FULL TEXT-Toronto-Dominion (TSE:TD) Q3 results
Reuters, Thursday, August 19, 1999 at 09:35
(Full text of press release from Canada NewsWire)
TD Bank Financial Group - third quarter highlightsTD Bank Financial Group -
third quarter highlights - On a cash basis, earnings per share are $.66, up
$.18 or 38%
(excluding the gain from the TD Waterhouse IPO) from the same period
last year. Earnings per share on an accrual basis are $.64 for the
quarter, up $.18 or 39%.
- On a cash basis, return on common equity is 21.4% (excluding the TD
Waterhouse IPO gain), compared to 17.3% in the third quarter of 1998.
On an accrual basis, return on common equity is 18.9%, compared to
15.0% in the third quarter of 1998.
- Record net income, for the third successive quarter, of $391 million
for the third quarter (excluding the TD Waterhouse IPO gain), up 36%
from the same period last year, including:
- net income of $139 million from personal and small and medium-sized
business banking (up 34%).
- net income of $48 million from wealth management services
(excluding the TD Waterhouse IPO), including discount brokerage and
mutual funds (up 30%).
- net income of $192 million from corporate and investment banking
(up 30% year-over-year, excluding $200 million in special
securities gains in Q3/1998).
- Total assets up 7% to $222 billion (as at July 31, 1999).
- Total capital ratio of 12.1%, Tier 1 capital ratio of 8.7%.
TD BANK FINANCIAL GROUP REPORTS
THIRD QUARTER PROFIT OF $391 MILLION
TORONTO, Aug. 19 /CNW/ - TD Bank Financial Group achieved record net
income, for the third successive quarter, of $391 million for the third quarter
of 1999, up 36% from the same period in 1998. This excludes the gain realized
through the initial public offering of TD Waterhouse Group, Inc.
Earnings per share, excluding the TD Waterhouse gain, are also a record.
Cash earnings per share (excluding goodwill charges) are $.66 compared to $.48
in the same quarter last year and return on common equity, on a cash basis, is
21.4% this quarter compared to 17.3% last year. On an accrual basis, earnings
per share are $.64 compared to $.46 and return on equity is 18.9% this quarter
compared to 15.0% last year.
"While delivering record quarterly results, TD undertook two bold
initiatives to build long term value for shareholders: the successful Initial
Public Offering (IPO) of TD Waterhouse Group, Inc. and the announcement of the
proposed takeover bid to acquire CT Financial Services," said A. Charles
Baillie, Chairman and Chief Executive Officer of TD Bank Financial Group.
TD's record quarterly earnings reflect strong performances by its core
businesses -- retail banking, wealth management, and corporate and investment
banking -- along with a reduction in loan loss provision for the quarter.
Strong core earnings were augmented by an after-tax gain of $1.82 per share,
representing the Bank's gain on the TD Waterhouse IPO.
TD Waterhouse IPO
During the quarter, TD combined its global discount brokerage operations to
create TD Waterhouse Group, Inc. -- the second largest discount broker in the
world -- and sold 43.4 million treasury shares (11.5%) in the new entity for
proceeds of approximately $1.5 billion.
"The successful IPO has raised substantial funds to finance the global
expansion of TD Waterhouse, as well as improving the Bank's Tier 1 capital
position and recognizing the market value of this core business for TD Bank
Financial Group," noted Baillie.
Canada Trust Proposal
TD took a major step toward becoming the leader in retail banking in Canada
with its agreement with British American Tobacco Plc (BAT) to make a takeover
bid to acquire 98.2% of the shares of CT Financial Services Inc. (Canada
Trust), currently owned by Imasco Limited. TD will subsequently proceed with a
follow-up bid for the balance. The transaction is subject to review and
approval by the Minister of Finance, the Competition Bureau and the Office of
the Superintendent of Financial Institutions Canada, as well as approval by
shareholders of Imasco and BAT.
With 3.7 million customers, 14,000 full-time equivalent employees, 431
branches and $41 billion in personal deposits, Canada Trust is one of Canada's
most successful retail financial services organizations -- renowned for its
friendly and convenient customer service and hours of service. "When combined
with our retail operations as TD Canada Trust', we will be No.1 in Canada in
number of retail customers, customer service, Internet and telephone banking
customers, mutual fund advice, personal loans and personal deposits," said
Baillie.
TD hopes to receive the necessary approvals and to close the transaction by
early February 2000. TD has agreed to a purchase price of approximately $8
billion -- a price which TD believes reflects the full and fair value of the
Canada Trust franchise while offering long term value to its shareholders. To
maintain its Tier 1 capital ratio at 7% and the total of Tier 1 and 2 capital
at 10% after the transaction closing, TD has raised $700 million in common
equity since the quarter end and will raise another $1.3 billion in other Tier
1 capital including preferred shares.
"We look forward to the creation of TD Canada Trust -- bringing customers
the best service, achieving leadership in retail financial services in Canada
and establishing a platform for North American expansion, while adding
substantial value for shareholders," added Baillie. "Through revenue
enhancement and expense savings, we anticipate increased cash earnings per
share and cash return on equity in the first year after closing."
Improving the business balance
"With the investments in growth of our global discount brokerage franchise,
TD Waterhouse, and our proposed acquisition of Canada Trust, we are moving
rapidly towards our stated objective of investing a higher proportion of our
capital in retail businesses -- businesses which historically show greater
earnings stability," noted Baillie. Since the beginning of the year, TD has
reduced capital allocation to corporate lending by approximately $200 million
through exiting lower return corporate loans. With the anticipated closing of
the Canada Trust transaction next year, over 60% of capital will be allocated
to retail businesses, up from about 46% today.
Highlights of the quarter
All of TD's core businesses successfully implemented growth strategies and
achieved strong year-over-year gains during the quarter. Among the operating
highlights:
- Euromoney magazine singled out TD Securities as the "Best Securities
Dealer in Canada", for the second year in a row -- citing TD Securities'
leadership in domestic corporate bond underwriting, Eurobonds, media and
telecom financing, high yield debt and government infrastructure financing.
- TD Waterhouse passed the 2 million mark in active customers (reaching 2.8
million total accounts) and became the first foreign discount broker to gain
approval to trade on the Stock Exchange of Hong Kong, the final step in
launching TD Waterhouse in Hong Kong. As well, TD Waterhouse was named
favourite discount brokerage firm in Mutual Fund Magazine's Readers' Choice and
ranked second overall in Smart Money magazine's annual survey of the best
discount brokerages in the U.S.
- TD Waterhouse National Bank (TDWNB) achieved significant growth, reaching
US$4.4 billion in assets and operating approximately 500,000 deposit accounts.
TDWNB is leveraging its affiliation with TD Waterhouse discount brokerage, as
480,000 of TD Waterhouse's discount brokerage customers maintain accounts with
it.
- TD led the way in mutual fund advice and delivery by offering proactive
advice on -- and the sale of -- third party mutual funds through TD branches.
This initiative, which was launched in over 50 branches in Greater Vancouver
and will be introduced through the entire branch network later this year, gives
TD customers access to selected funds from the AGF Group of Funds and Fidelity
Investments.
- TD built on its leadership in electronic and online delivery with
enhancements to its Web Banking services through the introduction of TD Access
Web Genie, a personalized messaging service that lets customers know, for
example, that their GM card statements are ready or that their TD mortgages or
GICs are coming up for renewal. TD is the first financial institution in Canada
to offer this service.
- TD Life became the first bank insurer in Canada to offer customers the
dual benefit of lifetime insurance protection and tax-deferred investment
growth with the launch of TD Universal Life.
Outlook
"The Canadian economy continues to outperform expectations and we expect
positive growth trends to continue into the next fiscal year. In this
environment, we believe our exceptional businesses are on track to make further
progress in the fourth quarter and in fiscal 2000," concluded Baillie.
This press release may contain forward-looking statements, including
statements regarding the business and anticipated financial performance
of TD. These statements are subject to a number of risks and
uncertainties that may cause actual results to differ materially from
those contemplated by the forward-looking statements. Some of the factors
that could cause such differences include legislative or regulatory
developments, competition, technological change, global capital market
activity, interest rates, inflation and general economic conditions in
geographic areas where TD operates. Also, additional risk factors
relating to the pending acquisition of CT Financial Services Inc. are
described in TD's Report on Form 6-K, filed with the U.S. Securities and
Exchange Commission on August 3, 1999 and TD's Material Change Report,
filed with the Ontario Securities Commission on August 3, 1999.
REVIEW OF OPERATING PERFORMANCE
TD achieved record earnings for the third successive quarter. Net income
this quarter was $391 million, excluding the gain realized through the initial
public offering of TD Waterhouse Group, Inc. This is $104 million or 36% higher
than the same quarter last year. Other income was a record $1,065 million.
Including net interest income of $779 million, total revenue at $1,844 million
is $255 million or 16% higher than the third quarter last year, excluding the
special securities gains in that quarter. Meanwhile, expense growth was
contained to 11%.
Earnings per share, excluding the TD Waterhouse gain, are also a record.
Cash earnings per share (that is, excluding goodwill charges) are $.66 compared
to $.48 in the same quarter last year and return on common equity, on a cash
basis, is 21.4% this quarter compared to 17.3% last year. On an accrual basis,
earnings per share are $.64 compared to $.46 and return on equity is 18.9% this
quarter compared to 15.0% last year.
The after-tax gain on the sale of 11.5% in our global discount brokerage
businesses -- TD Waterhouse Group, Inc. -- was $1,082 million or $1.82 per
share. This, coupled with our record core earnings, resulted in total net
income this quarter of $1,473 million or $2.48 per share on a cash basis.
Net interest income
Net interest income on a taxable equivalent basis is $779 million this
quarter. This is $5 million or 1% lower than the same quarter last year. The
decline in net interest income is attributable to our securitization of loan
assets, which reduces net interest income while increasing other income.
Average earning assets grew 15% or $24 billion to $190 billion primarily due to
strong growth in trading securities which support our investment banking
businesses. Trading securities have a much lower interest margin than loan
products, but also contribute to other income. This change in mix toward lower
margin assets, coupled with asset securitization, contributed to net interest
margin declining 25 basis points to 1.63% compared to the same quarter a year
ago.
Credit quality and provision for credit losses
Credit quality continues to be strong with the allowance for credit losses
exceeding gross impaired loans by $411 million at the end of the quarter
compared to a $321 million excess a year ago. In addition, the Bank's total
accumulated general allowance for credit losses, which relates to both loans
and off-balance sheet instruments, was $749 million versus $650 million last
year. General allowances within certain constraints qualify as Tier 2 capital
under guidelines issued by the Office of the Superintendent of Financial
Institutions Canada.
As a result of continued strong credit quality, our estimate of the
full-year provision for credit losses for 1999 has been reduced from $300
million to $200 million, excluding a $100 million special general provision
taken in the first quarter. Half of this reduction or $50 million was applied
this quarter resulting in the quarterly provision for credit loss expense
declining to $25 million.
Other income
Other income was a record $1,065 million this quarter. This performance is
$260 million or 32% higher than the same quarter last year, excluding $200
million in special securities gains realized last year which were offset by a
special increase in general provisions for credit losses of an equal amount.
Our strong growth in other income continues to be driven by our wealth
management and corporate and investment banking businesses. TD's wealth
management businesses, which include TD Waterhouse Group, Inc. globally and our
Green Line family of mutual funds in Canada, had a strong quarter. Global
discount brokerage revenue increased $71 million or 44% over last year and was
broadly based with increases in the U.S., Canada and internationally. Average
trades per day at our global discount brokerage were up 86% over last year.
Mutual fund revenues grew by $9 million or 16% over last year, reflecting
growth in mutual fund assets under administration of 14% to $17 billion in
Canada and 112% to $11 billion in the U.S.
Performance in our wholesale corporate and investment banking businesses
was also very strong. Trading income this quarter was $190 million -- twice
what it was last year. In addition, underwriting revenue increased $21 million
or 49% and mergers and acquisitions revenue was $17 million or 91% higher than
the same quarter last year.
Net investment securities gains this quarter were $65 million compared to
base gains of $48 million last year. The surplus over book value of the
investment securities portfolio was $1,239 million, compared to $770 million a
year ago, and includes hedged unrealized gains, which will result in an
after-tax investment securities gain of at least $400 million being recognized
in the fourth quarter.
Non-interest expenses
Base expenses declined 3% from the same quarter last year. While total
expense growth was 11%, the higher business activity in our global discount
brokerage business increased expenses by 8%. Expenses directly related to
revenue generation in our corporate and investment bank added another 6% to our
expense growth.
The percentage growth in total revenue was higher than expense growth,
excluding goodwill amortization expenses and one-time gains, with our
efficiency ratio improving 290 basis points to 61.4%.
Balance sheet
As at July 31, 1999, total assets were $222 billion, which is $14 billion
or 7% higher than a year ago including $8 billion growth in trading securities.
Growth in retail lending volumes has also been strong as we continue to gain
market share in Canada. Including securitizations, residential mortgage loans
and credit card loans grew 8% and 9%, respectively. Personal loans increased
34% or $4.9 billion with TD Waterhouse in the U.S. contributing $3.7 billion to
personal loan growth.
The U.S. operations of TD Waterhouse are also the primary factor in the 16%
increase in personal non-term deposits, which increased $3.7 billion from last
year. Personal term deposits are also 12% higher year over year.
Capital
Total common equity was $9.4 billion at July 31, 1999, an increase of $1.5
billion from April 30, 1999. The increase was a result of net income after
dividends of $1.3 billion, including the TD Waterhouse gain, and a foreign
currency translation gain arising from a weakening of the Canadian dollar
relative to other currencies at the end of the quarter.
As a result of the large increase in common equity and our continued active
balance sheet management, our net common equity to risk-weighted assets ratio
at July 31, 1999 was 7.6%, an increase of 130 basis points from April 30, 1999.
At the end of the quarter, our Tier 1 and total capital ratios were 8.7% and
12.1% compared to 7.0% and 10.6% last quarter.
TD BANK FINANCIAL GROUP
SUPPLEMENTAL INFORMATION
(Unaudited)
For the three months For the nine months
ended July 31 ended July 31
(millions of dollars) 1999 1998 1999 1998
Net interest income $ 727 $ 736 $ 2,224 $ 2,213
Provision for credit losses 25 263 275 388
Other income 1,065 1,005 3,046 2,540
Gain on sale of TD Waterhouse
Group, Inc. 1,082 - 1,082 -
Non-interest expenses
excluding non-cash
goodwill/intangible charges 1,132 1,022 3,316 2,877
Provision for income taxes 231 159 594 549
Non-controlling interest 2 - 2 -
Net income 1,484 297 2,165 939
Preferred dividends 10 12 32 33
Net income applicable to
common shares - cash basis 1,474 285 2,133 906
Non-cash goodwill/intangible
charges - tax effected 11 10 32 52
Net income - accrual basis 1,463 275 2,101 854
(dollars)
Net income per common share
- cash basis $ 2.48 $ .48 $ 3.59 $ 1.53
Net income per common share
- accrual basis $ 2.46 $ .46 $ 3.53 $ 1.44
As at July 31
(millions of dollars) 1999 1998
Total assets $222,486 $208,746
Total deposits 143,656 137,344
Total loans 89,860 84,610
Net impaired loans (411) (321)
(millions of dollars) 1999 1998
Provision for credit losses
for the year $ 200 $ 250
(excluding special increases
in general provisions) (Estimate) (Actual)
/For further information: Dan Marinangeli, Executive Vice President and
Chief Financial Officer, Group Finance, (416) 982-8002; Scott Lamb, Director,
Investor Relations, (416) 982-5075; To request a free copy of this
organization's annual report, please go to www.newswire.ca and click on
reports(at)cnw./
Copyright 1999, Reuters News Service |
