We’re Here To Help Make It Easier
The eight short words on the front cover of this annual report – We’re here to help make it easier – speak
volumes to the culture, attitude and strategies of TD Bank. Those words are a commitment to customers –
a commitment to help make their financial lives easier by providing them with the financial products and
services they want, when and where they want them, the advice they want, the help they want in managing
their financial affairs – as simply, conveniently and cost effectively as possible.
We have been reshaping the businesses of the TD Bank Financial Group
to deliver.
We know that helping to make it easier for customers will spur the growth of
our businesses and build value for shareholders.
While focusing on making it easier and building value, our businesses reported
very good results in 1997. Earnings per share were up 20% to $3.54, and return
on equity improved to 16.6% from 15.4% in 1996. As net earnings rose to
$1,088 million, total taxes climbed 47% to $1,106 million; 83% of these taxes
(ranging from income tax to capital and payroll taxes) were paid in Canada,
although 30% of our income was earned abroad. In 1997, we nearly doubled
our charitable donations. Going forward, TD’s donations program will be based
on 1.25% of after-tax profit on a five-year rolling average – so, as profits grow,
so will donations, which support the important initiatives such as those outlined
on the “TD in the Community” page following this letter.
A buoyant economy and recovery of consumer confidence in Canada – especially
in Ontario, TD’s largest single market – made a major contribution to our
record level of earnings. What we find particularly significant is the exceptional
growth we achieved in businesses we targeted for expansion, and the progress
we made towards achieving our long term goals.
Accelerating growth in 1997
In last year’s report, we stated that we were accelerating investment in high
growth, high return areas where we believe we can achieve success.
To this end, we structured TD Bank Financial Group to focus on individual
business lines – each with its own management, resources and strategies
(detailed in the Review of TD’s Businesses), and we established three
strategic priorities:
- investing in our wealth management businesses;
- repositioning our retail banking network; and
- expanding our investment dealer, TD Securities.
In 1997, we made considerable progress in pursuit of each of these priorities:
Investing in wealth management businesses
With changing demographics – particularly the aging of the baby boomer
generation – wealth management has become the growth field of retail
financial services. TD has been growing rapidly to meet our customers’ wealth
management needs. In 1997, we made impressive gains through internal growth
and expansion with our mutual funds business, with TD Evergreen, our full
service retail investment firm, and with Green Line Investor Services, Canada’s
#1 discount broker.
Of particular note, we made substantial investments in the development of
our international discount brokerage business. Following the acquisition of
Waterhouse Investor Services in the United States just before the 1996 year
end, we took advantage of acquisition opportunities in 1997 to develop a
global franchise in discount brokerage. In the second quarter, we acquired
Pont Securities – Australia’s leading discount broker, which subsequently
acquired Rivkin Croll Smith, another significant Australian firm. Also in the
fourth quarter, Waterhouse agreed to acquire Kennedy, Cabot & Co., a major
discount broker in California – and we opened a Green Line operation in
London, England.
With these acquisitions, TD has built on its position as the third largest discount
broker in the world – and has opened up new opportunities for global investing
by our customers in North America and around the world. We have the size,
scope, scale and technologies to generate considerable value in this field, and
we will actively pursue further growth opportunities.
Repositioning retail banking
In retail banking, we have been repositioning our branches and the electronic
delivery channels of TD Access to better serve our customers – and to increase
revenues while reducing costs. To this end, we have been transforming our
branches from transaction centres to sales, service and advice centres – while
increasing the convenience of TD Access, and lowering the customer charges
for using our electronic services.
This is a multi-year, multi-stage process, but we believe we are already well
ahead of the competition in building the value of our retail banking franchise.
As well as achieving record results in retail banking, we made market share gains
in personal loans, personal deposits, residential mortgages and credit cards.
Equally as important, TD ranked first in independent surveys among the five
largest banks for customer satisfaction in our branches – and first in mutual fund
advice delivered through the branches. As well, TD Access Telephone Banking
and TD Access PC Banking have far exceeded expectations and put TD at the
forefront of electronic banking usage in Canada.
To meet the changing needs of small business customers, we simplified the credit
application process and expanded the product line and delivery network of our
TD Main$treet Banking program, which provides business owners with a single
contact point for their business and personal banking needs at the branch of their
choice. To help make it easier for mid-sized (or commercial) business customers,
we began centralizing and automating administrative procedures and expanding
our industry specialization group – enabling our relationship managers to increase
their focus on value added service and advice.
Building TD Securities
In 1997, we firmly established TD Securities as a top-five investment dealer in
Canada. With our specific focus on industry specialization and an integrated
corporate and investment banking approach, we made significant gains in our
fixed income, investment banking and equities businesses.
Our international profile is also rising: TD Securities was the #1 Canadian
dealer in the international Eurobond market in 1997 and has been ranked in the
latest Euromoney Survey as the 9th overall best Eurobond house as rated by its
peers. As well, we were awarded the lead Canadian underwriting position in the
global share issue of Telecom Italia S.p.A. – one of the largest share offerings
ever completed.
The people who are helping to make it easier
It is the people of TD who are helping to make it easier for customers and who
developed and executed the operating strategies detailed in the Review of
TD’s Businesses. Their efforts have been exceptional as they have learned new
skills, entered new fields and broken new ground in our industry. In an era of
rapid change in banking, we believe our people are managing change better
than any of our competitors. We have made major investments in new training
programs to support these efforts.
Capital strategies
We remain committed to returning excess capital to shareholders if current
opportunities do not meet our objectives for building value. However, in the
latter part of 1997, we discontinued our share repurchase program and increased
our capital levels in response to new guidelines issued by the Office of the
Superintendent of Financial Institutions Canada requiring banks to increase their
Tier 1 capital ratios to 7% and their total capital ratios to 10%.
Looking forward
The economic outlook for Canada is highly positive and is strengthened by the
excellent record of deficit reduction by the federal and provincial governments.
With continued low inflation and interest rates and declining unemployment,
we expect 1998 to be a good year for TD customers. By continuing with our
strategies, it should be another strong year for TD.
We have a great deal to look forward to – in 1998 and beyond. We believe we
have the strongest prospects among Canada’s banks because we have positioned
ourselves for the future – investing in growth businesses, developing electronic
alternatives and working to help make it easier for our customers.
Richard M. Thomson
Chairman
A. Charles Baillie
President and Chief Executive Officer
Toronto, Canada
November 20, 1997
A. Charles Baillie, President since 1995 and Chief Executive since February 1st of
this year will become Chairman and Chief Executive Officer on February 1st, 1998.
Richard M. Thomson, Chairman of TD since 1978, will retire on January 31, 1998.
As Chief Executive of TD for two decades – from 1977 to early in 1997 –
Mr. Thomson led the Bank through an extraordinary era of challenge and change.
He will continue to serve TD as a member of the Board of Directors.
