FOURTH QUARTER FINANCIAL HIGHLIGHTS, compared with the fourth quarter last year:

• Reported diluted earnings per share were $1.58, compared with $1.42.
• Adjusted diluted earnings per share were $1.63, compared with $1.36.
• Reported net income was $2,960 million, compared with $2,712 million.
• Adjusted net income was $3,048 million, compared with $2,603 million.

FULL YEAR FINANCIAL HIGHLIGHTS, compared with last year:

• Reported diluted earnings per share were $6.01, compared with $5.50.
• Adjusted diluted earnings per share were $6.47, compared with $5.54.
• Reported net income was $11,334 million, compared with $10,517 million.
• Adjusted net income was $12,183 million, compared with $10,587 million.

FOURTH QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The fourth quarter reported earnings figures included the following items of note:

• Amortization of intangibles of $76 million ($63 million after tax or 4 cents per share), compared with $78 million ($59 million after tax or 3 cents per share) in the fourth quarter last year.
• Charges associated with the Scottrade transaction of $25 million ($25 million after tax or 1 cent per share), compared with $46 million ($36 million after tax or 2 cents per share).

TORONTO, Nov. 29, 2018 /CNW/ - TD Bank Group ("TD" or the "Bank") today announced its financial results for the fourth quarter ended October 31, 2018. Fourth quarter reported earnings were $3 billion, up 9% on a reported basis and up 17% on an adjusted basis, compared with the same quarter last year.

"I am extremely pleased with our earnings performance in the fourth quarter, which capped a very strong year," said Bharat Masrani, Group President and Chief Executive Officer, TD Bank Group. "2018 represented a year of tremendous progress as we advanced key strategic priorities and continued to innovate to strengthen our competitive advantage."

The Bank also announced its intention to amend its normal course issuer bid for up to an additional 20 million of its common shares, which is subject to regulatory approval.

Canadian Retail
Canadian Retail net income for the quarter was $1,741 million, an increase of 5%, compared with the fourth quarter last year. Canadian Retail continued to perform well in a competitive landscape achieving strong volumes and market share gains in Real Estate Secured Lending, and maintaining its market-leading position in credit cards, personal deposits, and direct investing¹.

U.S. Retail
U.S. Retail reported net income was $1,114 million (US$855 million) and adjusted net income was $1,139 million (US$874 million), an increase of 44% (38% in U.S. dollars) on a reported basis and 40% (34% in U.S. dollars) on an adjusted basis, compared with the same quarter last year.

The U.S. Retail Bank, which excludes the Bank's investment in TD Ameritrade, reported net income of $886 million (US$680 million), up 32% (26% in U.S. dollars) on a reported basis and up 29% (23% in U.S. dollars) on an adjusted basis, from the same period last year. The U.S. Retail Bank continued to invest in enhancing its capabilities, products, and services, while achieving peer-leading growth in loan and deposit volumes. Earnings also reflect higher margins driven by a favourable rate environment and benefits from U.S. tax reform.

TD Ameritrade contributed $228 million (US$175 million) in reported earnings to the segment and $253 million (US$194 million) in adjusted earnings.

Wholesale
Wholesale Banking net income was $286 million this quarter, an increase of 24% compared with the fourth quarter last year, reflecting higher trading-related revenue, and fee and advisory revenue, partially offset by higher provisions for credit losses and expenses. The Wholesale Bank continues to invest in the global expansion of its U.S. dollar business.

Capital
TD's Common Equity Tier 1 Capital ratio on a Basel III fully phased-in basis was 12%.

Innovation
"TD is helping our customers achieve their financial goals by delivering highly personalized and connected experiences across our branches and stores, contact centres, and digital channels," said Masrani. "We are providing the advice and services our customers need, when, where and how they choose to help them feel even more confident about their future."

Conclusion
"We enter 2019 from a position of strength. While there are a number of macro-economic and geopolitical unknowns in the year ahead, the progress we made in 2018 gives me confidence in our future success. Our over 85,000 TD colleagues around the globe have delivered outstanding outcomes for our customers and our shareholders and I thank them for their passion and commitment in 2018," concluded Masrani.

The foregoing contains forward-looking statements. Please refer to the "Caution Regarding Forward-Looking Statements".

 

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.

 

HOW WE PERFORMED

How the Bank Reports
The Bank prepares its Consolidated Financial Statements in accordance with IFRS, the current GAAP, and refers to results prepared in accordance with IFRS as "reported" results. The Bank also utilizes non-GAAP financial measures referred to as "adjusted" results to assess each of its businesses and to measure the Bank's overall performance. To arrive at adjusted results, the Bank removes "items of note", from reported results. The items of note relate to items which management does not believe are indicative of underlying business performance. The Bank believes that adjusted results provide the reader with a better understanding of how management views the Bank's performance. The items of note are disclosed in Table 3. As explained, adjusted results differ from reported results determined in accordance with IFRS. Adjusted results, items of note, and related terms used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers.

The Bank's U.S. strategic cards portfolio comprises 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 provisions for credit losses related to these portfolios in the Bank's 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 reported Net income (loss). The Net income (loss) included in the U.S. Retail segment includes only the portion of revenue and credit losses attributable to TD under the agreements.

Effective November 1, 2017, the Bank adopted IFRS 9, which replaces the guidance in IAS 39. Refer to Note 2 and Note 4 of the 2018 Consolidated Financial Statements for a summary of the Bank's accounting policies as it relates to IFRS 9. Under IFRS 9, the current period provision for credit losses (PCL) for performing (Stage 1 and Stage 2) and impaired (Stage 3) financial assets, loan commitments, and financial guarantees is recorded within the respective segment. Under IAS 39 and prior to November 1, 2017, the PCL related to the collectively assessed allowance for incurred but not identified credit losses that related to the Canadian Retail and Wholesale Banking segments was recorded in the Corporate segment. Prior period results have not been restated. PCL on impaired financial assets includes Stage 3 PCL under IFRS 9 and counterparty-specific and individually insignificant PCL under IAS 39. PCL on performing financial assets, loan commitments, and financial guarantees include Stage 1 and Stage 2 PCL under IFRS 9 and incurred but not identified losses under IAS 39.

IFRS 9 does not require restatement of comparative period financial statements except in limited circumstances related to aspects of hedge accounting. Entities are permitted to restate comparatives as long as hindsight is not applied. The Bank has made the decision not to restate comparative period financial information and has recognized any measurement differences between the previous carrying amount and the new carrying amount on November 1, 2017 through an adjustment to opening retained earnings. As such, fiscal 2018 results reflect the adoption of IFRS 9, while prior periods reflect results under IAS 39.

U.S. Tax Reform
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "U.S. Tax Act") which made broad and complex changes to the U.S. tax code.

The reduction of the U.S. federal corporate tax rate enacted by the U.S. Tax Act resulted in a net charge to earnings during the first quarter of 2018 of $453 million, comprising a net $48 million pre-tax charge related to the write-down of certain tax credit-related investments, partially offset by the favourable impact of the Bank's share of TD Ameritrade's remeasurement of its deferred income tax balances, and a $405 million income tax expense resulting from the remeasurement of the Bank's deferred tax assets and liabilities to the lower base rate of 21% and other related tax adjustments. The amount was estimated during the first quarter of 2018 and was updated through a net $61 million income tax benefit during the third quarter of 2018.

The lower corporate tax rate had and will have a positive effect on TD's current and future earnings. The amount of the benefit may vary due to, among other things, changes in interpretations and assumptions the Bank has made, guidance that may be issued by applicable regulatory authorities, and actions the Bank may take to reinvest some of the savings in its operations.

 

The following table provides a reconciliation between the Bank's adjusted and reported results.

 

 

 

RETURN ON COMMON EQUITY
The Bank's methodology for allocating capital to its business segments is aligned with the common equity capital requirements under Basel III. The capital allocated to the business segments is based on 9% CET1 Capital.

Adjusted ROE is adjusted net income available to common shareholders as a percentage of average common equity.

Adjusted ROE is a non-GAAP financial measure and is not a defined term under IFRS. Readers are cautioned that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other issuers.

 

RETURN ON TANGIBLE COMMON EQUITY
Tangible common equity (TCE) is calculated as common shareholders' equity less goodwill, imputed goodwill and intangibles on an investment in TD Ameritrade and other acquired intangible assets, net of related deferred tax liabilities. Return on tangible common equity (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 items of note, as a percentage of average TCE. Adjusted ROTCE provides a useful measure of the performance of the Bank's income producing assets, independent of whether or not they were acquired or developed internally. TCE, ROTCE, and adjusted ROTCE are each non-GAAP financial measures and are not defined terms under IFRS. Readers are cautioned that earnings and other measures adjusted to a basis other than IFRS do not have standardized meanings under IFRS and, therefore, may not be comparable to similar terms used by other issuers.

 

Impact of Foreign Exchange Rate on U.S. Retail Segment Translated Earnings
U.S. Retail segment earnings, including the contribution from the Bank's investment in TD Ameritrade, reflect fluctuations in the U.S. dollar to Canadian dollar exchange rate compared with the same period last year. The changes in the value of the Canadian dollar had a favourable impact on U.S. Retail segment earnings for the three months ended October 31, 2018, and an unfavourable impact for the twelve months ended October 31, 2018, compared with the same period last year, as shown in the following table.

 

On a trailing twelve-month basis, a one cent appreciation/depreciation in the U.S. dollar to Canadian dollar average exchange rate will increase/decrease U.S. Retail segment net income by approximately $57 million.

SIGNIFICANT AND SUBSEQUENT EVENTS, AND PENDING ACQUISITIONS

Acquisition of Greystone Managed Investments Inc.
On November 1, 2018, the Bank acquired 100% of the outstanding equity of Greystone Capital Management Inc., the parent company of Greystone Managed Investments Inc. (Greystone) for consideration of $817 million, of which $475 million was paid in cash and $342 million was paid in the Bank's common shares. The value of 4.7 million common shares issued as consideration was based on the volume weighted-average market price of the Bank's common shares over the 10 trading day period immediately preceding the fifth business day prior to the acquisition date and was recorded based on market price at close. Common shares of $167 million issued to employee shareholders in respect of the purchase price will be held in escrow for two years post-acquisition, subject to their continued employment, and will be recorded as a compensation expense over the two-year escrow period.

The acquisition is accounted for as a business combination under the purchase method. As at November 1, 2018, the acquisition contributed $169 million of assets and $55 million of liabilities. The excess of accounting consideration over the fair value of the identifiable net assets is allocated to customer relationship intangibles of $140 million, deferred tax liability of $37 million and goodwill of $433 million. Goodwill is not deductible for tax purposes. The results of the acquisition will be consolidated from the acquisition date and reported in the Canadian Retail segment. The purchase price allocation is subject to refinement and may be adjusted to reflect new information about facts and circumstances that existed at the acquisition date during the measurement period.

Agreement for Air Canada Credit Card Loyalty Program
On November 26, 2018, the Bank finalized a long-term loyalty program agreement (the "Loyalty Agreement") with Air Canada. Under the terms of the Loyalty Agreement, the Bank will become the primary credit card issuer for Air Canada's new loyalty program when it launches in 2020 through to 2030.  The Loyalty Agreement was finalized in conjunction with Air Canada entering into a definitive share purchase agreement with Aimia Inc. ("Aimia") for the acquisition of Aimia Canada Inc., which operates the Aeroplan loyalty business (the "Transaction"), for an aggregate purchase price of $450 million in cash and the assumption of approximately $1.9 billion of Aeroplan Miles liability. The closing of the Transaction is subject to the satisfaction of certain conditions, including receipt of Aimia shareholder approval and customary regulatory approvals. The Loyalty Agreement will become effective upon the closing of the Transaction and TD Aeroplan cardholders will become members of Air Canada's new loyalty program and their miles will be transitioned when Air Canada's new loyalty program launches in 2020.

If the proposed Transaction is completed, the Bank will pay $622 million plus applicable sales tax to Air Canada, of which $547 million ($446 million after sales and income taxes) will be recognized as an expense during the first quarter of 2019 to be reported in the Canadian Retail segment, and $75 million will be recognized as an intangible asset amortized over the Loyalty Agreement term, both of which are expected to be reported as items of note. In addition, the Bank will prepay $308 million plus applicable sales tax for the future purchase of loyalty points over a ten year period. The Bank also expects to incur additional pre-tax costs of approximately $100 million over two years to build the functionality required to facilitate the new program. The proposed Transaction is expected to reduce the Bank's CET 1 ratio on close by approximately 13 basis points (bps).

Normal Course Issuer Bid
As approved by the Board on November 28, 2018, the Bank announced its intention to amend its normal course issuer bid (NCIB) for up to an additional 20 million of its common shares, subject to the approval of OSFI and the TSX. The timing and amount of any purchases under the program are subject to regulatory approvals and to management discretion based on factors such as market conditions and capital adequacy.

Redemption of TD CaTS III Securities
On November 26, 2018, TD Capital Trust III announced its intention to redeem all of the outstanding TD Capital Trust III Securities – Series 2008 (TD CaTS III) on December 31, 2018, at a redemption price per TD CaTS III of $1,000, plus the unpaid distribution payable on the redemption date of December 31, 2018.

HOW OUR BUSINESSES PERFORMED

For management reporting purposes, the Bank reports its results under three key business segments: Canadian Retail, which includes the results of the Canadian personal and commercial banking, wealth, and insurance businesses; U.S. Retail, which includes the results of the U.S. personal and business banking operations, wealth management services, and the Bank's investment in TD Ameritrade; 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 the Bank Reports" section of this document, the "Business Focus" section in the 2018 MD&A, and Note 29 of the Bank's Consolidated Financial Statements for the year ended October 31, 2018. For information concerning the Bank's measure of adjusted return on average common equity, which is a non-GAAP financial measure, refer to the "How We Performed" section of this document.

Upon adoption of IFRS 9, the current period 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. Under IAS 39 and prior to November 1, 2017, the PCL related to the collectively assessed allowance for incurred but not identified credit losses that related to Canadian Retail and Wholesale Banking segments was recorded in the Corporate segment. Prior period results have not been restated. PCL on impaired financial assets includes Stage 3 PCL under IFRS 9 and counterparty-specific and individually insignificant PCL under IAS 39. PCL on performing financial assets, loan commitments, and financial guarantees include Stage 1 and Stage 2 PCL under IFRS 9 and incurred but not identified credit losses under IAS 39.

The reduction of the U.S. federal corporate tax rate enacted by the U.S. Tax Act resulted in an adjustment during the first quarter of 2018 which was updated during the third quarter of 2018, to the Bank's U.S. deferred tax assets and liabilities to the lower base rate of 21% as well as an adjustment to the Bank's carrying balances of certain tax credit-related investments and its investment in TD Ameritrade. The earnings impact of these adjustments was reported in the Corporate segment. The lower corporate tax rate had, and will have a positive effect on TD's current and future earnings, which are and will be reflected in the results of the affected segments. The amount of the benefit may vary due to, among other things, changes in interpretations and assumptions the Bank has made, guidance that may be issued by applicable regulatory authorities, and actions the Bank may take to reinvest some of the savings in its operations. The effective tax rate for the U.S. Retail Bank declined in proportion to the reduction in the federal rate. For additional details, refer to "How the Bank Reports" and "Non-GAAP Financial Measures – Reconciliation of Adjusted to Reported Net Income" table in the "How We Performed" section of this document.

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 dividends, is adjusted to its equivalent before-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's results are reversed in the Corporate segment. The TEB adjustment for the quarter was $28 million, compared with $26 million in the fourth quarter last year, and $26 million in the prior quarter.

 

Quarterly comparison – Q4 2018 vs. Q4 2017
Canadian Retail net income for the quarter was $1,741 million, an increase of $77 million, or 5%, compared with the fourth quarter last year. The increase in earnings reflects revenue growth, partially offset by higher non-interest expenses, insurance claims, and PCL. The annualized ROE for the quarter was 45.1%, compared with 45.7% in the fourth quarter last year.

Canadian Retail revenue is derived from Canadian personal and commercial banking, wealth, and insurance businesses. Revenue for the quarter was $5,852 million, an increase of $454 million, or 8%, compared with the fourth quarter last year.

Net interest income increased $249 million, or 9%, reflecting volume growth and higher margins. Average loan volumes increased $25 billion, or 6%, reflecting 6% growth in personal loans and 10% growth in business loans. Average deposit volumes increased $11 billion, or 3%, reflecting 3% growth in personal deposits, 5% growth in business deposits, and 2% growth in wealth deposits. Net interest margin was 2.94%, or an increase of 8 bps, reflecting rising interest rates, partially offset by competitive pricing in loans.

Non-interest income increased $205 million, or 8%, reflecting an increase in revenues from the insurance business, wealth asset growth, and higher fee-based revenue in the personal banking business. A decrease in the fair value of investments supporting claims liabilities, which resulted in a similar decrease to insurance claims, reduced non-interest income by $19 million.

Assets under administration (AUA) were $389 billion as at October 31, 2018, an increase of $2 billion, or 1%, compared with the fourth quarter last year, reflecting new asset growth, partially offset by decreases in market value. Assets under management (AUM) were $289 billion as at October 31, 2018, an increase of $6 billion, or 2%, compared with the fourth quarter last year, reflecting new asset growth.

PCL was $263 million, an increase of $19 million, or 8%, compared with the fourth quarter last year. PCL – impaired for the quarter was $245 million, an increase of $1 million, reflecting continued strong credit performance. PCL – performing (recorded in the Corporate segment last year as incurred but not identified credit losses under IAS 39) was $18 million, primarily in the real estate secured lending and commercial portfolios. Total PCL as an annualized percentage of credit volume was 0.25%, unchanged from the same quarter last year. Net impaired loans were $664 million, an increase of $109 million, or 20%. Net impaired loans as a percentage of total loans were 0.16%, compared with 0.14%, as at October 31, 2017.

Insurance claims and related expenses for the quarter were $684 million, an increase of $69 million, or 11%, compared with the fourth quarter last year, reflecting an increase in reinsurance liabilities assumed, more severe weather-related events, less favourable prior years' claims development, and the impact of changes to forward-looking actuarial assumptions, partially offset by a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease to non-interest income.

Non-interest expenses for the quarter were $2,530 million, an increase of $258 million, or 11%, compared with the fourth quarter last year, reflecting increased marketing and promotion costs, increased employee-related expenses including revenue-based variable compensation expenses in the wealth business, and increased spend related to strategic initiatives.

The efficiency ratio for the quarter was 43.2%, compared with 42.1% in the fourth quarter last year.

Quarterly comparison – Q4 2018 vs. Q3 2018
Canadian Retail net income for the quarter decreased $111 million, or 6%, compared with the prior quarter. The decrease in earnings reflects higher non-interest expenses, insurance claims, and PCL, partially offset by revenue growth. The annualized ROE for the quarter was 45.1%, compared with 48.6% in the prior quarter.

Revenue increased $53 million, or 1%, compared with the prior quarter. Net interest income increased $74 million, or 3%, reflecting volume growth and higher margins. Average loan volumes increased $9 billion, or 2%, reflecting 2% growth in personal loans and 2% growth in business loans. Average deposit volumes increased $2 billion. Net interest margin was 2.94%, or an increase of 1 basis point, primarily due to rising interest rates, partially offset by changes in balance sheet mix.

Non-interest income decreased $21 million, or 1%, reflecting higher trading volumes in the direct investing business, partially offset by lower fee-based revenue in the personal banking business. A decrease in the fair value of investments supporting claims liabilities, which resulted in a similar decrease to insurance claims, reduced non-interest income by $32 million.

AUA decreased $14 billion, or 3%, and AUM decreased $8 billion, or 3%, compared with the prior quarter, both reflecting decreases in market value.

PCL increased by $17 million, or 7%, compared with the prior quarter. PCL – impaired increased by $19 million, or 8%, primarily reflecting higher provisions in the auto-finance, real estate secured lending, and credit card portfolios. PCL – performing decreased by $2 million. Total PCL as an annualized percentage of credit volume was 0.25%, an increase of 1 basis point over the prior quarter. Net impaired loans increased $142 million, or 27%. Net impaired loans as a percentage of total loans was 0.16%, compared with 0.13%, in the prior quarter.

Insurance claims and related expenses for the quarter increased $57 million, or 9%, compared with the prior quarter, reflecting higher current year claims, the impact of changes to forward-looking actuarial assumptions, partially offset by a decrease in the fair value of investments supporting claims liabilities which resulted in a similar decrease to non-interest income, and less severe weather-related events.

Non-interest expenses increased $130 million, or 5%, compared with the prior quarter, reflecting increased spend related to strategic initiatives, marketing and promotion.

The efficiency ratio for the quarter was 43.2%, compared with 41.4% in the prior quarter.

 

Quarterly comparison – Q4 2018 vs. Q4 2017
U.S. Retail reported net income for the quarter was $1,114 million (US$855 million), an increase of $338 million (US$234 million), or 44% (38% in U.S. dollars), compared with the fourth quarter last year. On an adjusted basis, net income for the quarter was $1,139 million (US$874 million), an increase of $327 million (US$224 million), or 40% (34% in U.S. dollars). The reported and adjusted annualized ROE for the quarter was 12.8% and 13.0% respectively, compared with 9.3% and 9.7%, respectively, in the fourth quarter last year.

U.S. Retail net income includes contributions from the U.S. Retail Bank and the Bank's investment in TD Ameritrade. Net income for the quarter from the U.S. Retail Bank was $886 million (US$680 million). Reported and adjusted net income for the quarter from the Bank's investment in TD Ameritrade was $228 million (US$175 million) and $253 million (US$194 million), respectively.

The reported contribution from TD Ameritrade of US$175 million increased US$92 million, compared with the fourth quarter last year, primarily due to the benefit of the Scottrade transaction, higher interest rates, a lower corporate tax rate, and increased trading volumes, partially offset by higher operating expenses. Adjusted contribution from TD Ameritrade increased US$95 million, or 96%.

U.S. Retail Bank net income for the quarter increased US$142 million, or 26%, due to higher deposit margins, higher loan and deposit volumes, fee income growth, and a lower corporate tax rate, partially offset by higher expenses and PCL. U.S. Retail Bank net income increased US$129 million, or 23%, compared to the adjusted U.S. Retail Bank net income in the fourth quarter last year.

U.S. Retail Bank revenue is derived from personal and business banking, and wealth management. Revenue for the quarter was US$2,193 million, an increase of US$161 million, or 8%, compared with the fourth quarter last year. Net interest income increased US$148 million, or 10%, primarily due to higher deposit margins, and growth in loan and deposit volumes. Net interest margin was 3.33%, a 15 bps increase primarily due to higher deposit margins. Non‑interest income increased US$13 million, or 2%, reflecting fee income growth in personal and commercial banking, partially offset by losses on certain tax credit-related investments.

Average loan volumes increased US$4 billion, or 3%, compared with the fourth quarter last year due to growth in business and personal loans of 2% and 3%, respectively. Average deposit volumes increased US$14 billion, or 5%, reflecting 4% growth in business deposit volumes, 4% growth in personal deposit volumes, and an 8% increase in sweep deposit volume from TD Ameritrade. The increase in sweep deposit volumes primarily reflected the Scottrade transaction.

AUA were US$19 billion as at October 31, 2018, relatively flat compared with the fourth quarter last year. AUM were US$52 billion as at October 31, 2018, a decrease of 17%, reflecting net fund outflows.

PCL for the quarter was US$187 million, an increase of US$24 million, or 15%, compared with the fourth quarter last year. PCL – impaired was US$157 million, a decrease of US$3 million, or 2%. PCL – performing was US$30 million, an increase of US$27 million, reflecting the impact of methodology changes related to the adoption of IFRS 9 where Stage 2 loans are now measured based on a lifetime expected credit loss (ECL). U.S. Retail PCL including only the Bank's contractual portion of credit losses in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.50%, or an increase of 6 bps. Net impaired loans, excluding ACI loans, were US$1.4 billion, a decrease of US$45 million, or 3%. Excluding ACI loans, net impaired loans as a percentage of total loans were 1% as at October 31, 2018.

Reported non-interest expenses for the quarter were US$1,256 million, an increase of US$34 million, or 3%, compared with the fourth quarter last year, reflecting higher investments in business initiatives, business volume growth, and increased employee-related costs, partially offset by productivity savings. On an adjusted basis, non-interest expenses increased US$55 million, or 5%.

The reported and adjusted efficiency ratio for the quarter was 57.3%, compared with 60.1% and 59.1%, respectively, in the fourth quarter last year.

Quarterly comparison – Q4 2018 vs. Q3 2018
U.S. Retail reported net income decreased $29 million (US$22 million), or 3% (3% in U.S. dollars), compared with the prior quarter, while adjusted net income decreased $22 million (US$17 million), or 2% (2% in U.S. dollars). The reported and adjusted annualized ROE for the quarter was 12.8% and 13.0% respectively, compared to 13.1% and 13.3%, respectively, in the prior quarter.

The reported contribution from TD Ameritrade increased US$1 million, or 1%, compared with the prior quarter, as higher asset-based revenue was largely offset by reduced trading volumes and higher charges associated with the Scottrade transaction. On an adjusted basis, the contribution from TD Ameritrade increased US$6 million, or 3%.

U.S. Retail Bank net income for the quarter decreased US$23 million, or 3%, compared with the prior quarter, due to higher expenses and PCL, partially offset by higher loan and deposit volumes.

Revenue for the quarter increased US$37 million, or 2%, compared with the prior quarter. Net interest income increased US$26 million, or 2%, primarily due to growth in loan and deposit volumes. Net interest margin was 3.33%, flat compared to the prior quarter. Non‑interest income increased US$11 million, or 2%.

 Average loan volumes increased US$2 billion, or 1%, compared with the prior quarter, due to growth in business and personal loans of 1% and 2%, respectively. Average deposit volumes increased US$1 billion, reflecting 5% growth in business deposit volumes and a 2% decrease in sweep deposit volume from TD Ameritrade.

AUA were US$19 billion as at October 31, 2018, relatively flat compared with the prior quarter. AUM were US$52 billion as at October 31, 2018, a decrease of 11%, reflecting net fund outflows and market depreciation.

PCL for the quarter increased US$17 million, or 10%, compared with the prior quarter. PCL – impaired was US$157 million, an increase of US$15 million, or 11%, primarily reflecting seasonal trends in the auto portfolio. PCL – performing was US$30 million, an increase of US$2 million, or 7%, primarily reflecting seasonal trends in the credit card portfolios, offset by improvement in the residential lending portfolios. U.S. Retail PCL including only the Bank's contractual portion of credit losses in the U.S. strategic cards portfolio, as an annualized percentage of credit volume was 0.50%, or an increase of 4 bps. Net impaired loans, excluding ACI loans, were US$1.4 billion, an increase of US$22 million, or 2%. Excluding ACI loans, net impaired loans as a percentage of total loans were 1% as at October 31, 2018.

Non-interest expenses for the quarter increased US$84 million, or 7%, compared with the prior quarter, primarily reflecting higher investments in business initiatives, and increased employee-related costs, partially offset by charges for store optimization in the prior quarter.

The efficiency ratio for the quarter was 57.3%, compared with 54.4% in the prior quarter.

 

Quarterly comparison – Q4 2018 vs. Q4 2017
Wholesale Banking net income for the quarter was $286 million, an increase of $55 million, or 24%, compared with the fourth quarter last year reflecting higher revenue, partially offset by higher non-interest expenses, higher taxes and higher PCL. The annualized ROE for the quarter was 18.4%, compared with 16.0% in the fourth quarter last year.

Wholesale Banking revenue is derived primarily from capital markets and corporate and investment banking services provided to corporate, government, and institutional clients. Wholesale Banking generates revenue from corporate lending, advisory, underwriting, sales, trading and research, client securitization, trade finance, cash management, prime services, and trade execution services. Revenue for the quarter was $917 million, an increase of $223 million, or 32%, compared with the fourth quarter last year reflecting higher trading-related revenue, and fee and advisory revenue.

PCL for the quarter was $8 million, compared to no PCL in the fourth quarter last year. PCL – performing (recorded in the Corporate segment last year as incurred but not identified credit losses under IAS 39) for the quarter was $8 million primarily reflecting the adoption of IFRS 9 including where Stage 2 loans are measured on a lifetime ECL.

Non-interest expenses were $537 million, an increase of $117 million, or 28%, compared with the fourth quarter last year reflecting higher variable compensation commensurate with increased revenue, higher initiative spend and continued investments in client facing employees supporting the global expansion of Wholesale Banking's U.S. dollar strategy.

Quarterly comparison – Q4 2018 vs. Q3 2018
Wholesale Banking net income for the quarter increased $63 million, or 28%, compared with the prior quarter reflecting higher revenue, partially offset by higher non-interest expenses and PCL for this quarter compared to a net recovery of PCL in the prior quarter. The annualized ROE for the quarter was 18.4%, compared with 14.0% in the prior quarter.

Revenue for the quarter increased $122 million, or 15%, compared with the prior quarter reflecting higher trading-related revenue including equity trading from higher market volatility and gains on the revaluation of short-term trading deposits using own credit spreads.

PCL for the quarter was $8 million, compared to a benefit of $14 million in the prior quarter. PCL – performing increased by $22 million reflecting a prior quarter benefit and higher Stage 2 volumes in the current quarter.

Non-interest expenses for the quarter increased $19 million, or 4%, compared with the prior quarter primarily reflecting higher spend on regulatory initiatives.

 

Quarterly comparison – Q4 2018 vs. Q4 2017
Corporate segment's reported net loss for the quarter was $181 million, compared with a reported net income of $41 million in the fourth quarter last year. The year-over-year increase in reported net loss was primarily attributable to the dilution gain on the Scottrade transaction in the same quarter last year, increased net corporate expenses and decreased non-controlling interests, partially offset by increased contribution from Other items. Net corporate expenses increased due to the positive impact of tax adjustments in the same quarter last year. Other items increased primarily due to increased revenue from treasury and balance sheet management activities this quarter. Adjusted net loss was $118 million, compared with an adjusted net loss of $104 million in the fourth quarter last year.

Quarterly comparison – Q4 2018 vs. Q3 2018
Corporate segment's reported net loss for the quarter was $181 million, compared with a reported net loss of $113 million in the prior quarter. The quarter-over-quarter increase in reported net loss was primarily attributable to the income tax benefit resulting from the Bank's update to the impact of U.S. tax reform in the last quarter and increased net corporate expenses. Net corporate expenses increased largely due to the positive impact of tax adjustments in the prior quarter. Adjusted net loss was $118 million, compared with an adjusted net loss of $109 million in the prior quarter.

 

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.

 

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.

 

 

 

 

 

 

Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.

Appendix A – Segmented Information
For management reporting purposes, the Bank reports its results under three key business segments: Canadian Retail, which includes the results of the Canadian personal and commercial banking businesses, Canadian credit cards, TD Auto Finance Canada and Canadian wealth and insurance businesses; U.S. Retail, which includes the results of the U.S. personal and commercial banking businesses, U.S. credit cards, TD Auto Finance U.S., U.S. wealth business, and the Bank's investment in TD Ameritrade; and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment.

Results for these segments for the three and twelve months ended October 31 are presented in the following tables.

 

The amounts for the three months ended October 31, 2018 and October 31, 2017, have been derived from unaudited financial statements; for the twelve months ended October 31, 2018 and October 31, 2017, the amounts have been derived from audited financial statements.

SHAREHOLDER AND INVESTOR INFORMATION

Shareholder Services

 

For all other shareholder inquiries, please contact TD Shareholder Relations at 416-944-6367 or 1-866-756-8936 or email [email protected].
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.

Annual Report on Form 40-F (U.S.)
A copy of the Bank's Annual Report on Form 40-F for fiscal 2018 will be filed with the Securities and Exchange Commission later today and will be available at http://www.td.com. You may obtain a printed copy of the Bank's Annual Report on Form 40-F for fiscal 2018 free of charge upon request to TD Shareholder Relations at 416-944-6367 or 1-866-756-8936 or e-mail [email protected].

Access to Quarterly Results Materials
Interested investors, the media, and others may view this fourth quarter earnings news release, results slides, supplementary financial information, supplemental regulatory disclosure, and the 2018 Consolidated Financial Statements and MD&A documents on the TD website at www.td.com/investor/.

General Information
Contact Corporate & Public Affairs: 416-982-8578

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: www.td.com
Email: [email protected]

Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on November 29, 2018. The call will be available live via TD's website at 1:30 p.m. ET. The call and audio webcast will feature presentations by TD executives on the Bank's financial results for the fourth quarter, 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/qr_2018.jsp on November 29, 2018, by approximately 12 p.m. ET. A listen-only telephone line is available at 647-794-1827 or 1-800-949-2175 (toll free) and the passcode is 3108989.

The audio webcast and presentations will be archived at www.td.com/investor/qr_2018.jsp. Replay of the teleconference will be available from 4:30 p.m. ET on November 29, 2018, until 4:30 p.m. ET on December 28, 2018, by calling 647-436-0148 or 1-888-203-1112 (toll free). The passcode is 3108989.

Annual Meeting
Thursday, April 4, 2019
Design Exchange
Toronto, Ontario

About TD Bank Group
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 branches and serves more than 25 million customers in three key businesses operating in a number of locations in financial centres around the globe: Canadian Retail, including TD Canada Trust, TD Auto Finance Canada, TD Wealth (Canada), TD Direct Investing, and TD Insurance; U.S. Retail, including TD Bank, America's Most Convenient Bank^®, TD Auto Finance U.S., TD Wealth (U.S.), and an investment in TD Ameritrade; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with more than 12 million active online and mobile customers. TD had $1.3 trillion in assets on October 31, 2018. The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.

SOURCE TD Bank Group

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