The Toronto-Dominion Bank TD
Q4 2011 Earnings Call Transcript
Transcript Call Date 12/01/2011

Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the TD Bank Group Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. I would like to remind everyone that this conference call is being recorded today, Thursday, December 1, 2011 at 3.00 pm Eastern Time.

The conference will be turned over to Mr. Rudy Sankovic, Senior Vice President, Investor Relations momentarily. Please standby, the conference will begin shortly.

Rudy J. Sankovic - SVP, IR: Good afternoon and welcome to the TD Bank Group's fourth quarter 2011 investor presentation. My name is Rudy Sankovic, and I am the Head of Investor Relations for the Bank. We'll begin today's presentation with remarks from Ed Clark, the Bank's CEO; after which Colleen Johnston, the Bank's CFO will present our fourth quarter operating results. Mark Chauvin, Chief Risk Officer will then offer comments on credit quality, after which we will entertain questions from those present in the room and from pre-qualified analysts and investors on the phone.

Also present today to answer your questions are Bob Dorrance, Group Head, Wholesale Banking, Tim Hockey, Group Head, Canadian Banking, Auto Finance and Credit Cards; Bharat Masrani, Group Head, U.S. Banking; and Mike Pedersen, Group Head, Wealth Management, Insurance, and Corporate Shared Services.

Following are fourth quarter investor presentation, we will be extending our call to review our IFRS opening balance sheet disclosures and to answer any questions on that subject. There will be a short waiting period between calls while we setup, but you will not be required to log in again. I would like to keep the call to a tight one hour and then 15 minutes for the IFRS component, so I will try and monitor that fairly aggressively.

Please turn to Slide 2. At this time, I'd like to caution our listeners that this presentation contains forward-looking statements and there are risks that actual results could differ materially from what is discussed. Any forward-looking statements contained in this presentation represent the views of management and are presented for the purpose of assisting the Bank's shareholders and analysts in understanding the Bank's financial position, objectives and priorities, and anticipated financial performance may not be appropriate for other purposes. Certain material factors or assumptions were applied in making these forward-looking statements. For additional information on these factors and assumptions, please see our 2011 MD&A available at

With that, let me turn the presentation over to Ed Clark. Ed?

W. Edmund Clark - Group President and CEO: Thanks, Rudy, and thanks everyone for joining us today. I hope I don't hurt anyone's feelings if I don't stay for the exciting discussion of IFRS after the investor meeting. Colleen is going to take you through the fourth quarter results in detail, but I'd like to give you my thoughts about the quarter and the year, and then I'd like to focus on what our feelings are about 2012.

Now, obviously this quarter was an excellent finish to a record year for TD with all of our business delivering strong results. Total adjusted earnings grew 30% with double-digit increases for each of our businesses.

Our Personal and Commercial Banking businesses on both sides of the border continue to have strong loan and deposit growth, and our Wealth business saw strong inflows of new client assets.

Wholesale Bank bounced back from a tough third quarter to turn into strong results with much improved trading revenues, despite the continued challenging global environment helped us well by higher security gains. Overall, it was clearly a great quarter.

So, let me take a look back at 2011. I think the last 12 months really speak to the earnings power of our retail-focused business model and a growth that's capable of delivering. This time last year, our full year adjusted earnings just crossed the C$5 billion mark for the first time. Well, now we've crossed the C$6 billion mark. That's a 20% growth over last year in an environment which, to put it mildly, has been rather challenging and uncertain.

If you look at each of our businesses, all of them made really strong contributions and thrived despite the headwinds they faced. The growth and performance of TD Canada Trust in 2011 was nothing short of spectacular. TD Canada Trust set the pace for the rest of the industry in terms of delivering the best customer service and convenience, again, winning a number of prominent accolades.

With 17% earnings growth this year and a remarkable 13% compounded growth since 2006, TD Canada Trust remains an incredible growth leader. We've driven this growth through a relentless focus on reinvesting in our franchises to make sure we always stay ahead of the competition. 24 new branches, Sunday hours, a significant investment in additional small business and commercial offices, are examples of how we have invested to stay ahead.

Our insurance business also had a very strong year, driven by strong premium growth and improved claims management. This is another business in which we've consistently invested and where we're now seeing good returns.

Our Global Wealth business also had a record year with 27% earnings growth. We continue to do well, like gathering new client assets and improving client satisfaction metrics. We also saw healthy trading volumes, a byproduct of the volatility in the markets. The business is focused on our offering our retail and business banking clients, legendary TD service, and leveraging our leadership position in online brokerage.

TD Bank, America's most convenient bank had another strong year despite some very tough regulatory and economic headwinds. We delivered strong growth while continuing to build out our Maine to Florida footprint, opening 37 new stores and wowing our customers.

We also successfully integrated the South Financial Group, giving us a top five position in South Carolina, where we have just announced a major hub investment. We're confident about our ability to continue to win market share even in a difficult economy. We have outperformed our U.S. peer groups by a wide margin in terms of loan growth.

Through combination of strong organic growth and acquisitions, our U.S. adjusted earnings grew 33% this year, a powerful indicator that our servicing convenience proposition does work.

Our Wholesale Bank finished a difficult year on a strong note, and showed that by having a diversified client-focused business model you can withstand harsh operating conditions like those we faced in 2011. We've got a business that now competes for the number one or two position relative to its Canadian peers, a tremendous accomplishment. It wasn't long ago where we set out our sights on being a top three dealer. We clearly reached that goal.

These results again show that our strategy of growing a North American bank without going out the risk curve, by investing in franchises with repeatable earnings potential allows us to outperform in challenging operating conditions.

Our successes this year were also again recognized by Euromoney, a leading business magazine which named TD as the Best Bank in North America for the third year in a row. Now, none of this could have been achieved without the people who run this bank and their dedication to meeting the needs of our customers and clients. Our team of over 85,000 employees was outstanding this year. On behalf of the Board and the entire senior executive team; I'd like to take this opportunity to thank them for their efforts.

I'm also very pleased to announce and welcome that 1,700 employees from MBNA Canada have now joined TD Bank. We are delighted to have you on board. The MBNA acquisition closed today making us a top-tier dual card issuer in Canada. We now have a unique position in the marketplace with strong affinity positions in both insurance and credit cards.

Let me now share a few thoughts about 2012. In the last six months, we've certainly seen a negative shift in the mood about the global environment. There's still lots of uncertainty about how Europe's debt issues will ultimately be resolved. Clearly, there is some tail risk of a major political failure. The most likely outcome currently seems to be a series of muddling along adjustments. The likely net effect will be slower growth and possibly the mild recession.

In United States, we're seeing some signs of recovery. Businesses now have strong balance sheets and achieved significant productivity increases. They are investing, but are reluctant to do so boldly because of the risk in Europe, worries about the U.S. political polarization and the continued fragility in the mood of the U.S. consumer.

Absent the problems in Europe, it's not impossible that the U.S. economy would get some real traction. Given, however, the current European outlook, we expect slow growth and (pass on) moderate reductions in unemployment rates. Interest rates are at historical lows and are not likely to rise significantly any time soon.

Despite the global headwinds, we're feeling positive about TD in this environment. Our possibly pessimistic view of the economic outlook is not matched by a pessimistic view of our prospects. We've seen that the business model build on servicing convenience combined with continuous reinvestment will always outperform on a relative basis. We enter 2012 with strong momentum.

TD Canada Trust should deliver solid growth despite low rates and we expected slowdown in consumer lending. We expect loan growth will continue in the mid-to-high single-digit range with a strong contribution from business banking volumes and continued personal loan growth, though at a slower rate than we've seen in the last couple of years. Offsetting this growth, will be continued margin pressures. We'll manage our expenses very closely to ensure that we deliver positive operating leverage.

In United States, we delivered a record year in 2011 despite the impact of the new overdraft regulations and tough economic conditions. We're confident we can do the same with the new interchange regulations which are expected as you know to take away approximately $50 million to $60 million in gross revenue per quarter next year. We said we'll recover this over the next two years by introducing new products and optimizing our fee structure.

We'll continue to reinvest in our franchise by opening 30 new stores and continue to grow our loans and deposits at a faster rate than our competitors. We expect that our U.S. business will see modest earnings growth next year despite the impact of interchange fees.

Our Wealth business has good momentum and should continue to see steady flows from new clients despite the volatile markets. While difficult to predict, we expect to see decent growth from Wealth if the Capital Markets hold up. Our Insurance business which will be combined with Wealth starting in fiscal 2012 should continue with strong growth trajectory with the MBNA acquisition and expected premium growth adding to the bottom line.

Turning to our Wholesale Bank; while this is a difficult business to do forecasting, TD Securities should see continued growth in our core dealer operations next year. Offsetting this will be the fact we're unlikely to see the same level of security gains that we saw in 2011. We expect this business to generate a solid risk adjusted return on capital next year despite the tough trading environment.

We will continue to invest in the future of our franchises while ensuring that expenses don't go faster than revenues. In terms of earnings outlook, we remain committed to our medium-term target of 7% to 10% adjusted EPS growth.

Given the economic and regulatory headwinds we faced, we'll have our work cut hours to get there, but that's certainly what we would like to do. I'm confident that we have a proven business model and extraordinary management team to ensure we continue to grow in both relative and absolute terms in these tough times.

Let me make a few comments about our capital. We're in a very strong position. Going into 2012, we expect our Basel III common equity Tier 1 ratio on a fully phasing basis will be comfortably about 7% by the second quarter of 2012 and will be about 7.5% by the first quarter of 2013.

In 2011, we generated over $2.5 billion in excess capital through earnings growth and after raising our dividends twice, another impressive achievement. With that said, we'll continue to manage our capital very prudently.

With that, let me wrap up. I'm turning the call over to Colleen.

Colleen M. Johnston - Group Head, Finance and CFO: Thanks, Ed, and good afternoon everyone. Let me take you through our results. We'll start with a review of the full year. 2011, total bank adjusted net income was $6.3 billion, a new record, up 20% from last year, and adjusted EPS was $6.82, up 18% year-over-year, also new record.

Our 2011 results are a testament to the franchise earnings power of our retail businesses in both Canada and the United States. In total, our retail businesses delivered total adjusted earnings of $5.7 billion, up 20% over 2010 and also a new record.

Retail earnings were 88% of total bank earnings. TDCT had a record year, delivering $3.6 billion in earnings, up 17% over 2010. The personal bank, business bank and insurance businesses all had record years.

Strong volume growth positive operating leverage and improved credit helped drive another year of great performance.

Wealth Management, by far a record year in difficult markets. Our Global Wealth business delivered $569 million in earnings, up 27% from last year. Strong client asset growth and good transaction volumes were the key drivers.

The U.S. personal and commercial bank delivered a record year, with over $1.3 billion in adjusted earnings, up 33% driven by excellent loan in deposit volume growth, improving organic PCL and acquisitions.

We continued to invest in our U.S. footprint and build on the core fundamentals of the business. Wholesale Banking had a good year in the context of challenging markets, with earnings of over $800 million down 18% from a very strong performance in 2010. Strong security gains partially offset weaker dealer results.

Our Corporate segment loss narrowed to $274 million on an adjusted basis, an improvement of $263 million from 2010, due to segment transfers and higher earnings on unallocated capital. Tier 1 capital ratio finished the year at a strong 13%.

We achieved positive operating leverage of 1% during 2011. Q4 expenses were elevated as expected. As we move to 2012, we planned a lower rate of expense growth to maintain positive operating leverage while still investing for the future. Overall, this was an excellent result for TD.

Please turn to Slide 5. So turning to our Q4 results, total bank adjusted net income for the fourth quarter was $1.6 billion, up 30% from last year and 4% sequentially, another record. Adjusted diluted earnings per share for the quarter $1.77, up 28% over last year, also a new record. These strong results were driven by continued momentum in both our Canadian and U.S. retail businesses, which delivered total retail adjusted earnings of $1.4 billion, up 18% from last year.

Results in our Wholesale Bank were also stronger despite very difficult markets. Adjusted net income of $288 million was up 33% from last year. These impressive results were primarily due to solid trading results coupled with a higher than normal level of security gains in the quarter. Corporate segment adjusted loss was $80 million. Overall, these were very strong results with every business posting double-digit earnings growth.

Please turn to Slide 6. TD's reported net income was $1.6 billion or $1.69 per share. Adjusted net income was $1.6 billion or $1.77 per share. The difference between reported and adjusted results was due to five items of note all of which you've seen before.

Please turn to Slide 7. Canadian P&C had another very strong quarter. Net income was C$905 million, up 17% versus last year. Our business bank and insurance businesses delivered particularly strong results this quarter. Net income was down 5% from last quarter's record performance.

Revenue was up 5% versus last year and 1% over last quarter. Excluding segment transfers, revenue was up 7% over last year. The year-over-year increase was driven by continued strong volume growth in real estate secured lending, auto lending, business loans and deposits as well as strong insurance revenue growth. These positives were partially offset by a lower margin on average earning assets.

Overall average lending volumes were up 8%, year-over-year driven by real estate secured lending, which grew 8% and business lending which increased by 14%. Average deposit volumes were up 5% with core personal deposits increasing by 10% and business banking deposits growing at 11%.

While personal deposit growth was positive for the quarter, we continued to see negative trending in the term deposit book down 7% largely driven by competitive pricing actions. We are implementing profitable strategies to reverse this trend.

Excluding the impact of segment transfers, margin was down 16 basis points compared to last year and 6 basis points sequentially due to the low rate environment, increased pricing competition, and changes in portfolio mix.

We saw a continued momentum in our insurance business which had another strong quarter with revenues benefiting from premium growth and better claims experience. Provision for credit losses of $212 million was down $27 million or 11% over the prior year due to improved credit portfolio performance, improved collection strategies and segment transfers. Expenses increased 2% compared to last year. Expenses were elevated in Q4 this year and in the comparative period last year.

Sequential expenses were up 8% due to timing of business investments, marketing initiatives, and employee related costs.

Operating leverage was 3% this quarter or 5% excluding segment transfers. Overall this was an excellent performance from TDCT.

Looking to 2012 we expect continued solid growth while margins will remain under pressure. Positive operating leverage, stable credit plus the acquisition of MBNA Canada should help drive high single digit earnings growth.

Please turn to Slide 8. Global Wealth Management which excludes TD Ameritrade delivered strong results despite difficult and volatile markets. Net income of $139 million was up 18% from last year, but down 5% sequentially. Revenue was up 9% from the prior year primarily driven by increased fee-based revenue from higher client assets and increased transactions volumes.

Expenses increased 8% from last year mainly due to higher variable costs and higher employee and project related costs. TD Ameritrade contributed C$54 million to TD this quarter up 64% from last year and 13% sequentially due to higher base earnings.

On the whole this was another strong quarter for Global Wealth. Although equity market volatility mix prediction challenging we are cautiously optimistic that increasing client satisfaction and steady inflows of assets will drive good net income growth in 2012.

The bank has completed its review of segment reporting. Starting in Q1 2012, we will be reporting a new segment, Wealth Management and Insurance. These businesses both now report to Mike Pedersen. Four quarters of restated results will be available in late January as part of our supplementary IFRS disclosures.

Please turn to Slide 9. Our U.S. Personal and Commercial bank delivered strong adjusted net income of $325 million for the quarter, up 18% from last year, but now down 9% from last quarter. The year-over-year increase was primarily due to strong organic growth, improving asset quality and acquisitions. While there are various pluses and minuses versus the previous quarter, the decline was largely related to a more normalized level of other income plus the one-month impact of the Durbin Amendment.

Excluding the impact of acquisitions and segment transfers revenue showed good organic growth of 8% compared to last year due to strong volume growth and improved fee income. Organic volume growth continued to be very impressive. The core loan portfolio increased by 13% with residential mortgages up 42% and commercial loans up 10% compared to last year.

Core deposits excluding the impact of acquisitions, government deposits and TD Ameritrade IDAs were up 13% with personal deposits up 11% and commercial up 21%. TD Ameritrade sweep deposits grew 30% compared to last year and 14% sequentially. Compared to last quarter, margin on average earning assets was down 7 basis points to 351, which was largely related to acquired loan accounting.

Total PCL was down U.S. $17 million or 12% compared to last year as asset quality continued to improve modestly. The credit performance of acquired loans was in line with expectations. The decline in PCL quarter-over-quarter was acquisition accounting related.

Excluding the impact of acquisitions and segment transfers, expenses grew 11% compared to last year, largely due to new store expenses and investments in infrastructure. Looking to 2012, we expect single digit growth in the U.S. P&C segment. As outlined last quarter, the Durbin amendment is expected to negatively impact gross revenues by approximately US$50 million to $60 million per quarter in 2012. We expect to recover lost revenue in the next two years through new product initiatives and fee optimization. We are confident that TD Bank, America's most convenient bank can continue to take share and we plan to open more than 30 stores to support this continued growth. Overall, it was a strong quarter for the U.S Personal and Commercial Bank.

You'll note that we've improved our disclosures related to acquire credit impaired loans and our acquired non-agency CMO portfolio. These balances have been removed from our impaired loan disclosures. We provided increased disclosure related to the underlying portfolios and related credit marks.

Please turn to Slide 10. Adjusted net income for Wholesale was C$288 million this quarter, results were up 33% from last year and more than double versus Q3. Continued sovereign debt concerns as well as lackluster economic data in the U.S. led to significant volatility in the quarter. This supported higher revenues for our equities and currency trading businesses, partially offset by lower fixed income and credit trading revenues due to lower volumes. Results for the quarter also included a higher than normal level of security gains.

On a quarter-over-quarter basis, trading revenues improved due to better trading in our fixed income, currency and equity's businesses.

DVA adjustments on the Bank's own liabilities was not a driver of higher trading revenues. TD Securities continued to make strong progress in growing franchise revenues and this is clearly evident in our lead table results. Provision for credit losses for the quarter was C$3 million.

Expenses were up 19% compared to the previous year due to higher variable compensation, higher employee related costs and franchise businesses and investment in risk and control infrastructure.

Going forward, we expect the operating environment to remain challenging in 2012. We remain confident that we can generate a solid risk adjusted return while remaining within the risk appetite of the bank.

Please turn to Slide 11. On an adjusted basis, the Corporate segment posted a loss of C$80 million compared with a loss of C$163 million last year. The decrease was primarily due to segment transfers, higher earnings on unallocated capital and lower unallocated corporate expenses.

Updated guidance for the Corporate segment will be included when the bank provide IFRS parallel year results in late January.

Please turn Slide 12. While there are no material changes to our fourth quarter Basel III outlook, I did want to highlight a few items. Let me start with Basel II Tier 1. As I mentioned we finished the year at 13%. However, the Tier 1 ratio will be impacted by several items in Q1 including IFRS phase-in, the MBNA transaction, Basel 2.5 and the deduction for our insurance subs.

We currently expect our Tier 1 ratio to decline by approximately 110 basis points in Q1. At year end our pro forma Basel III capital ratio was 7.1%. This increase includes the Q4 equity issuance relating to the MBNA Canada deal which closed today.

Once you factor in the full impact of the acquisition, our Basel III ratio moves back down to approximately 6.7%. We continue to expect to be comfortably above 7% by Q2 of 2012.

With that I'll turn the presentation over to Mark.

Mark R. Chauvin - Group Head and Chief Risk Officer: Thank you, Colleen and good afternoon, everyone. Please turn to Slide 13. As in the past, we've excluded the debt securities classified as loans and the acquired credit impaired loan portfolios from the credit slides. The latter consists of the Florida FDIC-covered loans and the acquired credit impaired loans from the South Financial and the Chrysler Financial acquisitions. We exclude these portfolios to provide what we believe is a more representative picture of U.S. credit performance.

Overall, the Canadian credit portfolios continued to produce the strong performance that we've come to expect over the past couple of years. That said, we are concerned about the increasing level of consumer debt held by Canadians. We regularly assess the impact this could have in our portfolios and we are adjusting our credit strategies where appropriate.

Throughout the year, U.S. credit quality has continued to improve. We've seen some lumpiness in PCL performance, but this is expected as we exit the bottom of the current credit cycle. Overall, our underlying credit trends are positive. In particular, new formations have slowed, the level of problem loans is reducing each quarter, delinquency rates are improving and resolutions and recoveries are accelerating. While we are happy with our Canadian and U.S. performance, the ongoing global economic uncertainty concerns us. Having said this, we haven't seen any adverse effects on our credit performance and our leading indicators remained positive.

A detailed breakdown of our credit exposure to Europe is provided in Table 39 of the MD&A. As outlined in the table, exposure to the high risk countries continues to reduce with the majority of the remaining exposure to AAA countries and the highest quality banks within these countries. We are closely monitoring these exposures and remain satisfied they do not represent a significant risk to the Bank.

Finally, our acquired portfolios and debt securities classified as loans, continue to perform as expected.

Now, I'll turn the presentation back to Rudy.

Rudy J. Sankovic - SVP, IR: Thank you very much, Mark. Now, we'll move to the Q&A portion of the call, and as a reminder there will be time for questions about IFRS in our second segment, so I would ask you to please keep the questions to the fourth quarter.

To give everyone a chance to participate, if possible, please keep to one question and then re-queue. For those participating in person, can I ask you to identify your name and your organization before asking your question. Before ending the call today, I will ask Ed for some final comments and remarks.

So, why don't we get started in the room and if there is any questions from this – from our analysts in the room.

Transcript Call Date 12/01/2011

Operator: Michael Goldberg, Desjardins Securities.

Michael Goldberg - Desjardins Securities: Bob, $286 million of trading revenue this quarter, more than 2.5 times third quarter, but still 25% below fourth quarter last year. So it's $286 million above normal, below normal or sustainable?

Bob Dorrance - Group Head, Wholesale Banking, TD Bank Group and Chairman, CEO and President, TD Securities: We answered that Michael. I think what we look – or what I look at, at least is, for the year, we had just under a $1.1 billion of trading revenue. Prior years we were quite a bit above that as we came out of the 2008 financial and distressed scenario, but if you go back prior to 2007, our normalized range was in and around $1.2 billion annually. So, that would be an objective, that's a target. So, 300 a quarter on average. I certainly think, we have the trading capability to do that, what's not forecastable is what markets allow. So if there is such a thing as normalized markets, our objective $1.2 billion.

John Reucassel - BMO Capital Markets: John Reucassel from BMO Capital Markets. Two-part question. One for Mike Pedersen. We'll start – just – it was surprising to see the brokerage commissions and other revenue line up in the quarter given what we saw. Was there something unusual particularly going on in that segment? Then for you Tim, just talk about the outlook for loan growth in the margin competition you're seeing there. Maybe dissect the squeeze and the margin pressure in the quarter versus prepayments or whatever else you might have seen.

Mike Pedersen - Group Head, Wealth Management, Insurance, and Corporate Shared Services, TD Bank Group: We saw pretty strong trading, particularly in the beginning of the quarter. I think there was trading on the volatility. We saw that weaken a bit towards the end of the quarter heading into this fiscal.

John Reucassel - BMO Capital Markets: But there was nothing unusual anywhere or growth.

Mike Pedersen - Group Head, Wealth Management, Insurance, and Corporate Shared Services, TD Bank Group: No.

John Reucassel - BMO Capital Markets: Okay.

Timothy D. Hockey - Group Head Canadian Banking and TD Auto Finance, TD Bank Group President and CEO, TD Canada Trust: So, from a margin point of view, we were down about 6 basis points quarter-on-quarter, which is more than we thought. A very large number of moving parts as you can imagine. When we look through them one by one, unlike most quarters pretty much every single one of them went against us in the quarter, which is a bit unusual. But having said that, I had to group them. I would say that we had about 2 points of decline from competitive pressure notably on the real estate secured lending products and that's sort of inclusive of a mortgage breakage, so I include that in that product mix. We had about a little less than, well, just to say it's a third, about 2 points basically from a balance sheet mix. We grew our loans a lot faster than we grew our deposits on the quarter, and I'd say the third mark was or the third was just the continued low interest rate environment where we've got our (tractors) and things that are just coming on at a lower rate than they were, so that's how we'd make up to 6.

John Reucassel - BMO Capital Markets: Okay. Just then on the loan growth outlook, do you see the mortgages in the commercial lending?

Timothy D. Hockey - Group Head Canadian Banking and TD Auto Finance, TD Bank Group President and CEO, TD Canada Trust: So, of course, with the close of MBNA today, we get a bump, and we will all next year from a year-over-year, but if you sort of strip that out, we would see that we continue to have a decline in the year-over-year growth rate from the rates we've had, but frankly not as much as we again would have expected maybe a couple of quarters ago. We still forecast quite a strong growth on our credit on the business banking side, so it's mostly on the personal side that we see slowing.

Operator: Peter Routledge, National Bank Financial.

Peter Routledge - National Bank Financial: A question for Mark on Page 37 of the sub pack I just want to understand your European counterparty exposure. In particular, you breakout your European counterparty exposure, I know it's gross number to $57.7 billion. Can you talk about maybe the exposures drawn versus repo, versus OTC? What kind of mitigants might be in there collateral, for example? Also, I noticed the repo-style transactions to European counterparties dropped by quite a substantial number, and maybe you could provide some color on that?

Mark R. Chauvin - Group Head and Chief Risk Officer: Okay. Well, in terms of the repo-style transactions at $20.1 billion, that's a notional number. So the contingent number would be much smaller and all of that is secured with collateral, which would be all high grade cash or collateral and it would not include any sovereign debt from the PIIGs really it's concentrated in sovereign debt of Canada, U.S., U.K. and Germany and the Netherlands to some degree. There is a bit France would be the minority. There is a bit to France, but it's probably less than 5% and then if you look at and all of our repos are from terms of over a date under 90 days. So, they turn quickly. In terms of the, I can't really comment on why change core, it does. If you look over the last four quarters, it does change a fair amount just by the nature of it, it must simply be the attractiveness of the trade itself. If you'll go to the next column of the OTC derivatives that number excludes collateral. So, if you include collateral, which again is the same high quality type of collateral I mentioned for repos, a little more restrictive in fact. So, it wouldn't have it would have a very small amount of France then others it's generally cash either U.S. or European. If you take the cash out and net it down it comes to about $4 million to $5 million. As you know that it's all under a CSA so the mark-to-market is collateralized. So, the majority of the exposure is what we refer to is the future potential exposure of where it could go over the term of the trade kind of on a statistical 95% competence basis. Again to the large counterparties in the AAA rated countries, generally speaking.

Operator: Andre Hardy, RBC Capital Markets.

Andre-Philippe Hardy - RBC Capital Markets: I was going to ask the similar question. I guess you didn't address the $23.5 billion of drawn exposure to Europe on the same page Mark?

Mark R. Chauvin - Group Head and Chief Risk Officer: So that's the majority, that's all investments effectively. I'd say the vast majority are investments that are held in our investment portfolio either in Europe or in Canada or the U.S and it is restricted to the high grade sovereigns again, and it would not include exposures to the – other than the amounts that we've declared, but it's generally to U.S. sovereigns or agencies or items such as that well not U.S. because it's Europe, but to European sovereigns.

Andre-Philippe Hardy - RBC Capital Markets: Do you have a sense of how much is U.K. versus eurozone?

Mark R. Chauvin - Group Head and Chief Risk Officer: Well it's specifically in our disclosure, if you look in the MD&A on the more granular breakdown we provided, it gives us exactly at $5.8 billion is the U.K. portion.

Operator: Steve Theriault, Bank of America Merrill Lynch.

Steve Theriault - Bank of America: Just want to follow-up first on Michael Goldberg's question to Bob going back to the trading revenue, October was probably a bit of a rebound month I guess but I was still surprised the equity trading contributions was high – I think it was the highest we've seen since I think 2009. So Bob, is there anything unusual going through the line, maybe some derivatives trades that are more onetime in nature that are maybe creating some of the lift there. Can you give us a little color on the equity business in particular and then also if I might sneak in one quick other question I'm not sure who wants to take it Bharat or maybe Colleen and there was a really dramatic increase in the Ameritrade deposit accounts in the quarter to the tune I think just about $7 billion which I think is the highest ever. Is that just money going to the sidelines at Ameritrade is there something more unusual going on through there?

Mark R. Chauvin - Group Head and Chief Risk Officer: So just to quickly talk to the equity side – was a very strong quarter for the equity derivatives business which benefited from an increase in volatility in equity markets. We run a variety of businesses within the equity derivatives ranging through option swaps et cetera. Overall, we tried to run the business to be longwall, to the extent that we can that clients allow us et cetera. So we were longwall and it all went up, so we were able to take advantage of that. So that's definitely a trading aspect of the business for the one key cause of why it probably would've been higher than typically that line would be.

Steve Theriault - Bank of America: But no big like total rate of return swaps that were sized or anything like that?

Mark R. Chauvin - Group Head and Chief Risk Officer: No, it was an explosion in the VIX in August.

W. Edmund Clark - Group President and CEO: It's Ed here, on the Ameritrade, there are certain sort of institutional rules and frankly also some process rules that has met, that we haven't been able to get all the money over all in one lump. This is probably one of the last of the big lumps to come over that kind of $4 million biz. There's the normal growth and then there was a few things that we're able to now move over. So, you won't see those kind of increases every a quarter from now and there will be more normal.

Operator: Robert Sedran, CIBC.

Robert Sedran - CIBC: Bharat the pace of mortgage loan growth remains quite strong. So I have two related questions. The first is how much of this is just thinning out of the competitive environment and how much perhaps relates the price? As you see the Case-Shiller Index continues to decline, the housing market continues to slide a little bit. How should we feel the credit risk as this book builds. How big – and you think business mix, how big would you like the mortgage book to be as a longer term aspirational target?

Bharat B. Masrani - President and CEO, TD Bank, America's Most Convenient Bank: Yeah, so just on the – why are we growing at the rate we're growing, I think and I mentioned this before, what is going on is, because of the rate cycle there is a huge amount of refi activity in the United States, and frankly, our legacy institutions, when we acquired them did not have much of a mortgage business, and so, when we put in a new platform, came together as one bank from Maine to Florida, and our brand with the service and convenience proposition, we are able to take advantage of this refi boom. So, what happens is that these are TD customers that had the mortgages elsewhere and as they refi, they'd like to bring them to TD. So, that's why we're seeing the growth in our book that you have just noted, and until this rate cycle continues, until this refi booms continues, I would expect us to benefit more so than perhaps the overall market might suggest. As far as credit quality goes, the geography where we are located continues to be quite strong. In fact, our underwriting is very strong, very high FICOs, the loan-to-values are very impressive. We monitor this on an ongoing basis. So, frankly, I am not worried about the credit that we have in the mortgage book and are quite happy, continue to do the business that is available out there. So, how big should this business be? I've said this before, that whenever we have a mortgage client, we have more than four other products with that client. When we don't have a mortgage with the client then we have approximately two products with that client. So, very quickly in the U.S. which is relatively a new phenomenon that mortgages are becoming a relationship product? So I'd like to continue to grow as long as we get the good quality mortgages that we are, as long as we are able to cross-sell other products and these are in our footprints, these are clients, then I'm happy to grow as much as I can. Yes, there is a limit as to how much of that we would carry on our balance sheet. We still have lots of room. Once we hit such a limit, then obviously we'll have to think about how do we securitize them or sell them to Freddie or Fannie, but we are quite away from that point currently.

Operator: Brad Smith, Stonecap Securities.

Brad Smith - Stonecap Securities: Colleen, the question for you in the U.S. Personal and Commercial Banking segment in the U.S. dollar, Slide 8 in the sub-pack. We're being shown an average of invested capital there, $17.8 billion. The holding company in the U.S. last reported in excess of $20 billion, both in the second and third fiscal quarter. I'm just wondering what where is the balance of the capital that is employed in the U.S. reflected in the sub-pack and how do you separate the earnings relating to the make sure that we get – our reflected return on invested capital in the U.S. P&C Bank that is representative of its realities?

Colleen M. Johnston - Group Head, Finance and CFO: So, Brad, when we disclose our segment, invested capital and our returns we're not disclosing this necessarily on a legal entity basis. What we are disclosing is the economic capital that we have committed to that business and that reflects the amount of core operating capital that we require as well as any amount of goodwill and intangibles and that's the way our calculations work. So, again, I think it's difficult to try and tie that back to the legal entity basis. There are various reasons that we need to hold more capital in certain cases at that legal entity level. So, I think the key number to look at is the number that will show for the segment.

Brad Smith - Stonecap Securities: But, Colleen, I mean, realistically, if you're downloading capital into the U.S. market and generating rates of return that are fractional compared to what you're showing us in your segment, don't you think that the fulsome reconciliation of that would be important, especially when the numbers are as big in the $20 billion to $30 billion range?

Colleen M. Johnston - Group Head, Finance and CFO: I guess, what your question is, Brad, is whether or not there are earnings related to that capital that appear in the sub that is not the case. The earnings would only be related to the amount of economic capital that we have dedicated to the business. So I'm very comfortable with the way of we're portraying the numbers.

Brad Smith - Stonecap Securities: I would just note in closing then the fact that the earnings that you report here are about $100 million above the legal entity earnings that you report in the U.S. It's quite remarkable if you think that there is no earnings here related to that extra capital.

Operator: Gabriel Dechaine, Credit Suisse.

Gabriel Dechaine - Credit Suisse: Tim, I didn't quite get your margin guidance in Canada. So, just let me ask it this way. If nothing else changes competitively or rates wise, like what's the additional downside to NIM, just from the rollover of your mortgage portfolio? Then like what kind of mitigating actions are you taking to limit the amount of margin contraction you could experience? Then just sorry, I sneak this one in there for Mark, as of pretty juicy comment. You're adjusting your credit strategies where appropriate now within relation to Canadian lending exposures, can you expand on that what it means exactly?

Bob Dorrance - Group Head, Wholesale Banking, TD Bank Group and Chairman, CEO and President, TD Securities: So, Gabriel I guess what you're asking is what's our outlook for margin, so the first again to note is its starting this first quarter we'll see a bump as a result of the MBNA acquisition, so, but barring that if you just didn't add in the MBNA acquisition, we're expecting to see like sort of a continued decline into the first two quarters because it's pretty much all you can see out about onesies or twosies which is what we expected for Q4 frankly, some of it is related to continued pressure on real estate secured lending, but there is a lot of puts and takes, and to your point about mitigating strategies of course, we have some that we don't tend to put on analyst call in terms of an answer.

Gabriel Dechaine - Credit Suisse: What about the rollover or the refinancing I guess of the mortgage portfolio?

Mark R. Chauvin - Group Head and Chief Risk Officer: Yeah. We don't break it out product by product. There were some products that are obviously in a much competitive environment today than they were, and so they are repricing at different rates and it depends on what the attrition level is versus the new originations. So, I just say in aggregate that's the expectation of all of the puts and takes across our products.

Bob Dorrance - Group Head, Wholesale Banking, TD Bank Group and Chairman, CEO and President, TD Securities: That I made is really to say that we run stresses on the Canadian consumer portfolio all of the time and that kind of surfaces maybe the unsecured primarily areas of credit there might be most vulnerable, and so what you do is you simply tweak the credit strategies or effectively the basis upon which you approve it, there was edge to tighten it up a bit to say that we have lower impact should that stress occur.

Operator: Sumit Malhotra, Macquarie Capital.

Sumit Malhotra - Macquarie Capital Markets: Two numbers questions, please first for Colleen on Page 14 of the supplement we see your balance sheet and assets up about $22 billion quarter-over-quarter which is pretty normal for TD, but if I look at Page 11 on the average asset side, you have a much more noticeable increase of about $50 billion. Seems like a wide discrepancy between the two numbers for a single quarter. Can you help me understand what's happening there and probably most importantly was this somehow related to the increases we saw in either trading or securities gains in the quarter?

Colleen M. Johnston - Group Head, Finance and CFO: The answer is no to your second question. In terms of the earning assets versus the total assets I probably would be better if I got back to you on that one Sumit and just to square those two numbers and start doing it on the fly.

Sumit Malhotra - Macquarie Capital Markets: That's not actually earning assets, looking at average total assets which run from 648 to 699.

Colleen M. Johnston - Group Head, Finance and CFO: Yeah, let me get back to you on that.

Sumit Malhotra - Macquarie Capital Markets: That's fine then my second one on the number side has to do with your other income page in the supplement which is Page 12 non-interest income. I was surprised to see and this might be for Bharat or Tim, looking at the service charge line, I was surprised to see that up $40 million quarter-over-quarter despite the fact you told us that Durbin would impact the U.S. for one month this quarter and I'm assuming that the Durbin impact hits the service charge line. So, I guess if you could help me out here Tim was there some changes in Europe business that maybe offset the impact on Durbin or can you give some color on what's happening here?

Bharat B. Masrani - President and CEO, TD Bank, America's Most Convenient Bank: Yeah, short answer is we did some repricing on the deposit accounts and that had almost a full quarter's impact in our numbers.

Sumit Malhotra - Macquarie Capital Markets: So how much did that out for you in the quarter?

Bharat B. Masrani - President and CEO, TD Bank, America's Most Convenient Bank: We don't disclose that.

Sumit Malhotra - Macquarie Capital Markets: Was the offset in your business completely matched on the downside Ameritrade business or what are we looking at differential wise and don't disclose that either.

Bharat B. Masrani - President and CEO, TD Bank, America's Most Convenient Bank: We don't disclose that either.

Operator: Brian Klock, Keefe, Bruyette & Woods.

Brian Klock - Keefe, Bruyette & Woods: My question is for Colleen. Colleen, can you remind me what the impact on the U.S. net interest margin from the purchased loans was?

Colleen M. Johnston - Group Head, Finance and CFO: Sorry, what is your – your question is on the purchased--?

Brian Klock - Keefe, Bruyette & Woods: You said that the NIM contracted in the U.S. P&C business and it was all related to the impact of acquired loans or purchased...

Colleen M. Johnston - Group Head, Finance and CFO: Yeah, okay. So what we're referring to there is really more of a mix issue. As you look at the income on some of those legacy portfolios, we did see a decline in the quarter, which was probably a little greater than you would expect to see on a normalized basis and then that contributed to the 7 basis points. So, some of that relates to the South Financial as well as Chrysler.

Brian Klock - Keefe, Bruyette & Woods: So that's not purchase accounting, that's just the repricing of those acquired loans?

Colleen M. Johnston - Group Head, Finance and CFO: Yeah, and it's – in certain cases, the run-off of the book. So, in the case of Chrysler, as an example, you've got that book running off fairly quickly in the initial – the margins on that book were pretty thick.

Brian Klock - Keefe, Bruyette & Woods: Just one follow-up real quickly. I guess on your expense side, you guys did tell us about the expense build for this quarter. I guess, what do you think going to the first quarter of 2012, how much of the expense build – because expenses did come in a little higher than guidance. What do you think we should expect to see come out when we move to normalized first quarter 2012?

W. Edmund Clark - Group President and CEO: I've been trying to get the answer to that question, so I'm very excited to hear, what we're going to hear right now.

Colleen M. Johnston - Group Head, Finance and CFO: Yeah, me too. First of I would, this may sound feeble, but I would hasten to point out that foreign exchange was a factor in the quarter-over-quarter increase as well of about $30 million. But we were ahead of the high end of the range that we had provided with our guidance. Otherwise, it was about $270 million. So, as we look ahead to our forecast for Q1, excluding MBNA, the impact of the acquisition, which obviously will add some expenses, I think you could expect to see that number down, probably about $150 million or so. But we tend to be a little bit conservative on that. Usually, you do see the Q1 number come down a fair bit, and again, then we'll be adding the MBNA expenses.

Operator: Mario Mendonca, Canaccord Genuity.

Mario Mendonca - Canaccord Genuity: A quick question. If you could help me think through the change in the business and government deposits, just on the balance sheet as a whole on Page 14, from Q2 to Q4, about a $27 billion increase and I imagine there is a number of parts. What I'm trying to get a handle on is, how much of that increase is just your traditional growth in commercial deposits versus, say, purchased funds or perhaps even TD Ameritrade does it go – the TD Ameritrade deposits go through there. Could you just help me think through that change?

Colleen M. Johnston - Group Head, Finance and CFO: So, what a nice start Mario, just from some of the key drivers and then maybe we can have Bharat and Tim just comment in terms of what's being going on in the commercial businesses. So, first of all, you have seen fantastic growth in business banking deposits on both sides of the border. The other factor that you're seeing this quarter is you would've seen us raise a lot of senior debt, and part of that was prefunding the MBNA acquisition which we closed today. So, that was a definite factor in the quarter-over-quarter. The TD Ameritrade sweep deposits go into personal deposits non-term is that where you would see that $7 billion increase. I don't know, if Bharat or Tim had anything to add on the…

Bharat B. Masrani - President and CEO, TD Bank, America's Most Convenient Bank: All I'd say is I think, in your comment, in your prepared remarks, Colleen, you talked about huge increase in commercial deposits in the U.S. and we've seen a good growth in that number, and I'd say overall we are being quite selective in the type of deposit business we do given the rates out there. So – but we're seeing some good growth and these are core deposits. We're not seeing as much growth in government deposits and that's on strategy because we want to make sure that we're only business in that segment that is core and franchise business for the bank, but overall quite happy with deposit growth and some of those are in Colleen's comments.

Mario Mendonca - Canaccord Genuity: So Colleen, just to be clear, the $27 billion, would you say like two-thirds of that is your traditional business deposit growth and request is purchase funding. I am just trying to understand what that $27 billion from Q2 to Q4 represents?

Colleen M. Johnston - Group Head, Finance and CFO: I'd say that's roughly right.

Mario Mendonca - Canaccord Genuity: Two-thirds one-third.

Colleen M. Johnston - Group Head, Finance and CFO: Yeah.

Mario Mendonca - Canaccord Genuity: Then the one-third in purchase funding or wholesale. What assets are against that?

Colleen M. Johnston - Group Head, Finance and CFO: You'd see that mostly in available for sale, we've just put that into liquid investments.

Mario Mendonca - Canaccord Genuity: Available for sales, pending what, reinvestments into lending and everything else as the year progresses?

Colleen M. Johnston - Group Head, Finance and CFO: No. So reinvestment into the MBNA transaction which closed today.

Rudy J. Sankovic - SVP, IR: Thank you very much for your questions and I am going to turn it over to Ed for final comments.

W. Edmund Clark - Group President and CEO: Well, I'd say obviously it was a pretty fantastic quarter up 30% and a pretty fantastic year, up 20% and frankly, a year where we did better than I think we thought we're going to do going into the year. I would say we are certainly not unaware of the tail risk that are out there and I think we've been managing the organization against those tail risk and we're not unaware that I think we're looking at growth trajectory for the world and certainly for North America. That's slower than one might have wanted with probably interest rates that are lower than one might have wanted. So I think we find that before we got to start wallowing and pessimism, we have to keep on putting the fact that we have continued to outperform and I'd say as an organization, we probably underestimate the advantage of outperforming. So by being able to take market share both sides of the border and continue to adapt to make the kind of changes that you have to do to make money in this environment, those capabilities turn out to be worth a lot of money in the end. So that's why when we look next year, we're still focused on maintaining earnings growth of 7% to 10%. We're telling you that that's going to be hard work to do that, but it's certainly what mission statement tells us that we should be trying to do. Thank you very much.

Rudy J. Sankovic - SVP, IR: Great. Thank you, Ed and that ends our official Q4 earnings call. We're going to pause for two minutes to setup for IFRS call. So everybody please stay on the line for two minutes while we get set. Thank you.

Operator: Ladies and gentlemen, this concludes the fourth quarter investor presentation.

Rudy J. Sankovic - SVP, IR: Thank you. We'll come back to the IFRS portion of our call. Colleen Johnston, our CFO will speak to you about the transition to IFRS and the impact that has on TD. She is going to be joined by Xihao Hu, Senior Vice President and Chief Accountant for the Bank. So, Colleen I will turn it over to you to speak to the slide.

Colleen M. Johnston - Group Head, Finance and CFO: Thanks, Rudy and hello again, everyone. So, we'll start the second part of the call. We did want take some additional time today to discuss IFRS transition, specifically now 34 to our financial statements. Today, we'll be discussing opening balance sheets adjustments only. In late January we'll be rolling out our 2011 parallel year results under IFRS and we'll discuss P&L impacts in detail at that time. I would like to start by commending and thanking my amazing finance team and all of the work that they have done in the last three years to get ready for IFRS. Their work has been truly world class. IFRS is now official effective November 1, 2011 it's GAAP for us and will no longer be reporting under Canadian or U.S. GAAP. Again, as you know, I'm jointed today on the call by Xihao Hu, TDs Chief Accountant. From a business standpoint IFRS represents an accounting change only and will not impact our business operations or decisions. The financial statement and regulatory impacts have proven to be manageable. Let me simplify this as much as possible. Firstly, under IFRS, our shareholder's equity declines by $3.9 billion which consist largely of $2.1 billion of reduced goodwill with the balance due primarily to the following impacts. Pension $0.9 billion, de-recognition $0.6 million and loan-related items including origination cost and commitments of $0.4 billion. For Basel II regulatory capital purposes initial adjustment will be phased in over five quarters starting Q1 of 2012 with an impact of roughly 20 basis points per quarter. However, for Basel III purposes, the total impact will be roughly 50 basis points lower as the pension amount has already been deducted and calculating our Basel III pro forma ratio from common equity tier 1 capital. Let's talk about goodwill. Under the new IFRS rules, we're required to value our transaction at the date of close as opposed to the date of deal announcement. We've actually always thought this made more sense. The goodwill reduction arises because we've elected to retroactively adopt the new IFRS rules with respect to acquisitions. This has no impact on our regulatory capital ratios. The lower goodwill relates entirely to U.S. acquisitions. You may be asking how this will impact our U.S. return on invested capital. Next year we're making changes to our capital allocation methodology. The major change is that we'll be allocating Basel III capital to our segments. The net effect of IFRS and these other changes means that U.S. return measure will remain relatively unchanged. Finally, our balance sheet assets will grow by $48 billion due mainly to loan securitizations which will be going back on balance sheet. As mentioned earlier, we'll go through the P&L impacts in January, however, our parallel year shows an increase in adjusted EPS of roughly 1% due to IFRS. With that, we'll open it up to questions.

Rudy J. Sankovic - SVP, IR: Great. Thank you very much, Colleen. So, why don't we do the same if there is any questions in the room, we'll start with these folks or otherwise we'll go to the phones. So, Michael.

Operator: Michael Goldberg, Desjardins Securities.

Michael Goldberg - Desjardins Securities: With IFRS, insurance securitized mortgages, as you said Colleen, come on the balance sheet and use capital if just in boosting your asset capital multiple. How much do rates on these mortgages have to go up in order to achieve an acceptable return on capital for those loans if they're on your balance sheet?

Colleen M. Johnston - Group Head, Finance and CFO: Well, as you know, Michael, those assets are not capital-intensive at all. It's very low amounts of capital held with respect to that, will help an impact on our tax multiple, but that's a pretty minor issues for us. So, securitization still will continue to make sense for us in terms of being an advantageous way to fund the Bank, but obviously, we will not get off-balance sheet treatment going forward.

Operator: Mario Mendonca, Canaccord Genuity.

Mario Mendonca - Canaccord Genuity: Just one quick question. Colleen, the MBNA deal closes, that takes your common equity Tier 1 ratio Basel III to 6.7%. Are you then saying that there's another 50 basis point decline next quarter on implementation of IFRS?

Colleen M. Johnston - Group Head, Finance and CFO: No, so that – so all of the numbers that we've shown you under Basel III do include the impact of IFRS rolling forward over the next five quarters is essentially the impact. So that will not affect Q1. It will not be entirely in Q1.

Mario Mendonca - Canaccord Genuity: No, I'm talking Basel III now, I'm not talking Basel II.

Colleen M. Johnston - Group Head, Finance and CFO: Right, same thing.

Mario Mendonca - Canaccord Genuity: Basel III, you'll also amortize in the effect, four to five quarters?

Colleen M. Johnston - Group Head, Finance and CFO: Yeah, that's correct.

Mario Mendonca - Canaccord Genuity: The full impact being 50 basis points?

Colleen M. Johnston - Group Head, Finance and CFO: Right, because we're already deducting the pension asset and…

Mario Mendonca - Canaccord Genuity: That's what I understood. Asset securitization.

Colleen M. Johnston - Group Head, Finance and CFO: Yeah.

Operator: There are no further questions on the phone lines. Please continue.

Rudy J. Sankovic - SVP, IR: Okay. Well, thank you very much Colleen for the IFRS update. So, that concludes the call. If we can be a further assistance to anyone, please give the Investor Relations team a call and we'll definitely try and help you out. So, that concludes the call and we wish everybody the best of the holiday season. We'll see you here for the Q1 earnings call. Thank you.