial Institutions Canada (OSFI). The Interim Consolidated Financial Statements are presented in Canadian dollars, unless
otherwise indicated.
These Interim Consolidated Financial Statements were prepared on a condensed basis in accordance with International Accounting Standard 34,
Interim
Financial Reporting
Certain comparative amounts have been revised to conform with the presentation adopted in the current period.
The preparation of the Interim Consolidated Financial Statements requires that management make judgments, estimates, and assumptions regarding the
reported amount of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities, as further described in Note 3 of the Bank’s 2023
Annual Consolidated Financial Statements and in Note 3 of this report. Accordingly, actual results may differ from estimated amounts as future confirming events
occur.
The Bank’s Interim Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions and events in similar
circumstances. All intercompany transactions, balances, and unrealized gains and losses on transactions are eliminated on consolidation.
The Interim Consolidated Financial Statements for the three and nine months ended July 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 August 21, 2024.
As the Interim Consolidated Financial Statements do not include all of the disclosures normally provided in the Annual Consolidated Financial Statements, they
should be read in conjunction with the Bank’s 2023 Annual Consolidated Financial Statements and the accompanying Notes, and the shaded sections of the 2023
Management’s Discussion and Analysis (MD&A). The risk management policies and procedures of the Bank are provided in the MD&A. The shaded sections of
the “Managing Risk” section of the MD&A in this report, relating to market, liquidity, and insurance risks, are an integral part of these Interim Consolidated Financial
Statements, as permitted by IFRS.
NOTE 2: CURRENT AND FUTURE CHANGES IN ACCOUNTING POLICIES
CURRENT CHANGES IN ACCOUNTING POLICIES
The following new standard has been adopted by the Bank on November 1, 2023.
Insurance Contracts
The IASB issued IFRS 17 which replaced the guidance in IFRS 4,
Insurance Contracts
after January 1, 2023, which was November 1, 2023 for the Bank. IFRS 17 establishes principles for recognition, measurement, presentation and disclosure of
insurance contracts.
Under IFRS 17, insurance contracts are aggregated into groups which are measured at the risk-adjusted present value of cash flows in fulfilling the contracts.
Revenue is recognized as insurance services are provided over the coverage period. Losses are recognized immediately if the contract group is expected to be
onerous. The liabilities presented by insurance groups are comprised of the liability for remaining coverage (LRC) and the liability for incurred claims (LIC) and are
reported as Insurance contract liabilities on the Interim Consolidated Balance Sheet. The LRC is the obligation to investigate and pay claims that have not yet
occurred and includes the loss component related to onerous contract groups. The LIC is the estimate of claims incurred, including claims that have occurred but
have not been reported, and related insurance costs.
IFRS 17 introduces two measurement models that are applicable to the Bank, the premium allocation approach model (PAA) and the general measurement model
(GMM). The Bank measures the majority of its insurance contract groups using the PAA, which includes property and casualty contracts as well as short-term life
and health contracts. The PAA is a simplified model applied to insurance contracts that are either one year or less or where the PAA approximates the GMM.
Contracts using the GMM are longer-term life and health contracts. The LRC for insurance contract groups using the PAA is measured as unearned premiums less
deferred acquisition cash flows allocated to the group. The LRC is adjusted for the recognition of insurance revenue and amortization of acquisition cash flows
reported in insurance service expenses on a straight-line basis over the contractual terms of the underlying insurance contracts, usually twelve months. The LRC
for longer term contracts using the GMM model is measured using estimates and assumptions that reflect the timing and uncertainty of insurance cash flows.
When a group of contracts is expected to be onerous, a loss component (expected loss related to fulfilling the related insurance contracts) is established which
increases the LRC and insurance service expenses. The loss component of the LRC is subsequently recognized in income over the contractual term of the
underlying insurance contracts to offset claims incurred and related expenses.
The Bank measures the LIC at the present value of current estimates of claims and related costs for insurable events occurring at or before the Interim
Consolidated Balance Sheet date. The LIC includes a risk adjustment, which represents the compensation the Bank requires for bearing the uncertainty related to
non-financial risks in its fulfilment of insurance contracts. Expenses related to claims incurred and related costs are reported in insurance service expenses and
changes related to discounting the liability are recorded as insurance finance income or expenses in other income (loss). Prior to the adoption of IFRS 17, these
expenses were recorded in insurance claims and related expenses and non-interest expenses.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 56
Reinsurance contracts held are recognized and measured using the same principles as insurance contracts issued. Reinsurance contract assets are presented in
Other assets on the Interim Consolidated Balance Sheet and the net results from reinsurance contracts held are presented in Other income (loss) on the Interim
Consolidated Statement of Income. Refer to Note 14 for further detail on the balances and results of insurance and reinsurance contracts.
The Bank initially applied IFRS 17 on November 1, 2023 and restated the comparative period. The Bank transitioned by primarily applying the full retrospective
approach which resulted in the measurement of insurance contracts as if IFRS 17 had always applied to them.
The following table sets out adjustments to the
Bank’s insurance-related balances reported under IFRS 4 as at October 31, 2022 used to derive the insurance contract liabilities and reinsurance contract assets
recognized by the Bank as at November 1, 2022 under IFRS 17.
(millions of Canadian dollars)
Amount
Insurance-related liabilities
$
7,468
Other liabilities
131
Other assets
(2,361)
Net insurance-related balances as at October 31, 2022
$
5,238
Changes in actuarial assumptions, including risk adjustment and discount factor
(192)
Recognition of losses on onerous contracts
113
Other adjustments
(93)
Net insurance-related balances as at November 1, 2022
$
5,066
Insurance contract liabilities
$
5,761
Reinsurance contract assets
(695)
Net insurance-related balances as at November 1, 2022
$
5,066
On November 1, 2022, IFRS 17 transition adjustments resulted in a decrease to the Bank’s deferred tax assets of $
earnings of $
Upon the initial application of IFRS 17 on November 1, 2023, the Bank applied transitional guidance and reclassified certain securities supporting insurance
operations to minimize accounting mismatches arising from the application of the new discount factor under IFRS 17. The transitional guidance for such securities
is applicable for entities that previously used IFRS 9,
Financial Instruments
resulted in a decrease to retained earnings and an increase in accumulated other comprehensive income (AOCI) of $
FUTURE CHANGES IN ACCOUNTING POLICIES
The following standard and amendments have been issued, but are not yet effective on the date of issuance of the Bank’s Interim Consolidated Financial
Statements.
Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18,
Presentation and Disclosure in Financial Statements
Presentation of
Financial Statements
statements. IFRS 18 focuses on the presentation of financial performance in the statement of profit or loss. It will be effective for the Bank’s annual period
beginning November 1, 2027. Early application is permitted. The Bank is currently assessing the impact of adopting this standard.
Amendments to the Classification and Measurement of Financial Instruments
In May 2024, the IASB issued
Amendments to the Classification and Measurement of Financial Instruments,
which amended IFRS 9 and IFRS 7,
Financial
Instruments: Disclosures.
The amendments address matters identified during the post-implementation review of the classification and measurement requirements
of IFRS 9. The amendments clarify how to assess the contractual cash flow characteristics of financial assets that include environmental, social, and governance
linked features and other similar contingent features. The amendments also clarify the treatment of non-recourse assets and contractually linked instruments.
Furthermore, the amendments clarify that a financial liability is derecognized on the settlement date and provide an accounting policy choice to derecognize a
financial liability settled using an electronic payment system before the settlement date if certain conditions are met. Finally, the amendments introduce additional
disclosure requirements for financial instruments with contingent features and equity instruments classified at fair value through other comprehensive income
(FVOCI).
The amendments will be effective for the Bank’s annual period beginning November 1, 2026. Early adoption is permitted, with an option to early adopt the
amendments for contingent features only. The Bank is required to apply the amendments retrospectively, but is not required to restate prior periods. The Bank is
currently assessing the impact of adopting these amendments.
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.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 57
Insurance Contracts
The assumptions used in establishing the Bank’s insurance claims and policy benefit liabilities are based on best estimates of possible outcomes.
For property and casualty insurance contracts, the ultimate cost of LIC is estimated using a range of standard actuarial claims projection techniques in
accordance with Canadian accepted actuarial practices. Additional qualitative judgment is used to assess the extent to which past trends may or may not apply in
the future, in order to arrive at the estimated ultimate claims cost amounts that present the most likely outcome taking into account all the uncertainties involved.
For life and health insurance contracts, actuarial liabilities consider all future policy cash flows, including premiums, claims, and expenses required to administer
the policies. Critical assumptions used in the measurement of life and health insurance contract liabilities are determined by the appointed actuary.
Further information on insurance risk assumptions is provided in Note 14.
Interest Rate Benchmark Reform
As part of the interest rate benchmark reform, the remaining tenors of the Canadian Dollar Offered Rate (CDOR) (one-month, two-month, and three-month) have
ceased following a final publication on June 28, 2024. Consistent with its transition plan, the Bank’s exposure to financial instruments referencing CDOR is no
longer significant to its Interim Consolidated Financial Statements as at July 31, 2024.
For further details regarding interest rate benchmark reform, refer to Note 3 of the Bank’s 2023 Annual Consolidated Financial Statements.
NOTE 4: FAIR VALUE MEASUREMENTS
There have been no significant changes to the Bank’s approach and methodologies used to determine fair value measurements for the three and nine months
ended July 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
July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 58
(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
July 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
July 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 Cooperation and Development (OECD).
(c)
The Bank’s policy is to record transfers of assets and liabilities between the different levels of the fair value hierarchy using the fair values as at the end of each
reporting period.
There were no significant transfers between Level 1 and Level 2 during the three and nine months ended July 31, 2024 and July 31, 2023.
There were no significant transfers between Level 2 and Level 3 during the three and nine months ended July 31, 2024 and July 31, 2023.
There were no significant changes to the unobservable inputs and sensitivities for assets and liabilities classified as Level 3 during the three and nine months
ended July 31, 2024, and July 31, 2023.
TD BANK GROUP • THIRD 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 and
nine months ended July 31, 2024 and July 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
May 1
Included
Included
Purchases/
Sales/
Into
Out of
July 31
instruments
2024
in income
2
in OCI
3,4
Issuances
Settlements
Level 3
Level 3
2024
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
$
$
$
$
Other debt securities
(1 )
(27 )
Equity securities
(5 )
(6 )
(27 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(22 )
(22 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(3 )
Equity securities
(23 )
$
$
$
$
$
(26 )
$
$
$
$
FINANCIAL LIABILITIES
Trading deposits
6
$
(910 )
$
(18 )
$
$
(24 )
$
$
$
$
(724 )
$
(12 )
Derivatives
7
Interest rate contracts
(148 )
(22 )
(160 )
(14 )
Foreign exchange contracts
(7 )
(5 )
(4 )
(1 )
Equity contracts
(23 )
(23 )
(2 )
Commodity contracts
(15 )
(172 )
(11 )
(2 )
(5 )
(187 )
(17 )
Financial liabilities designated
at fair value
through profit or loss
(74 )
(77 )
(9 )
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
July 31
instruments
2023
in income
2
in OCI
4
Issuances
Settlements
Level 3
Level 3
2024
still held
5
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
(67 )
$
$
$
$
Other debt securities
(86 )
(76 )
Equity securities
(1 )
(7 )
(160 )
(76 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(37 )
(1 )
(37 )
(1 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(4 )
(15 )
Equity securities
(9 )
(209 )
(10 )
$
$
$
(13 )
$
$
(224 )
$
$
$
$
(10 )
FINANCIAL LIABILITIES
Trading deposits
6
$
(985 )
$
(8 )
$
$
(98 )
$
$
$
$
(724 )
$
(10 )
Derivatives
7
Interest rate contracts
(126 )
(63 )
(160 )
(36 )
Foreign exchange contracts
(6 )
(11 )
(4 )
Equity contracts
(21 )
(1 )
(1 )
(1 )
(23 )
(3 )
Commodity contracts
(1 )
(4 )
(5 )
(154 )
(56 )
(12 )
(187 )
(44 )
Financial liabilities designated
at fair value through profit
or loss
(22 )
(210 )
(9 )
1
Includes foreign exchange.
2
3
4
5
6
7
(April 30, 2024/May 1, 2024 – $
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 60
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
May 1
Included
Included
Purchases/
Sales/
Into
Out of
July 31
instruments
2023
in income
2
in OCI
3
Issuances
Settlements
Level 3
Level 3
2023
still held
4
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
$
$
$
$
Other debt securities
(13 )
(5 )
Equity securities
(24 )
(37 )
(5 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(52 )
(3 )
(20 )
(52 )
(3 )
(20 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(4 )
Equity securities
(295 )
(1,144 )
(6 )
$
$
$
(293 )
$
$
(1,148 )
$
$
$
$
(6 )
FINANCIAL LIABILITIES
Trading deposits
5
$
(592 )
$
(9 )
$
$
(211 )
$
$
(1 )
$
$
(795 )
$
(4 )
Derivatives
6
Interest rate contracts
(169 )
(142 )
Foreign exchange contracts
(2 )
(1 )
(1 )
(1 )
Equity contracts
(27 )
(10 )
(12 )
(47 )
(1 )
Commodity contracts
(2 )
(8 )
(197 )
(1 )
(11 )
(187 )
Financial liabilities designated
at fair value
through profit or loss
(49 )
(166 )
(202 )
(107 )
(167 )
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
July 31
instruments
2022
in income
2
in OCI
3
Issuances
Settlements
Level 3
Level 3
2023
still held
4
FINANCIAL ASSETS
Trading loans, securities,
and other
Government and government-
related securities
$
$
$
$
$
$
$
$
$
Other debt securities
(72 )
(32 )
(28 )
Equity securities
(2 )
(29 )
(101 )
(32 )
(28 )
Non-trading financial
assets at fair value
through profit or loss
Securities
(51 )
(51 )
Financial assets at fair value
through other
comprehensive income
Other debt securities
(6 )
(16 )
Equity securities
(506 )
(1,818 )
(8 )
$
$
$
(512 )
$
$
(1,834 )
$
$
$
$
(8 )
FINANCIAL LIABILITIES
Trading deposits
5
$
(416 )
$
(38 )
$
$
(359 )
$
$
(10 )
$
$
(795 )
$
(28 )
Derivatives
6
Interest rate contracts
(156 )
(16 )
(142 )
Foreign exchange contracts
(6 )
(1 )
(1 )
(1 )
Equity contracts
(59 )
(17 )
(2 )
(40 )
(47 )
Commodity contracts
(56 )
(1 )
(184 )
(43 )
(3 )
(38 )
(187 )
Financial liabilities designated
at fair value
through profit or loss
(44 )
(96 )
(389 )
(107 )
(95 )
1
Includes foreign exchange.
2
3
4
5
6
(April 30, 2023/May 1, 2023 – $
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 61
NOTE 5: SECURITIES
(a)
UNREALIZED SECURITIES GAINS (LOSSES)
The following table summarizes the unrealized gains and losses as at July 31, 2024 and October 31, 2023.
Unrealized Gains (Losses) for Securities at Fair Value Through Other Comprehensive Income
(millions of Canadian dollars)
As at
July 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
$
$
$
(103 )
$
$
$
$
(170 )
$
Provinces
(51 )
(118 )
U.S. federal, state, municipal governments, and
(138 )
(275 )
Other OECD government-guaranteed debt
(12 )
(24 )
Mortgage-backed securities
(4 )
(36 )
(308 )
(623 )
Other debt securities
Asset-backed securities
(8 )
(32 )
Corporate and other debt
(38 )
(99 )
(46 )
(131 )
Total debt securities
(354 )
(754 )
Equity securities
Common shares
(76 )
(116 )
Preferred shares
(157 )
(224 )
(233 )
(340 )
Total securities at fair value through
$
$
$
(587 )
$
$
$
$
(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
July 31, 2024 and October 31, 2023, and dividend income recognized on these securities for the three and nine months ended July 31, 2024 and July 31, 2023.
Equity Securities Designated at Fair Value Through Other Comprehensive Income
(millions of Canadian dollars)
As at
For the three months ended
For the nine months ended
July 31, 2024
October 31, 2023
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Fair value
Dividend income recognized
Dividend income recognized
Common shares
$
$
$
$
$
$
Preferred shares
Total
$
$
$
$
$
$
The Bank disposed of certain equity securities in line with the Bank’s investment strategy and disposed of Federal Home Loan Bank (FHLB) stocks in accordance
with FHLB member stockholding requirements, as follows:
Equity Securities Net Realized Gains (Losses)
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Equity Securities
1
Fair value
$
$
$
$
Cumulative realized gain/(loss)
(8 )
FHLB Stock
Fair value
Cumulative realized gain/(loss)
1
Includes disposal of the Bank’s holdings in First Horizon Corporation common shares.
(c)
DEBT SECURITIES NET REALIZED GAINS (LOSSES)
The following table summarizes the net realized gains and losses for the three and nine months ended July 31, 2024 and July 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
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Debt securities at amortized cost
$
$
(22 )
$
(69 )
$
(58 )
Debt securities at fair value through other comprehensive income
(4 )
Total
$
$
(26 )
$
(53 )
$
(48 )
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 62
(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
July 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 July 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 July 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 July 31, 2024 and October 31, 2023.
Loans and Acceptances
(millions of Canadian dollars)
As at
July 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
July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 63
(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
July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 64
Loans and Acceptances by Risk Ratings
(Continued)
1
(millions of Canadian dollars)
As at
July 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
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 65
(c)
ALLOWANCE FOR CREDIT LOSSES
The following table provides details on the Bank’s allowance for credit losses as at and for the three and nine months ended July 31, 2024 and July 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
July 31, 2024
July 31, 2023
Residential mortgages
$
$
(16 )
$
(2 )
$
$
$
$
$
(1 )
$
$
Consumer instalment and other
personal
(302 )
(199 )
(19 )
Credit card
(396 )
(287 )
(46 )
Business and government
(88 )
(3 )
(28 )
(58 )
Total allowance for loan losses,
including off-balance sheet
instruments
(788 )
(515 )
(123 )
Debt securities at amortized cost
(1 )
Debt securities at FVOCI
Total allowance for credit
losses on debt securities
(1 )
Total allowance for credit losses
$
$
$
(788 )
$
$
$
$
$
(515 )
$
(124 )
$
Comprising:
Allowance for credit losses on
loans at amortized cost
$
$
$
$
Allowance for credit losses on
loans at FVOCI
Allowance for loan losses
Allowance for off-balance sheet
instruments
Allowance for credit losses on
debt securities
For the nine months ended
July 31, 2024
July 31, 2023
Residential mortgages
$
$
(16 )
$
(5 )
$
$
$
$
$
(5 )
$
(1 )
$
Consumer instalment and other
personal
(865 )
(2 )
(576 )
(25 )
Credit card
(1,168 )
(8 )
(815 )
(54 )
Business and government
(408 )
(42 )
(116 )
(55 )
Total allowance for loan losses,
including off-balance sheet
instruments
(2,446 )
(49 )
(1,512 )
(135 )
Debt securities at amortized cost
Debt securities at FVOCI
(1 )
(1 )
Total allowance for credit
losses on debt securities
(1 )
Total allowance for credit losses
$
$
$
(2,446 )
$
(49 )
$
$
$
$
(1,512 )
$
(135 )
$
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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 66
(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 July 31, 2024 and July 31, 2023.
Allowance for Loan Losses by Stage
(millions of Canadian dollars)
For the three months ended
July 31, 2024
July 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
(42 )
(40 )
(1 )
Transfer to Stage 2
(6 )
(6 )
(5 )
(3 )
Transfer to Stage 3
(6 )
(1 )
(10 )
Net remeasurement due to transfers into stage
3
(10 )
(5 )
(7 )
(4 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(1 )
(1 )
(1 )
(1 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(2 )
(8 )
(6 )
(16 )
(2 )
(5 )
(3 )
(10 )
Changes to risk, parameters, and models
7
(32 )
(3 )
Disposals
Write-offs
(2 )
(2 )
(3 )
(3 )
Recoveries
Foreign exchange and other adjustments
(1 )
(1 )
Balance at end of period
$
$
$
$
$
$
$
$
Consumer Instalment and Other Personal
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(177 )
(1 )
(166 )
(1 )
Transfer to Stage 2
(61 )
(21 )
(47 )
(16 )
Transfer to Stage 3
(2 )
(61 )
(2 )
(46 )
Net remeasurement due to transfers into stage
3
(81 )
(61 )
(6 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(20 )
(25 )
(5 )
(50 )
(21 )
(18 )
(2 )
(41 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(22 )
(31 )
(13 )
(66 )
(21 )
(25 )
(13 )
(59 )
Changes to risk, parameters, and models
7
(82 )
(102 )
Disposals
Write-offs
(386 )
(386 )
(275 )
(275 )
Recoveries
Foreign exchange and other adjustments
(8 )
(9 )
(2 )
(19 )
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
(289 )
(12 )
(294 )
(9 )
Transfer to Stage 2
(73 )
(25 )
(71 )
(17 )
Transfer to Stage 3
(5 )
(206 )
(4 )
(171 )
Net remeasurement due to transfers into stage
3
(132 )
(17 )
(131 )
(21 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(3 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(10 )
(17 )
(99 )
(126 )
(11 )
(18 )
(80 )
(109 )
Changes to risk, parameters, and models
7
(93 )
(109 )
Disposals
Write-offs
(478 )
(478 )
(360 )
(360 )
Recoveries
Foreign exchange and other adjustments
(18 )
(22 )
(6 )
(46 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
8
Balance at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
described in the “Significant Increase in Credit Risk” section of Note 2 and Note 3 of the Bank’s 2023 Annual Consolidated Financial Statements, holding all other factors impacting the
change in ECLs constant.
4
5
6
7
subsequent to stage migration. Refer to the “Measurement of Expected Credit Losses”, “Forward-Looking Information ” and “Expert Credit Judgment” sections of Note 2 and Note 3 of the
Bank’s 2023 Annual Consolidated Financial Statements for further details.
8
9
Consolidated Financial Statements for further details.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 67
Allowance for Loan Losses by Stage
(Continued)
(millions of Canadian dollars)
For the three months ended
July 31, 2024
July 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
(80 )
(71 )
Transfer to Stage 2
(158 )
(5 )
(128 )
(3 )
Transfer to Stage 3
(1 )
(85 )
(1 )
(59 )
Net remeasurement due to transfers into stage
3
(27 )
(21 )
New originations or purchases
3
n/a
n/a
n/a
n/a
Net repayments
3
(22 )
(7 )
(27 )
(10 )
(16 )
(18 )
Derecognition of financial assets (excluding
disposals and write-offs)
3
(161 )
(196 )
(75 )
(432 )
(173 )
(155 )
(127 )
(455 )
Changes to risk, parameters, and models
3
(61 )
(20 )
Disposals
Write-offs
(113 )
(113 )
(49 )
(49 )
Recoveries
Foreign exchange and other adjustments
(17 )
(3 )
(27 )
(16 )
(15 )
(58 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
4
Balance at end of period
Total Allowance, including off-balance sheet
instruments, at end of period
Less: Total Allowance for off-balance sheet
instruments
4
Total Allowance for Loan Losses at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
4
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 68
The following table provides details on the Bank’s allowance for loan losses by stage as at and for the nine months ended July 31, 2024 and July 31, 2023.
Allowance for Loan Losses by Stage
(millions of Canadian dollars)
For the nine months ended
July 31, 2024
July 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
(107 )
(3 )
(95 )
(2 )
Transfer to Stage 2
(23 )
(17 )
(19 )
(12 )
Transfer to Stage 3
(23 )
(2 )
(18 )
Net remeasurement due to transfers into stage
3
(24 )
(6 )
(18 )
(4 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(3 )
(3 )
(3 )
(2 )
(5 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(5 )
(20 )
(29 )
(54 )
(4 )
(13 )
(9 )
(26 )
Changes to risk, parameters, and models
7
(103 )
(50 )
Disposals
Write-offs
(6 )
(6 )
(8 )
(8 )
Recoveries
Foreign exchange and other adjustments
(1 )
(2 )
(1 )
(1 )
Balance at end of period
$
$
$
$
$
$
$
$
Consumer Instalment and Other Personal
Balance, including off-balance sheet instruments,
at beginning of period
$
$
$
$
$
$
$
$
Provision for credit losses
Transfer to Stage 1
2
(448 )
(3 )
(469 )
(4 )
Transfer to Stage 2
(191 )
(63 )
(147 )
(53 )
Transfer to Stage 3
(8 )
(183 )
(6 )
(141 )
Net remeasurement due to transfers into stage
3
(198 )
(162 )
New originations or purchases
4
n/a
n/a
n/a
n/a
Net repayments
5
(56 )
(70 )
(12 )
(138 )
(44 )
(62 )
(8 )
(114 )
Derecognition of financial assets (excluding
disposals and write-offs)
6
(55 )
(77 )
(39 )
(171 )
(56 )
(72 )
(30 )
(158 )
Changes to risk, parameters, and models
7
(208 )
(320 )
Disposals
Write-offs
(1,103 )
(1,103 )
(795 )
(795 )
Recoveries
Foreign exchange and other adjustments
(1 )
(2 )
(2 )
(10 )
(12 )
(3 )
(25 )
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
(783 )
(27 )
(852 )
(20 )
Transfer to Stage 2
(249 )
(61 )
(233 )
(43 )
Transfer to Stage 3
(16 )
(668 )
(14 )
(514 )
Net remeasurement due to transfers into stage
3
(358 )
(397 )
(29 )
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
(30 )
(51 )
(271 )
(352 )
(33 )
(59 )
(191 )
(283 )
Changes to risk, parameters, and models
7
(329 )
(364 )
Disposals
Write-offs
(1,408 )
(1,408 )
(1,031 )
(1,031 )
Recoveries
Foreign exchange and other adjustments
(3 )
(4 )
(1 )
(8 )
(21 )
(27 )
(6 )
(54 )
Balance, including off-balance sheet instruments,
at end of period
Less: Allowance for off-balance sheet instruments
8
Balance at end of period
$
$
$
$
$
$
$
$
1
Includes allowance for loan losses related to ACI loans.
2
3
described in the “Significant Increase in Credit Risk” section of Note 2 and Note 3 of the Bank’s 2023 Annual Consolidated Financial Statements, holding all other factors impacting the
change in ECLs constant.
4
5
6
7
subsequent to stage migration. Refer to the “Measurement of Expected Credit Losses”, “Forward-Looking Information ” and “Expert Credit Judgment” sections of Note 2 and Note 3 of the
Bank’s 2023 Annual Consolidated Financial Statements for further details.
8
9
Consolidated Financial Statements for further details.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 69
Allowance for Loan Losses by Stage
(Continued)
(millions of Canadian dollars)
For the nine months ended
July 31, 2024
July 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
(194 )
(291 )
(2 )
Transfer to Stage 2
(441 )
(12 )
(411 )
(9 )
Transfer to Stage 3
(17 )
(220 )
(10 )
(98 )
Net remeasurement due to transfers into stage
3
(66 )
(85 )
(6 )
New originations or purchases
3
n/a
n/a
n/a
n/a
Net repayments
3
(41 )
(36 )
(58 )
(49 )
(59 )
(68 )
Derecognition of financial assets (excluding
disposals and write-offs)
3
(494 )
(450 )
(220 )
(1,164 )
(524 )
(427 )
(366 )
(1,317 )
Changes to risk, parameters, and models
3
(221 )
(136 )
Disposals
Write-offs
(459 )
(459 )
(157 )
(157 )
Recoveries
Foreign exchange and other adjustments
(12 )
(39 )
(42 )
(14 )
(18 )
(23 )
(55 )
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 July 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
continues to contribute to elevated economic uncertainty, particularly in Canada where household debt levels remain elevated, and is likely to continue to weigh on
near-term economic growth and lead to a further modest increase in the unemployment rate.
Macroeconomic Variables
As at
July 31, 2024
Base Forecast
Upside Scenario
Downside Scenario
Average
Remaining
Average
Remaining
Average
Remaining
Q3 2024-
4-year
Q3 2024-
4-year
Q3 2024-
4-year
Q2 2025
1
period
1
Q2 2025
1
period
1
Q2 2025
1
period
1
Unemployment rate
Canada
%
%
%
%
%
%
United States
Real GDP
Canada
(0.5 )
United States
(0.4 )
Home prices
Canada (average existing price)
2
(8.0 )
United States (CoreLogic HPI)
3
(9.2 )
Central bank policy interest rate
Canada
United States
U.S. 10-year treasury yield
U.S. 10-year BBB spread (%-pts)
Exchange rate (U.S. dollar/Canadian dollar)
$
$
$
$
$
$
1
The numbers represent average values for the quoted periods, and average of year-on-year growth for real GDP and home prices.
2
The average home price is the average transacted sale price of homes sold via the Multiple Listing Service; data is collected by the Canadian Real Estate Association.
3
The CoreLogic home price index (HPI) is a repeat-sales index which tracks increases and decreases in the same home’s sales price over time.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 70
(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
July 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
July 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 $
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
July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 71
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 (“IDA”) 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 July 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 former Chair of the Board. Under the Stockholder Agreement, the Bank is not
permitted to own more than
% voting common shares of Schwab, and the Bank is subject to customary standstill restrictions and subject to certain exceptions,
transfer restrictions.
The carrying value of the Bank’s investment in Schwab of $
Schwab’s stockholders’ equity, adjusted for goodwill, other intangibles, and cumulative translation adjustment. The Bank’s share of net income from its investment
in Schwab of $
$
On August 21, 2024, the Bank announced that it had sold
$
% to
%. The Bank is expected to recognize
approximately $
2024. The Bank will continue to account for its investment in Schwab using the equity method.
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
June 30
September 30
2024
2023
Total assets
$
$
Total liabilities
(millions of Canadian dollars)
For the three months ended
For the nine months ended
June 30
June 30
June 30
June 30
2024
2023
2024
2023
Total net revenues
$
$
$
$
Total net income available to common stockholders
Total other comprehensive income (loss)
(54 )
Total comprehensive income (loss)
Insured Deposit Account Agreement
On November 25, 2019, the Bank and Schwab signed an insured deposit account agreement (the “2019 Schwab IDA Agreement”), with an initial expiration date of
July 1, 2031. Under the 2019 Schwab IDA Agreement, starting July 1, 2021, Schwab had the option to reduce the deposits by up to US$
to certain limitations and adjustments), with a floor of US$
deposit balances to fluctuate over time, under certain conditions and subject to certain limitations.
On May 4, 2023, the Bank and Schwab entered into an amended insured deposit account agreement (the “2023 Schwab IDA Agreement” or the “Schwab IDA
Agreement”), which replaced the 2019 Schwab IDA Agreement. Pursuant to the 2023 Schwab IDA Agreement, the Bank continues to make sweep deposit
accounts available to clients of Schwab. Schwab designates a portion of the deposits with the Bank as fixed-rate obligation amounts (FROA). Remaining deposits
over FROA are designated as floating-rate obligations. In comparison to the 2019 Schwab IDA Agreement, the 2023 Schwab IDA Agreement extends the initial
expiration date by three years to July 1, 2034 and provides for lower deposit balances in its first six years, followed by higher balances in the later years.
Specifically, until September 2025, the aggregate FROA will serve as the floor. Thereafter, the floor will be set at US$
to buy down up to $
limits. Refer to Note 27 of the Bank’s 2023 Annual Consolidated Financial Statements for further details on the Schwab IDA Agreement.
During the first quarter of 2024, Schwab exercised its option to buy down the remaining $
allowance and paid $
of 2024, Schwab had completed its buy down of the full US$
fees to the Bank. The fees were intended to compensate the Bank for losses incurred from discontinuing certain hedging relationships and for lost revenues. The
net impact was recorded in net interest income.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 72
NOTE 8: SIGNIFICANT TRANSACTION
Acquisition of Cowen Inc.
On March 1, 2023, the Bank completed the acquisition of Cowen Inc. (“Cowen”). The acquisition advances the Wholesale Banking segment’s long-term growth
strategy in the U.S. and adds complementary products and services to the Bank’s existing businesses. The results of the acquired business have been
consolidated by the Bank from the closing date and primarily reported in the Wholesale Banking segment. Consideration included $
(US$
% of Cowen’s common shares outstanding, $
Stock, and $
The acquisition was accounted for as a business combination under the purchase method. The acquisition contributed $
assets and $
allocated to intangible assets of $
purposes.
The Bank plans to dispose of certain non-core businesses that were acquired in connection with the Cowen acquisition. These non-core businesses are
disposal groups which meet the criteria to be classified as held for sale and are measured at the lower of their carrying amount and fair value less costs to sell. The
assets and liabilities of these disposal groups are recorded in Other assets and Other liabilities, respectively, on the Interim Consolidated Balance Sheet. During
the three months ended January 31, 2024, the Bank disposed of Cowen’s legacy prime brokerage and outsourced trading business that was classified as held for
sale. As at July 31, 2024, assets of $
classified as held for sale.
NOTE 9: OTHER ASSETS
Other Assets
(millions of Canadian dollars)
As at
July 31
October 31
2024
2023
Accounts receivable and other items
1
$
$
Accrued interest
Cheques and other items in transit
Current income tax receivable
Defined benefit asset
Prepaid expenses
2
Reinsurance contract assets
Total
2
$
$
1
Includes assets related to disposal groups classified as held for sale in connection with the Cowen acquisition. Refer to Note 8 for further details.
2
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 73
NOTE 10: DEPOSITS
Demand deposits are those for which the Bank does not have the right to require notice prior to withdrawal, which primarily include business and government
chequing accounts. Notice deposits are those for which the Bank can legally require notice prior to withdrawal, which include both savings and chequing
accounts. Term deposits are payable on a given date of maturity and are purchased by customers to earn interest over a fixed period, with terms ranging from
one day to ten years and generally include fixed term deposits, guaranteed investment certificates, senior debt, and similar instruments. The aggregate amount
of term deposits in denominations of $100,000 or more as at July 31, 2024, was $
Deposits
(millions of Canadian dollars)
As at
July 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
July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 74
NOTE 12: SUBORDINATED NOTES AND DEBENTURES
Issues
On April 9, 2024, the Bank issued $
(the “Notes”), maturing on April 9, 2034. The Notes will bear interest at a fixed rate of
% per annum (paid semi-annually) until April 9, 2029, and at
% thereafter (paid quarterly) until maturity on April 9, 2034. With the prior approval of OSFI, the
Bank may, at its option, redeem the Notes on or after April 9, 2029, in whole or in part, at par plus accrued and unpaid interest by giving not more than
than
’ notice to holders.
Redemptions
On July 25, 2024, the Bank redeemed all of its outstanding $
% medium term notes due July 25, 2029 NVCC constituting subordinated
indebtedness of the Bank, at a redemption price of
NOTE 13: EQUITY
The following table summarizes the changes to the shares and other equity instruments issued and outstanding, and treasury instruments held as at and for the
three and nine months ended July 31, 2024 and July 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
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Number
Number
Number
Number
of shares
Amount
of shares
Amount
of shares
Amount
of shares
Amount
Common Shares
Balance as at beginning of period
$
$
$
$
Proceeds from shares issued on exercise
of stock options
Shares issued as a result of dividend
reinvestment plan
Purchase of shares for cancellation and other
(13.3 )
(190 )
(14.3 )
(200 )
(49.4 )
(702 )
(14.3 )
(200 )
Balance as at end of period – common shares
$
$
$
$
Preferred Shares and Other Equity Instruments
Preferred Shares – Class A
Balance as at beginning of period
$
$
$
$
Redemption of shares
1,2,3
(38.0 )
(950 )
(52.0 )
(1,300 )
Balance as at end of period
$
$
$
$
Other Equity Instruments
4
Balance as at beginning of period
$
$
$
$
Issue of limited recourse capital notes
5
Issue of perpetual subordinated capital notes
6
Balance as at end of period
Balance as at end of period – preferred shares
and other equity instruments
$
$
$
$
Treasury – common shares
7
Balance as at beginning of period
$
(24 )
$
(99 )
$
(64 )
$
(91 )
Purchase of shares
(2,745 )
(1,965 )
(7,995 )
(6,016 )
Sale of shares
(35.6 )
(25.4 )
(100.2 )
(72.2 )
Balance as at end of period – treasury
– common shares
$
(35 )
$
$
(35 )
$
Treasury – preferred shares and
other equity instruments
7
Balance as at beginning of period
$
(8 )
$
(10 )
$
(65 )
$
(7 )
Purchase of shares and other equity instruments
(147 )
(46 )
(398 )
(372 )
Sale of shares and other equity instruments
(2.3 )
(0.7 )
(5.5 )
(2.7 )
Balance as at end of period – treasury
– preferred shares and other equity instruments
$
(17 )
$
(11 )
$
(17 )
$
(11 )
1
On April 30, 2024, the Bank redeemed all of its
Shares”), at a redemption price of $
2
a redemption price of $
3
at a redemption price of $
4
5
% Fixed Rate Reset Limited Recourse Capital Notes, Series 4 NVCC (the “LRCNs”). The LRCNs will bear interest at a rate of
equal to the prevailing U.S. Treasury Rate plus
Cumulative
% Fixed Rate Reset Preferred Shares, Series 31 NVCC (“Preferred Shares Series 31”). The Preferred Shares Series 31 are eliminated on the Bank’s consolidated
financial statements. For LRCNs – Series 4, the amount represents the Canadian dollar equivalent of the U.S. dollar notional amount.
6
AT1 Perpetual Notes will bear interest at a rate of
on the AT1 Perpetual Notes will reset every
or redemption date. With the prior written approval of OSFI, the Bank may redeem the AT1 Perpetual Notes on July 31, 2029 and every January 31st and July 31st thereafter, in whole or
in part, on not less than 10 nor more than 60 days’ prior notice to holders. For AT1 Perpetual Notes, the amount represents the Canadian dollar equivalent of the Singapore dollar notional
amount.
7
reduction in equity.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 75
DIVIDENDS
On August 21, 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 October 31, 2024, payable on and after October 31, 2024, to shareholders of record at the close of business on October 10, 2024.
DIVIDEND REINVESTMENT PLAN
The Bank offers a dividend reinvestment plan for its common shareholders. Participation in the plan is optional and under the terms of the plan, cash dividends on
common shares are used to purchase additional common shares. At the option of the Bank, the common shares may be issued from treasury at an average
market price based on the last five trading days before the date of the dividend payment, with a discount of between
% to
% at the Bank’s discretion or
purchased from the open market at market price.
During the three and nine months ended July 31, 2024, the Bank issued
During the three months ended July 31, 2023, the Bank issued
July 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
July 31, 2024, the Bank repurchased
the commencement of the NCIB to July 31, 2024, the Bank repurchased
NOTE 14: INSURANCE
(a)
Insurance revenue and expenses are presented on the Interim Consolidated Statement of Income under Insurance revenue and Insurance service expenses,
respectively. Net income or expense from reinsurance is presented in other income (loss).
The following table presents components of the insurance service result
presented on the Interim Consolidated Statement of Income for the Bank which includes the results of property and casualty insurance, life and health insurance,
as well as reinsurance issued and held in Canada and internationally.
Insurance Service Result
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Insurance revenue
$
$
$
$
Insurance service expenses
Insurance service result before reinsurance contracts held
Net income (expense) from reinsurance contracts held
(24 )
(13 )
(108 )
Insurance service result
$
$
$
$
For the three and nine months ended July 31, 2024, the Bank recognized insurance finance expenses (income) of $
(three and nine months ended July 31, 2023 – ($
) million and $
Bank’s investment return on securities supporting insurance contracts is comprised of interest income reported in net interest income and fair value changes
reported in other income (loss). Investment return (loss) on securities supporting insurance contracts was $
and nine months ended July 31, 2024 (three and nine months ended July 31, 2023 – ($
) million and $
(b)
Insurance contract liabilities are comprised of amounts related to the LRC, LIC and other insurance liabilities.
The following table presents LRC and LIC balances for property and casualty insurance contracts.
Property and casualty insurance contract liabilities by LRC and LIC
(millions of Canadian dollars)
As at
July 31, 2024
July 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 and nine months ended July 31, 2024, the Bank recognized insurance revenue of $
$
$
finance expenses of $
($
) million and $
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 76
Other insurance liabilities were $
$
(c)
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 July 31, 2024 (October 31, 2023 –
% to
%).
NOTE 15: SHARE-BASED COMPENSATION
For the three and nine months ended July 31, 2024, the Bank recognized compensation expense for stock option awards of $
respectively (three and nine months ended July 31, 2023 – $
July 31, 2023,
nil
stock options were granted by the Bank at a weighted-average fair value of $
The following table summarizes the assumptions used for estimating the fair value of options for the nine months ended July 31, 2024 and July 31, 2023.
Assumptions Used for Estimating the Fair Value of Options
(in Canadian dollars, except as noted)
For the nine months ended
July 31
July 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 16: EMPLOYEE BENEFITS
The following table summarizes expenses for the Bank’s principal pension and non-pension post-retirement defined benefit plans and the Bank’s other material
defined benefit pension plans, for the three and nine months ended July 31, 2024 and July 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
July 31
July 31
July 31
July 31
July 31
July 31
2024
2023
2024
2023
2024
2023
Service cost – benefits earned
$
$
$
$
$
$
Net interest cost (income) on net defined benefit liability (asset)
(21 )
(25 )
Interest cost on asset limitation and minimum funding
requirement
Past service cost
2
Defined benefit administrative expenses
Total
$
$
$
$
$
$
For the nine months ended
July 31
July 31
July 31
July 31
July 31
July 31
2024
2023
2024
2023
2024
2023
Service cost – benefits earned
$
$
$
$
$
$
Net interest cost (income) on net defined benefit liability (asset)
(62 )
(75 )
Interest cost on asset limitation and minimum funding
requirement
Past service cost
2
Defined benefit administrative expenses
Total
$
$
$
$
$
$
1
Includes Canada Trust defined benefit pension plan, TD Banknorth defined benefit pension plan, TD Auto Finance defined benefit pension plan, TD Insurance defined benefit pension
plan, and supplemental executive defined benefit pension plans.
2
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 77
The following table summarizes expenses for the Bank’s defined contribution plans for the three and nine months ended July 31, 2024 and July 31, 2023.
Defined Contribution Plan Expenses
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31
July 31
July 31
July 31
2024
2023
2024
2023
Defined contribution pension plans
1
$
$
$
$
Government pension plans
2
Total
$
$
$
$
-
1
Includes defined contribution portion of the TD Pension Plan (Canada) and TD Bank, N.A. defined contribution 401(k) plan.
2
Federal Insurance Contributions Act
.
The following table summarizes the remeasurements recognized in OCI for the Bank’s principal pension and postretirement defined benefit plans and certain of
the Bank’s other material defined benefit pension plans, for the three and nine months ended July 31, 2024 and July 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
July 31
July 31
July 31
July 31
July 31
July 31
2024
2023
2024
2023
2024
2023
Remeasurement gain/(loss) – financial
$
(314 )
$
$
(15 )
$
$
(18 )
$
Remeasurement gain/(loss) – return on plan assets less
interest income
(412 )
Change in asset limitation and minimum funding requirement
(34 )
Total
$
$
(148 )
$
(15 )
$
$
(18 )
$
For the nine months ended
July 31
July 31
July 31
July 31
July 31
July 31
2024
2023
2024
2023
2024
2023
Remeasurement gain/(loss) – financial
$
(999 )
$
(276 )
$
(38 )
$
(14 )
$
(43 )
$
Remeasurement gain/(loss) – return on plan assets less
interest income
Change in asset limitation and minimum funding requirement
Total
$
$
(74 )
$
(38 )
$
(14 )
$
(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 17: INCOME TAXES
International Tax Reform – Pillar Two Global Minimum Tax
The OECD published Pillar Two model rules as part of its efforts toward international tax reform. The Pillar Two model rules provide for the implementation of a
15% global minimum tax for large multinational enterprises, which is to be applied on a jurisdiction-by-jurisdiction basis. Pillar Two legislation was enacted in
Canada on June 20, 2024 under Bill C-69, which includes the
Global Minimum Tax Act
Bank for the fiscal year beginning on November 1, 2024. Similar legislation has also passed in other jurisdictions in which the Bank operates. The Bank is currently
assessing the impact of the new legislation.
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 July 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.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 78
NOTE 18: EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares
outstanding for the period.
Diluted earnings per share is calculated using the same method as basic earnings per share except that certain adjustments are made to net income
attributable to common shareholders and the weighted-average number of shares outstanding for the effects of all dilutive potential common shares that are
assumed to be issued by the Bank.
The following table presents the Bank’s basic and diluted earnings per share for the three and nine months ended July 31, 2024 and July 31, 2023.
Basic and Diluted Earnings Per Share
1
(millions of Canadian dollars, except as noted)
For the three months ended
For the nine months ended
July 31
July 31
July 31
July 31
2024
2023
2024
2023
Basic earnings (loss) per share
Net income (loss) attributable to common shareholders
$
(250 )
$
$
$
Weighted-average number of common shares outstanding (millions)
Basic earnings (loss) per share
(Canadian dollars)
$
(0.14 )
$
$
$
Diluted earnings (loss) per share
Net income (loss) attributable to common shareholders
$
(250 )
$
$
$
Net income (loss) attributable to common shareholders including impact of dilutive
securities
securities
(250 )
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 (loss) per share
(Canadian dollars)
2
$
(0.14 )
$
$
$
1
Amounts for the three and nine months ended July 31, 2023 have been restated for the adoption of IFRS 17. Refer to Note 2 for details.
2
weighted-average exercise price of $
, respectively, as the option price was greater than the average market price of the Bank’s common shares. For the three and nine
months ended July 31, 2023, the computation of diluted earnings per share excluded average options outstanding of
exercise price of $
, respectively, as the option price was greater than the average market price of the Bank’s common shares.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 79
NOTE 19: PROVISIONS AND CONTINGENT LIABILITIES
Other than as described below, there have been no new significant events or transactions except as previously identified in Note 26 of the Bank’s 2023 Annual
Consolidated Financial Statements.
(a)
The Bank continued to undertake certain measures in the third quarter of 2024 to reduce its cost base and achieve greater efficiency. In connection with these
measures, the Bank incurred $
restructuring costs primarily relate to: (i) employee severance and other personnel-related costs recorded as provisions and (ii) real estate optimization mainly
recorded as a reduction to buildings.
(b)
Other than as described below, there have been no new significant legal and regulatory matters, and no significant developments to the matters previously
identified in Note 26 of the Bank’s 2023 Annual Consolidated Financial Statements.
In the ordinary course of business, the Bank and its subsidiaries are involved in various legal and regulatory actions, including but not limited to civil claims and
lawsuits, regulatory examinations, investigations, audits, and requests for information by governmental, regulatory and self-regulatory agencies and law
enforcement authorities in various jurisdictions, in respect of our businesses and compliance programs. The Bank establishes provisions when it becomes
probable that the Bank will incur a loss and the amount can be reliably estimated. The Bank also estimates the aggregate range of reasonably possible losses
(RPL) in its legal and regulatory actions (that is, those which are neither probable nor remote), in excess of provisions. As at July 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.
In connection with the civil and criminal investigations into the Bank’s U.S.
Bank Secrecy Act
(BSA)/anti-money laundering (AML) program by its U.S. prudential
regulators, the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Justice (DOJ), and in anticipation of a global resolution, which will
include monetary and non-monetary penalties, the Bank has taken a further provision of $
total fines related to these matters. In the second quarter of 2024, the Bank took an initial provision of $
discussions with one of its U.S. regulators related to this matter. The Bank expects that a global resolution will be finalized by calendar year end.
The Bank has been named as a defendant in four overlapping proposed class action lawsuits purporting to be brought on behalf of shareholders alleging that its
disclosure with respect to its U.S. AML program has been misleading. None of these proposed class actions have been certified or granted leave to proceed by the
court, and losses or damages cannot be estimated at this time.
The Bank and certain of its subsidiaries have resolved the investigations by 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 and its subsidiaries in the aggregate paid penalties totaling US$
various other customary terms similar to those imposed on other financial institutions that have resolved similar investigations.
On May 31, 2024, the claims against the Bank were dismissed with prejudice in
Rotstain v. Trustmark National Bank, et al
. On June 3, 2024, the United States
Supreme Court denied R. Allen Stanford’s request for rehearing regarding the denial of his petition for a writ of certiorari in which he challenged the settlement in
this action. This brings to a close the Stanford litigation in the United States.
In the second quarter of 2024, the Bank and certain of its subsidiaries reached a settlement in principle relating to a civil matter, pursuant to which the Bank
recorded a provision of $
In management’s opinion, based on its current knowledge and after consultation with counsel, the ultimate disposition of these actions, individually or in the
aggregate, will not have a material adverse effect on the consolidated financial condition or the consolidated cash flows of the Bank. However, because of the
factors listed above, as well as other uncertainties inherent in litigation and regulatory matters, there is a possibility that the ultimate resolution of legal or regulatory
actions may be material to the Bank’s consolidated results of operations for any particular reporting period.
TD BANK GROUP • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 80
NOTE 20: SEGMENTED INFORMATION
For management reporting purposes, the Bank reports its results from business operations and activities under four key business segments: Canadian Personal
and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking. The Bank’s other activities are grouped into the Corporate
segment.
Canadian Personal and Commercial Banking provides financial products and services to personal, small business and commercial customers, and includes
TD Auto Finance Canada. U.S. Retail is comprised of personal and business banking in the U.S., TD Auto Finance U.S., the U.S. wealth business, as well as the
Bank’s equity investment in Schwab. Wealth Management and Insurance includes the Canadian wealth business which provides investment products and services
to institutional and retail investors, and the insurance business which provides property and casualty insurance, as well as life and health insurance products to
customers across Canada. Effective the first quarter of 2024, certain asset management businesses which were previously reported in the U.S. Retail segment are
now reported in the Wealth Management and Insurance segment. Comparative period information has been adjusted to reflect the new alignment. Wholesale
Banking provides a wide range of capital markets, investment banking, and corporate banking products and services, including underwriting and distribution of new
debt and equity issues, providing advice on strategic acquisitions and divestitures, and meeting the daily trading, funding, and investment needs of the Bank’s
clients. The Corporate segment includes the effects of certain asset securitization programs, treasury management, elimination of taxable equivalent adjustments
and other management reclassifications, corporate level tax items, and residual unallocated revenue and expenses.
The following table summarizes the segment results for the three and nine months ended July 31, 2024 and July 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 July 31
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Net interest income (loss)
$
$
$
$
$
$
$
(26 )
$
$
$
$
$
Non-interest income (loss)
Total revenue
Provision for (recovery of)
credit losses
Insurance service expenses
Non-interest expenses
Income (loss) before income taxes
and share of net income from
investment in Schwab
(2,324 )
(797 )
(1,044 )
Provision for (recovery of)
income taxes
(260 )
(271 )
Share of net income from
investment in Schwab
4,5
(9 )
Net income (loss)
$
$
$
(2,275 )
$
$
$
$
$
$
(525 )
$
(782 )
$
(181 )
$
For the nine months ended July 31
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Net interest income (loss)
$
$
$
$
$
$
$
$
$
$
$
$
Non-interest income (loss)
(615 )
Total revenue
Provision for (recovery of)
credit losses
Insurance service expenses
Non-interest expenses
Income (loss) before income taxes
and share of net income from
investment in Schwab
(1,146 )
(2,737 )
(4,477 )
Provision for (recovery of)
income taxes
(877 )
(713 )
Share of net income from
investment in Schwab
4,5
(30 )
(34 )
Net income (loss)
$
$
$
(788 )
$
$
$
$
$
$
(1,890 )
$
(3,798 )
$
$
1
Amounts for the three and nine months ended July 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 July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 81
NOTE 21: INTEREST INCOME AND EXPENSE
The following tables present interest income and interest expense by basis of accounting measurement.
Interest Income
(millions of Canadian dollars)
For the three months ended
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 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
For the nine months ended
July 31, 2024
July 31, 2023
July 31, 2024
July 31, 2023
Measured at amortized cost
1
$
$
$
$
Measured or designated at FVTPL
Total
$
$
$
$
1
Interest expense is calculated using EIRM.
NOTE 22: REGULATORY CAPITAL
The Bank manages its capital under guidelines established by OSFI. The regulatory capital guidelines measure capital in relation to credit, market, and operational
risks. The Bank has various capital policies, procedures, and controls which it utilizes to achieve its goals and objectives. The Bank is designated as a domestic
systemically important bank (D-SIB) and a global systemically important bank (G-SIB).
Canadian banks designated as D-SIBs are required to comply with OSFI’s minimum targets for risk-based capital and leverage ratios. The minimum targets
include a D-SIB surcharge and Domestic Stability Buffer (DSB) for Common Equity Tier 1 (CET1), Tier 1, Total Capital and risk-based Total Loss Absorbing
Capacity (TLAC) ratios. The DSB level was increased to
% as of November 1, 2023, which sets these minimum target ratios at
%,
%,
% and
%, respectively. The OSFI target includes the greater of the D-SIB or G-SIB surcharge, both of which are currently
% for the Bank. On February 1, 2023,
OSFI announced revisions to the Leverage Requirements Guideline to introduce a requirement for D-SIBs to hold a leverage ratio buffer of
% in addition to the
existing minimum requirement. This sets the minimum targets for leverage and TLAC leverage ratios at
% and
%, respectively.
The Bank complied with all minimum risk-based capital and leverage ratio requirements set by OSFI in the nine months ended July 31, 2024.
The following table summarizes the Bank’s regulatory capital positions as at July 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
July 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 • THIRD QUARTER 2024 • REPORT TO SHAREHOLDERS
Page 82
SHAREHOLDER AND INVESTOR INFORMATION
Shareholder Services
If you:
And your inquiry relates to:
Are a registered shareholder (your name appears
on your TD share certificate)
Missing dividends, lost share certificates, estate
questions, address changes to the share register,
dividend bank account changes, the dividend
reinvestment plan, eliminating duplicate mailings of
shareholder materials or stopping (or resuming)
receiving annual and quarterly reports
Transfer Agent:
TSX Trust Company
301-100 Adelaide Street West
Toronto, ON M5H 4H1
1-800-387-0825 (Canada and U.S. only)
or 416-682-3860
Facsimile: 1-888-249-6189
shareholderinquiries@tmx.com or www.tsxtrust.com
Hold your TD shares through the
Direct Registration System
in the United States
Missing dividends, lost share certificates, estate
questions, address changes to the share register,
eliminating duplicate mailings of shareholder
materials or stopping (or resuming) receiving annual
and quarterly reports
Co-Transfer Agent and Registrar:
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, RI 02940-3006
or
Computershare Trust Company, N.A.
150 Royall Street
Canton, MA 02021
1-866-233-4836
TDD for hearing impaired: 1-800-231-5469
Shareholders outside of U.S.: 201-680-6578
TDD shareholders outside of U.S.: 201-680-6610
Email inquiries: web.queries@computershare.com
For electronic access to your account visit:
www.computershare.com/investor
Beneficially own TD shares that are held in the
name of an intermediary, such as a bank, a trust
company, a securities broker or other nominee
Your TD shares, including questions regarding the
dividend reinvestment plan and mailings of
shareholder materials
Your intermediary
For all other shareholder inquiries, please contact TD Shareholder Relations at 416-944-6367 or 1-866-756-8936 or email tdshinfo@td.com. Please note that by
leaving us an e-mail or voicemail message, you are providing your consent for us to forward your inquiry to the appropriate party for response.
General Information
Products and services: Contact TD Canada Trust, 24 hours a day, seven days a week: 1-866-567-8888
French: 1-866-233-2323
Cantonese/Mandarin: 1-800-328-3698
Telephone device for the hearing impaired (TTY): 1-800-361-1180
Website:
Email:
customer.service@td.com
Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on August 22, 2024. The call will be audio webcast live through TD’s website at
8:00 a.m. ET. The call will feature presentations by TD executives on the Bank’s financial results for the third 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
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
August 22, 2024, until 11:59 p.m. ET on September 6, 2024, by calling 905-694-9451 or 1-800-408-3053 (toll free). The passcode is 7300743#.
Annual Meeting
Thursday, April 10, 2025
Toronto, Ontario