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Article Excerpt
TORONTO, May 26 /PRNewswire-FirstCall/ --
SECOND QUARTER FINANCIAL HIGHLIGHTS - On a reported basis(1), diluted earnings per share were $.86, compared with $.74 for the second quarter last year. - Diluted earnings per share before amortization of intangibles(2) were $.99, compared with $.90 for the second quarter last year. - On a reported basis, return on total common equity for the quarter was 17%, compared with 17% for the second quarter last year. - Return on invested capital(3) before amortization of intangibles for the quarter was 16%, compared with 16% for the second quarter last year. - Reported net income was $599 million for the quarter, compared with reported net income of $490 million for the second quarter last year. - Net income before amortization of intangibles was $689 million, compared with $597 million for the second quarter last year. The diluted earnings per share figures above include the following: - specific non-core portfolio loan loss recoveries related to prior year sectoral provisions of $25 million after-tax, (3 cents per share), compared with a sectoral provision release of $130 million after-tax (20 cents per share) for the second quarter last year; - the impact of Accounting Guideline 13 (AcG-13) resulting in a gain of $33 million after-tax, (5 cents per share), compared with a loss of $16 million after-tax ((3) cents per share) for the second quarter last year; - an internal restructuring tax charge of $25 million after-tax ((4) cents per share), compared with nil in the second quarter of last year; - a restructuring charge in TD Securities resulting in a loss of $15 million after-tax ((2) cents per share) compared with nil in the second quarter of last year. - The diluted earnings per share figures above do not include TD Banknorth's April earnings because there is a one month lag between fiscal quarter ends. Only one month of TD Banknorth's earnings were included this quarter while two months of funding cost and share issuance resulted in a negative earnings impact of approximately 3 cents per share. This effect will not repeat in future quarters. (1) Reported results are prepared in accordance with Canadian generally accepted accounting principles (GAAP). (2) Earnings before amortization of intangibles and reported results referenced in this report are explained in detail on page 3 under "How the Bank Reports." (3) Return on invested capital is explained in detail on page 4 under "Economic Profit and Return on Invested Capital."
TORONTO, May 26, 2005 - TD Bank Financial Group (TDBFG) today announced its financial results for the second quarter ended April 30, 2005. Results for the quarter reflect strong contributions from the Bank's three historical segments and include results for the month of March from the Bank's fourth segment: U.S. Personal and Commercial Banking through TD Banknorth.
"We have pursued a strategy aimed at delivering consistent and growing earnings for shareholders at lower risk than our peers and this quarter we have delivered on that strategy," said W. Edmund Clark, TD Bank Financial Group President and Chief Executive Officer. "The addition of TD Banknorth represents a significant milestone for TDBFG and provides us with another viable growth platform for many years to come." Clark also noted that following the acquisition of a majority stake in TD Banknorth on March 1, 2005, TDBFG's Tier 1 capital position stood at 10% for the quarter, compared with 11.9% at the end of the second quarter 2004.
SECOND QUARTER BUSINESS SEGMENT PERFORMANCE Canadian Personal and Commercial Banking
The Canadian Personal and Commercial Banking operations of TD Canada Trust once again posted strong results in the second quarter. Earnings before amortization of intangibles were up 16% compared with the second quarter last year.
Strong volume growth in real estate secured lending, savings and business deposits, combined with both sales growth and fewer claims from insurance were responsible for much of Canadian Personal and Commercial Banking's performance this quarter.
"This was another great quarter for Canadian Personal and Commercial Banking, fueled by strong performances in our high growth businesses. I often say look at our weaknesses to see additional sources of strength because that is where we can enhance the rate of earnings growth inherent in our industry- leading personal bank. Businesses where we are underrepresented in terms of market share provide us with considerable upside," said Clark. "This quarter these high growth businesses - insurance and small business banking in particular - provided a significant boost to earnings and we believe they continue to offer above-average growth potential going forward."
Wealth Management
Robust mutual fund sales and continuing progress in the advice-based businesses drove solid net income results for the Bank's global Wealth Management business in the second quarter. Muted discount brokerage transactional volumes, particularly in April, partially offset these strong results as market volatility kept many investors on the sidelines.
"We continue to make steady progress in our advice-based businesses and in mutual funds. In addition to driving revenue growth, this earnings diversification reduces our exposure to the volatility associated with trades per day volumes throughout the segment," said Clark. "This quarter builds on a strong first quarter and is evidence that Wealth Management is steadily transitioning itself to a more diverse and comprehensive offering."
Wholesale Banking
Wholesale Banking generated very good results this quarter. TD Securities saw broad based contributions from across the dealer, with particularly strong results in trading, investment banking and domestic equity. On balance, Wholesale Banking generated an excellent return on capital in the quarter.
At the end of the quarter TD Securities made a decision to reposition the global capital markets businesses to reduce the focus on some of the less profitable products in order to dedicate resources on growing the parts of the business where TD Securities has a competitive advantage.
"I am very pleased with Wholesale Banking's results this quarter and with their continued focus on growing economic profit and generating a superior Return On Invested Capital," said Clark.
U.S. Personal and Commercial Banking
On March 1, 2005, TDBFG closed the transaction to acquire a majority stake in Banknorth Group, Inc. of Portland, Maine. The new company, TD Banknorth Inc., along with its subsidiaries, operates under the brand name TD Banknorth. Starting this quarter, TD Banknorth's performance will be reported as TDBFG's fourth business segment - U.S. Personal and Commercial Banking. "With the transaction now complete, TD Banknorth's management can place renewed focus on growing the business and continuing to execute on their community-based banking strategies," said Clark.
TD Banknorth Inc.'s fiscal quarter ends March 31 while TDBFG's second quarter ends April 30. As a result, there is a one month lag in the quarterly results of TD Banknorth that is consolidated into TDBFG's earnings. Because the transaction closed March 1, TDBFG's second quarter results include TD Banknorth results for the month of March only. This staggered start is unique to this quarter and, due to funding cost and share issuance had a net impact of reducing TDBFG's second quarter earnings per share by approximately three cents.
Corporate
The Bank had specific non-core portfolio loan loss recoveries related to prior year sectoral provisions totaling $25 million after-tax, (3 cents per share). The Bank recorded a gain of $33 million after-tax or 5 cents per share this quarter as a result of the impact of Accounting Guideline 13 (AcG-13), requiring management to mark-to-market the value of its credit protection on its corporate lending portfolio.
CONCLUSION
"This was a very successful quarter marked by broad based earnings strength across the Bank and the closing of the TD Banknorth acquisition," said Clark. "With back-to-back strong quarters, a continued focus on capital allocation, and what I believe is the best growth platform in the United States, we are well positioned for continued success."
Caution regarding forward-looking statements
From time to time, the Bank makes written and oral forward-looking statements, including in this report, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission (SEC), and in other communications. All such statements are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements regarding the Bank's objectives and targets and strategies to achieve them, the outlook for the Bank's business lines, and the Bank's anticipated financial performance. Forward-looking statements are typically identified by words such as "believe", "expect", "may" and "could". By their very nature, these statements are subject to inherent risks and uncertainties, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Some of the factors that could cause such differences include: the credit, market, liquidity, interest rate, operational and other risks discussed in the management discussion and analysis section in other regulatory filings made in Canada and with the SEC, including the Bank's 2004 Annual Report; general business and economic conditions in Canada, the United States and other countries in which the Bank conducts business, as well as the effect of changes in monetary policy in those jurisdictions and changes in the foreign exchange rates for the currencies of those jurisdictions; the degree of competition in the markets in which the Bank operates, both from established competitors and new entrants; legislative and regulatory developments; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank's ability to execute its growth and acquisition strategies including those of its subsidiaries; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; technological changes; change in tax laws; unexpected judicial or regulatory proceedings; continued negative impact of the United States litigation environment; unexpected changes in consumer spending and saving habits; the possible impact on the Bank's businesses of international conflicts and terrorism; acts of God, such as earthquakes; and management's ability to anticipate and manage the...
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