Toronto-Dominion Bank · TSX:TD
Toronto-Dominion Bank — TD Bank Group — Debt Investor Presentation (2016)
49 slides from Toronto-Dominion Bank's debt investor presentation, Mar 26, 2016
Slide 1: TD Bank Group Fixed Income Investor Presentation Q1 2016
TD Bank Group Fixed Income Investor Presentation Q1 2016
Slide 2: Caution regarding forward-looking statements
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
Slide 3: Contents
Contents 1. TD Bank Group 2. Economic Outlook 3. Treasury & Balance Sheet Management 4. Appendix 3
Slide 4: TD Snapshot
TD Snapshot Our Businesses Canadian Retail • Personal banking, credit cards and auto finance • Small business and commercial banking • Direct investing, advice-based wealth businesses, and asset management • Property, casualty, life and health insurance Q1 20161 Canadian U.S. U.S. Retail (C$ except
Slide 5: TD Strategy
TD Strategy To be the Better Bank North America • Top 10 Bank in North America1 • Leverage platform and brand for growth • One of only a few banks globally to be rated Aa1 by Moody’s2 • Strong employment brand Retail Earnings Focus • Leader in customer service and convenience • Strong organic growth
Slide 6: Competing in Attractive Markets
Competing in Attractive Markets Country Statistics Country Statistics • 11th largest economy • World’s largest economy • Nominal GDP of C$2.0 trillion • Nominal GDP of US$17.3 trillion • Population of 36 million • Population of 319 million Canadian Banking System U.S. Banking System • Soundest banki
Slide 7: TD in North America
TD in North America North Q1 2016 Canadian American C$ except otherwise noted Ranking5 Ranking6 Total assets $1,174B 2nd 6th Total deposits $737B 2nd 6th Market capitalization $98B 2nd 7th Adjusted net income1 (trailing four quarters) $8.9B 2nd 6th Reported net income (trailing four quarters) $8.2B
Slide 8: Composition of Earnings
Composition of Earnings 2015 Adjusted Earnings Mix1,2 Three key business lines • Canadian Retail robust retail banking platform in Canada with proven performance 9% • U.S. Retail top 10 bank5 in the Canadian U.S Retail3 U.S. with significant organic Retail 23% growth opportunities 64% • Wholesale Ba
Slide 9: Strategic Evolution of TD
Strategic Evolution of TD INCREASING RETAIL FOCUS Became primary Acquired Acquired Target issuer of Completed TD Chrysler credit card Aeroplan Visa; strategic Waterhouse Financial portfolio & Epoch; acquired ~50% credit card TD Bank Acquired Acquired USA / Acquired Commerce Acquired and MBNA and ann
Slide 10: Risk Management Framework
Risk Management Framework Our Risk Appetite We take risks required to build our business, but only if those risks: • Fit our business strategy and can be understood and managed • Do not expose the enterprise to any significant single loss events; we don’t “bet the bank” on any single acquisition, bu
Slide 11: Q1 2016 Highlights
Q1 2016 Highlights Total Bank (YoY) Financial Highlights C$MM Adjusted1 Q1/16 Q4/15 Q1/15 Adjusted EPS of $1.18 up 5% Revenue 8,564 8,096 7,614 Expenses 4,579 4,480 4,092 Adjusted Net Income up 6% Net Income 2,247 2,177 2,123 Adjusted Revenue up 12% Diluted EPS ($) 1.18 1.14 1.12 Up 4% ex FX and a
Slide 12: Q1 2016 Segment Results Highlights
Q1 2016 Segment Results Highlights • Net income up 4% YoY • Led by loan, deposit and wealth asset growth and higher fee-based Canadian revenue, partially offset by higher PCL and a higher effective tax rate Retail • PCL up 3% QoQ reflecting higher commercial recoveries in the prior quarter • Expense
Slide 13: Q1 2016 Credit Highlights
Q1 2016 Credit Highlights GIL Ratio (bps)1 65 • Canadian Retail and Wholesale GIL stable for the past four quarters 57 57 58 • U.S. GIL quarterly increase driven by the 56 negative impact of FX and ongoing renewal of legacy interest-only HELOCs Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 • Canadian Retail and Who
Slide 14: Oil and Gas Exposure
Oil and Gas Exposure Corporate and Commercial Outstandings Highlights by Sector (C$B): • Oil and Gas Producers and Services $3.5 outstandings represent less than 1% of total gross loans and acceptances: • No new impairments in Wholesale in O&G $1.2 / 34% • C$21MM in Commercial and Mid-Market impaire
Slide 15: Contents
Contents 1. TD Bank Group 2. Economic Outlook 3. Treasury & Balance Sheet Management 4. Appendix 15
Slide 16: Canada's Relative Strengths
Canada’s Relative Strengths • One of the world’s most competitive economies1 • Soundest banking system in the world1 • Unemployment rate remains below prior recessionary peaks • One of the strongest fiscal positions among G-7 industrialized countries • Relatively low projected deficits and debt 16 1
Slide 17: Solid Financial System in Canada
Solid Financial System in Canada Strong retail and commercial banks • Conservative lending standards • All major wholesale dealers owned by Canadian banks, with stable retail earnings base to absorb any wholesale write-offs Responsive government and central bank • Proactive policies and programs to
Slide 18: North American Economy
North American Economy Outlook Ongoing economic improvement in the United States • Job creation expected to remain healthy, pushing down unemployment and pulling up wage growth • Accelerating income growth and low energy prices will buoy consumer spending • Residential real estate will make an impor
Slide 19: Global Economic Outlook
Global Economic Outlook World Real GDP Growth1 Y/Y % Change • Global economic growth will 6 remain modest with a mild 5 Forecast3 acceleration expected over the 4 next two years 3 2 1 • U.S. economic outperformance, 0 amidst sluggish activity in Japan -1 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 20: Canadian Economic Outlook
Canadian Economic Outlook Canadian Export and U.S. Activity Index1 Y/Y % Change • Canadian economy still 25 10 20 Forecast3 8 tightly linked to U.S. 15 6 fortunes, and better U.S. 10 5 4 growth in medium term 0 2 0 expected to help Canada’s -5 -10 -2 prospects -15 Canadian Real Exports (LHS) -4 U.S.
Slide 21: U.S. Economic Outlook
U.S. Economic Outlook Consumption Rising on Faster Income Growth1 Y/Y % Change 6 • Supported by continued Forecast2 4 job growth, rising wages 2 and falling energy prices, consumer spending 0 growth will accelerate in -2 Real Consumer Spending Real Disposable Income 2016 -4 2000 2001 2002 2003 2004
Slide 22: Interest Rate Outlook
Interest Rate Outlook • With U.S. unemployment nearing Interest Rates, Canada and U.S.1 healthy levels, the Federal Reserve is likely to continue to edge up % interest rates 7 US Federal • In Canada, a modest economic and Funds Rate 6 Forecast2 inflationary outlook implies the Bank of Canada is like
Slide 23: TD's Real Estate Secured Lending
TD's Real Estate Secured Lending Portfolio Q1/16 Gross Loans Outstanding $247 B Canadian RESL Percentage Insured 55% Uninsured Residential Mortgages Current LTV1 59% Condo Borrower Gross Loans Outstanding $30 B (Residential Mortgages) Percentage Insured 66% Gross Loans Outstanding $6 B Condo Borrowe
Slide 24: Contents
Contents 1. TD Bank Group 2. Economic Outlook 3. Treasury & Balance Sheet Management 4. Appendix 24
Slide 25: Capital
Capital Highlights Common Equity Tier 11 • Common Equity Tier 1 ratio of Q4 2015 CET1 Ratio 9.9% 9.9% Internal capital generation 32 bps Common share repurchases (13) bps • Leverage ratio of 3.7% Actuarial losses on employee benefit plans (8) bps • Completed normal course issuer Unrealized losses on
Slide 26: TD Credit Ratings
TD Credit Ratings Issuer Ratings1 Moody's S&P DBRS Ratings Aa1 AA- AA Outlook Negative Stable Negative Ratings vs. Peer Group S&P Long-Term Debt Rating Moody’s Long-Term Debt Rating Aa1 18 AA- 14 16 Aa2 A+ 12 14 Aa3 10A 12 A1 A- 8 10 A2 8 A3 BBB+ 6 6 Baa1 BBB 4 4 Baa2 2 2 TD Canadian Peers 2 U.S. Pe
Slide 27: Non-Common Equity Capital Ratings
Non-Common Equity Capital Ratings TD has industry leading ratings1 for both Additional Tier 1 and Tier 2 capital instruments Ratings vs. Peers Tier 2 Subordinated Debt Ratings Additional Tier 1 Preferred Share Ratings S&P Moody’s S&P Moody’s 12 A- 12 A2 12 A- 12 A2 10 A- 10 A3 10 A- 10 A3 8 BBB+ 8 B
Slide 28: Robust Liquidity Management
Robust Liquidity Management Treasury paradigm • Contribute to stable and growing earnings • Manage non-trading market risk within established limits Match terms of assets and liabilities • Do not engage in liquidity carry trade • Match underlying funding maturities to term of assets or stressed trad
Slide 29: Liquidity Position
Liquidity Position Average LCR for Q1 2016 HQLA Distribution (Weighted & Includes Excess U.S. HQLA) Level 1 Cash & U.S. P&C Central Bank Excess Reserve 124% Level 1 Sovereign 100% Issued/ 81% Level 2A Guaranteed Sovereign Level 1 MDBs, Issued/Guaranteed PSEs, Level 2A PSEs, Provincials Cor
Slide 30: Term Funding Strategy
Term Funding Strategy Large base of stable retail and commercial deposits • Customer service business model delivers growing base of “sticky” and franchise-based deposits • Reserve assets held for deposit balances based on LCR run-off requirements User of mortgage securitization programs via Canada
Slide 31: Attractive Balance Sheet Composition
Attractive Balance Sheet Composition1 Funding Mix2 Wholesale Term Debt Assets Securitized Other Deposits33 23% Personal Other Deposits Covered Bonds Personal 24% Term Deposits 26% 25% Term Deposits 8% 5% Short Term Liabilities 4 Short Term Liabilities4 Mortgage 11% 11% Securitization 20% Senior Pers
Slide 32: Wholesale Term Debt Composition
Wholesale Term Debt Composition1 By Currency2,3 By Term2,3 4 Year 3% Covered Bonds $3B 16% Residential Mortgages 58% 5 Year 55% USD 56% $49B CAD 22% $49B Covered Bonds Senior $20B 3 Year 25% Unsecured15% $22B MTN5 Senior Unsecured 48% MTN 2 Year 4% 26% $4B 7 Year 5% EUR 14% $4B $13B AUD 3% $2B 6 Yea
Slide 33: Debt Maturity Profile F2016 – 2020
Debt Maturity Profile1 F2016 – 2020 Bullet Debt Maturities (C$ billions)2 $30 $25 $24 $22 $20 $19 $19 $16 $15 $10 $5 $0 2016 2017 2018 2019 2020 MBS Covered Bonds Senior Debt ABS Subordinated Debt 3 Manageable debt maturities 1. For wholesale term debt that has bullet maturities. 2. As of January 31
Slide 34: Canadian Covered Bond Legislation
Canadian Covered Bond Legislation • The Covered Bond legal framework was announced in the 2012 Federal Budget through amendment to the National Housing Act and was passed into law in June 2012 • Issuance must be in accordance with the legislation and issuers are prohibited from using insured mortgag
Slide 35: CMHC Guide Highlights
CMHC Guide Highlights Asset Coverage Test • To confirm overcollateralization of the covered bond collateral held against covered bonds outstanding • Indexation requirement (July 1, 2014) provides adjustment for market development • Value to be adjusted at least quarterly Valuation Calculation • Test
Slide 36: TD Legislative Covered Bonds
TD Legislative Covered Bonds TD Covered Bond Programme Highlights Cover Pool as at January 31, 2016 • TD has a C$40B legislative covered bond program • High quality, conventional first lien Canadian Residential mortgages originated by TD • Covered bonds issuance for Canadian issuers governed by CMHC
Slide 37: Key Takeaways
Key Takeaways • Strong capital base • Industry leading credit ratings • Proactive & disciplined risk management • Attractive balance sheet composition • Diverse funding strategy 37
Slide 38: Contents
Contents 1. TD Bank Group 2. Economic Outlook 3. Treasury & Balance Sheet Management 4. Appendix 38
Slide 39: Stable Earnings Growth
Stable Earnings Growth Adjusted Earnings1,2 (C$MM) 8,754 8,127 20112: Wholesale Banking 7,136 7,064 Wealth & Insurance 6,432 U.S. P&C Canadian P&C 2012 – 20153: Wholesale Banking U.S. Retail Canadian Retail 2011 Segment realignment 2012 2013 2014 2015 Targeting 7-10% adjusted EPS growth1 over the me
Slide 40: Gross Lending Portfolio
Gross Lending Portfolio Includes B/As Balances (C$B unless otherwise noted) Q4/15 Q1/16 Canadian Retail Portfolio $ 355.9 $ 359.2 Personal $ 298.6 $ 299.8 Residential Mortgages 184.5 185.9 Home Equity Lines of Credit (HELOC) 61.2 61.2 Indirect Auto 19.0 19.2 Unsecured Lines of Credit 9.6 9.6 Credit
Slide 41: Gross Impaired Loan Formations
Gross Impaired Loan Formations By Portfolio GIL Formations1: C$MM and Ratios2 Highlights $1,717 • Canadian Retail Formations constant at 19bps over the $1,338 past four quarters $1,206 $1,168 • No Formations in Wholesale $1,124 $33 / 10bps in the quarter $14 / 5bps $1,020 / 57 bps $16 / 5bps • U.S.
Slide 42: Gross Impaired Loans (GIL)
Gross Impaired Loans (GIL) By Portfolio GIL1: C$MM and Ratios2 $3,799 Highlights $39 / 10 bps • Canadian Retail and $3,244 Wholesale GIL stable for the $3,077 $2,967 past four quarters $2,905 $55 / 16 bps $36 / 12 bps $13 / 4 bps $28 / 9 bps • U.S. GIL quarterly increase of $518MM driven by: $2,709
Slide 43: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) By Portfolio Highlights PCL1: C$MM and Ratios2 $648 • Canadian Retail and Wholesale $10 / NM credit quality remains strong $550 $65 / NM • Stable loss rate of 25bps $11 / NM $443 $36 / NM • $65MM reserve build mainly $396 attributable to volume growth and $1 / NM $3
Slide 44: Canadian Personal Banking
Canadian Personal Banking Q1/16 Gross Loans GIL/ GIL PCL2 Canadian Personal Banking1 ($B) Loans ($MM) ($MM) Highlights Residential Mortgages 186 0.23% 435 4 • Credit quality remains Home Equity Lines of Credit (HELOC) 61 0.28% 174 (1) strong in the Canadian Indirect Auto 19 0.28% 53 63 Personal port
Slide 45: Canadian Commercial and Wholesale Banking
Canadian Commercial and Wholesale Banking Q1/16 Canadian Commercial and Gross GIL PCL1 Highlights Loans/BAs Wholesale Banking ($B) ($MM) ($MM) • Canadian Commercial and Commercial Banking3 60 177 8 Wholesale Banking Wholesale 37 39 10 portfolios continue to Total Canadian Commercial and Wholesale $9
Slide 46: U.S. Personal Banking – U.S. Dollars
U.S. Personal Banking – U.S. Dollars Q1/16 U.S. Personal Banking1 Gross Loans GIL/ GIL PCL2 Highlights ($B) Loans ($MM) ($MM) • Gross Impaired Loans Residential Mortgages 21 1.56% 317 -6 increase driven by ongoing Home Equity Lines of Credit (HELOC)3 10 8.68% 881 11 renewal of legacy interest- Indir
Slide 47: U.S. Commercial Banking – U.S. Dollars
U.S. Commercial Banking – U.S. Dollars Q1/16 Gross Highlights GIL PCL2 U.S. Commercial Banking1 Loans/BAs ($B) ($MM) ($MM) • Strong portfolio growth and Commercial Real Estate (CRE) 19 152 -1 sustained good quality in Non-residential Real Estate 14 94 -2 U.S. Commercial Banking Residential Real Esta
Slide 48: Investor Relations Contacts
Investor Relations Contacts Phone: 416-308-9030 or 1-866-486-4826 Email: [email protected] Best Investor Relations by Sector: Financial Services Best Corporate Governance Website: www.td.com/investor
Slide 49: TD Bank Group Fixed Income Investor Presentation
TD Bank Group Fixed Income Investor Presentation Q1 2016