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The Toronto-Dominion Bank (TD) (NYSE: TD) is one of Canada's Big Five banks, being the second largest bank in the country by assets and market capitalization, adn the only bank in North America with a AAA rating. The bank offers a full range of financial products, ranging from retail to loans and mortgages. Out of the Big Five, TD has the most branches in the United States.[1]

Since TD has the most U.S. branches, the bank was more affected by the 2008 Financial Crisis than the rest of the Big Five. TD's Wholesale Banking segment had a 50% decline in revenues.[1] In response, TD lowered its prime lending rate by 50 basis points to 3.50%.[2] As a whole, however, Canadian banks are more sound than U.S. banks. Canadian banks as a whole have lost $11.7 billion due to subprime investments[3] -- which is a fraction of the over $592 billion that U.S. banks have written down.[4] Even though its banks' losses were minimal compared to their U.S. counterparts, Canada has hinted at raising the minimal Tier 1 Capital Ratio% to 10%.

Company Overview

The Toronto-Dominion Bank and its subsidiaries provide a range of financial services in North America.

Business and Financial Metrics

Second Quarter 2010 Results[5]

TD Bank reported diluted earnings per share of $1.30 during the quarter, compared with $0.59 in the year-ago period. Reported net income was $1,176 million, compared with $545 million in the second quarter of 2010.

Business Segments

The bank operates in four segments: Canadian Personal and Commercial Banking, U.S. Personal and Commercial Banking, Wholesale Banking, and Wealth Management.

Canadian Personal and Commercial Banking (57.3% of Revenue, 59.6% of Net Income)[1]

This segment consists of Canadian banking and global insurance. Under the TD Canada Trust brand, the retail operations provide a full range of financial products and services to approximately 11 million personal and small business customers.[1] As a leading customer services provider, TD Canada Trust offers anywhere, anytime banking solutions through telephone and internet banking, more than 2,600 automated banking machines and a network of 1,098 branches located across Canada.[1] TD Commercial Banking serves the needs of medium-sized Canadian businesses, customizing products to meet their financing, investment, cash management, international trade and day-to-day banking needs. Under the TD Insurance brand, the Bank offers insurance products, including home and automobile coverage, life and health insurance in Canada and the U.S., as well as business property and casualty business in the U.S., in addition to credit protection coverage on TD Canada Trust lending products.[1]

U.S. Personal and Commercial Banking (19.5% of Revenue, 17.8% of Net Income)[1]

U.S. Personal and Commercial Banking comprises the Bank’s retail and commercial banking operations in the U.S. The Bank’s U.S. Personal and Commercial banking operations expanded upon completion of the acquisition of Commerce Bank in March 2008.[1] Operating under the brand TD Bank, the retail operations provide a full range of financial products and services through multiple delivery channels, including a network of over 1,000 branches located in the U.S., primarily in the Northeast and Mid-Atlantic regions and Florida, telephone and internet banking and automated banking machines, allowing customers to have banking access virtually anywhere and anytime. U.S. Personal and Commercial Banking also serves the needs of business, customizing products to meet their financing, investment, cash management, international trade and day-to-day banking needs.[1] In 2008, TD Bank added 29 new branches in the U.S. [6]

Wealth Management (15.1% of Revenue, 18.9% of Net Income)[1]

Wealth Management provides a wide array of investment products and services through different brands to a large and diverse retail and institutional global client base. Wealth Management is one of the largest in Canada, based on market share of assets, and comprises a number of advisory, distribution and asset management businesses, including TD Waterhouse, TD Mutual Funds and TD Asset Management Inc. In Canada, discount brokerage, financial planning, private investment advice and private client services cater to the needs of different retail customer segments through all stages of their investing life cycle. U.S. Wealth Management also provides a wide range of financial advisory, private banking, trust and investment management services to U.S. clients. Through Wealth Management’s discount brokerage channels, it serves customers in Canada and the United Kingdom, and TD Ameritrade serves customers in the U.S. Discount Brokerage industry and has leadership in both price and service. [6]

Wholesale Banking (8.1% of Revenue, 3.7% of Net Income)[1]

Wholesale Banking serves a diverse base of corporate, government and institutional clients in key financial markets around the world. Under the TD Securities brand, Wholesale Banking provides a wide range of capital markets and investment banking products and services that include: underwriting and distribution of new debt and equity issues, providing advice on strategic acquisitions and divestitures, and executing daily trading and investment needs. [6]


The Corporate segment includes corporate development programs ranging from treasury management to provisions for credit losses. The goal of this segment is to design and establish efficient operations for banks.

Trends and Forces

TD's C$ 17 billion+ investments in its U.S. retail platform face 2008 Financial Crisis

From 2004 to 2008, TD spent move than C$ 17 billion to enhance its U.S. retail platform.[1] C$ 8.5 billion of that number was spent to acquire Commerce Bancorp (CBH) in March 2008. With C$ 12 billion of goodwill associated with U.S. retail as of 2008, TD is hoping its investment will not sink due to the 2008 Financial Crisis.[1] TD had already written down C$ 65 million since Q307 due to the 2007 Credit Crunch.[7] Further, the initial impact of the crisis caused a 50% decrease in TD's Wholesale Banking revenue.[1] To adjust, the bank lowered its prime lending rate by 50 basis points to 3.50%.[8] Also, the Canadian government has provided aid to lending businesses by purchasing C$8 billion in mortgages from banks on January 14th in a plan to buy as much as C$75 billion.[9]

Canadian Banks are Seen as Less Risky than American Banks

Canadian banks as a whole have lost $11.7 billion due to subprime investments[10] -- which is a fraction of the over $592 billion that U.S. banks have lost.[4] Further, the World Economic Forum published its survey of 12,000 corporate executives in October 2008, which showed that these company heads ranked Canadian banks as the soundest in the World; US banks ranked 40th on the list. Canada achieved a score of 6.8 (7.0 indicates a perfect score). In comparison, the US scored 4.0.[11] Canadian banks have also profited from winning deposits and accounts as clients leave shaky U.S. banks.[12]

TD raises capital to boost Tier 1 Capital Ratio%

Canada requires banks to maintain a tier-1 capital ratio of at least 7%. The ratio is a measure of equity and retained earnings to risk-adjusted assets and provides a general guide for determining a bank's financial health.[13]

In 2008, TD had a Tier 1 ratio of 9.8%.[14] That compares with a ratio of 10.5% posted by fellow Big Five Canadian Bank Canadian Imperial Bank of Commerce (CM). To raise its Tier 1 ratio above 10%, TD announced that it will issue C$ 1 billion in notes that expire in 2108.[15] One set of notes worth C$550 million with be compounded semi-annually at a rate of 9.523%.[15] The other set of notes worth C$450 million will be compounded semi-annually at 10.000%.[15] The other Big Five banks have made plans to raise capital, such as Royal Bank Of Canada (RY) issuing as much as $2.3-billion in common equity and Bank Of Montreal (BMO) raising C$ 1.1 billion by selling shares at a lower price.[16]


Canada's "Big Five" Banks

In a highly competitive, dense Canadian banking business, TD ranks behind just Royal Bank Of Canada (RY) in market cap and net income. Of the Big Five, TD also has the highest U.S. presence, with over 1,000 branches ranging from Florida to Maine. TD is the 7th largest bank in North America in terms of market capitalization. Barron’s Magazine named TDBFG one of the best companies in North America, ranking 13th out of the top 500 companies.[1]

Bank Net Income (C$/Yr) Assets (C$) Market Cap (NYSE) Yields (NYSE) Branches Tier 1 Capital Ratio Write-downs from Q307 to Q408 Employees Customers Forbes Global 2000 Rank
Royal Bank Of Canada (RY) 4.555B723,859M37.68B7.2%17419.00% C$1,086 billion70,00016,000,00055
Bank of Nova Scotia (BNS)[17] 3.140B455,500M24.57B7.5%9.30%C$ 899 million69,00012,500,00092
Bank Of Montreal (BMO) [18]1.978B152,687M12.37B9.4%12809.77%C$ 638 million37,1008,200,000189
Toronto-Dominion Bank (TD)[19] 3.813B563,214M26.92B6.8%22009.80%C$ 65 million52,00010,000,00095
Canadian Imperial Bank of Commerce (CM)[20] -2.060B353,930M1.86B8.3%104810.50%C$ 4,969 billion40,45711,000,000159

TD's U.S. Competitors

TD bank has offices in the U.S. from Florida to Maine. As such, their U.S. business competes with U.S. retail banks. TD's U.S. business has been slowed due to the 2008 Financial Crisis, but not as much as its competitors. Bank of America (BAC) is struggling with its acquisition of Merrill Lynch (MER). BAC lost $10 billion, but has obtained $20 billion worth of capital and backing $118 billion of mortgage-related securities from the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation (FDIC).[21] Citigroup (C) has had similar turmoil, as it posted a $8.29 billion loss on 1/16/09 and has declared a company split into Citicorp and Citi Holdings.[22]

Competition Toronto-Dominion Bank (TD) Wells Fargo (WFC)[23] Bank of America (BAC)[24] Citigroup (C)[25]

Market Cap $Mil 27,804.39 72,360.00 55,570.00 32,420.00
Total Assets $Mil 462,623.98 575,442.00 1,715,746.00 2,187,631.00
Net Income $Mil 3,148.43 8,057.00 14,982.00 3,617.00
Net Profit Margin % 24.32% 20.45% 22.59% 4.78%

Operating Margin % 27.98% 29.52% 31.55% 2.08%


  1. 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 1.14 TD 2008 Annual Report
  2. TD website, "Press Releases," 12/9/08
  3. Forbes, "In Crisis, Canadian Banks Strive and Thrive," 12/11/08
  4. 4.0 4.1 Seeking Alpha, "Subprime Writedowns and Losses for Major Financials," 10/31/08
  5. iStockAnalyst: "TD Bank Financial Group Reports Second Quarter 2010 Results" May 27, 2010
  6. 6.0 6.1 6.2 2008 Annual Report
  7. Seeking Alpha, "The Year of the Canadian Bank Writedowns," 11/20/08
  8. TD website, "Press Releases," 12/9/08
  9. Bloomberg, "Canada Purchases C$8 Billion of Mortgages From Banks," 01/14/09
  10. Forbes, "In Crisis, Canadian Banks Strive and Thrive," 12/11/08
  11. Reuter’s “Canada rated world’s soundest bank system: survey” October 2008
  12. Seeking Alpha, "Canadian Banks Benefit from Market Turmoil," 11/01/08
  13. Financial Post, "10% tier 1 ratio will be costly for Scotia," 12/10/08
  14. Financial Post, "Bank of Montreal Announces Common Share Issue," 12/15/08
  15. 15.0 15.1 15.2 RTT News, "TD Bank Financial Group to Issue C$1 bln of TD Capital Trust IV Notes, 1/15/09
  16. Financial Post, "Bank of Montreal Announces Common Share Issue," 12/15/08
  17. Bank of Nova Scotia FY 2008 10-K
  18. Bank of Montreal FY 2008 10-K
  19. TD FY 2008 10-K
  20. CIBC FY 2008 10-K
  21. Forbes, "U.S. Rescues Bank Of America," 1/16/08
  22. Bloomberg, "Citigroup Reports $8.3 Billion Loss, Splits Into Two," 1/16/09
  23. WFC 2007 10-k, Item 6: Selected Financial Data, page 14
  24. BAC 2007 10-k, Item 6: Selected Financial Data
  25. Citigroup 2007 Annual Report
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