TD Bank Group Reports Second Quarter 2013 Results

SECOND QUARTER FINANCIAL HIGHLIGHTS, compared with the second quarter a year ago:

• Reported diluted earnings per share were $1.78, compared with $1.78.
• Adjusted diluted earnings per share were $1.90, compared with $1.82.
• Reported net income was $1,723 million, compared with $1,693 million.
• Adjusted net income was $1,833 million, compared with $1,736 million.

YEAR-TO-DATE FINANCIAL HIGHLIGHTS, six months ended April 30, 2013, compared with the corresponding period a year ago:

• Reported diluted earnings per share were $3.65, compared with $3.33.
• Adjusted diluted earnings per share were $3.90, compared with $3.68.
• Reported net income was $3,513 million, compared with $3,171 million.
• Adjusted net income was $3,749 million, compared with $3,498 million.

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

• Amortization of intangibles of $58 million after tax (6 cents per share), compared with $59 million after tax (6 cents per share) in the second quarter last year.
• A loss of $22 million after tax (3 cents per share), due to the change in fair value of derivatives hedging the reclassified available-for-sale securities portfolio, compared with a loss of $9 million after tax (1 cent per share) in the second quarter last year.
• Integration charges and direct transaction costs of $30 million after tax (3 cents per share) relating to the acquisition of the credit card portfolio of MBNA Canada, compared with $30 million after tax (3 cents per share) in the second quarter last year.

TORONTO, May 23, 2013 /CNW/ - TD Bank Group (TD or the Bank) today announced its financial results for the second quarter ended April 30, 2013. Results for the quarter reflected good earnings contributions from TD's personal and commercial banking operations in Canada and the U.S.

"TD had a solid second quarter, delivering adjusted earnings of $1.8 billion, up 6% from a year ago," said Ed Clark, Group President and Chief Executive Officer. "We feel positive about these results in the context of a challenging operating environment. We remain confident that our customer-focused, retail-driven business model will help us manage through a period of slower growth and low interest rates."

Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking posted reported net income of $847 million in the second quarter. On an adjusted basis, net income was $877 million, up 5% compared with the second quarter last year. These earnings reflect continued good loan and deposit growth, stable margins, favourable credit performance and effective cost management.

"Canadian Personal and Commercial Banking businesses generated good results in a continued slow growth environment," said Tim Hockey, Group Head, Canadian Banking, Auto Finance, and Credit Cards. "We are pleased with our results to date in 2013, and we believe that our continued focus on providing industry-leading customer service and convenience, as well as ongoing improvements in productivity, will position us well for the future."

Wealth and Insurance
Wealth and Insurance delivered net income of $364 million in the quarter, flat to last year. Increased Wealth earnings were driven by strong performance in our advice-based and asset management businesses and good growth in client assets. During the quarter, TD acquired Epoch Investment Partners, Inc., a successful New York-based asset management firm, which will further advance the growth strategy for the Wealth business. In Insurance, good premium growth was more than offset by higher claims due to a more severe winter and increased investments in the business. TD Ameritrade contributed $53 million in earnings to the segment, an increase of 13% compared with the second quarter last year.

"In our Wealth business we have strong momentum, and we look forward to working with Epoch to drive further growth," said Mike Pedersen, Group Head, Wealth Management, Insurance, and Corporate Shared Services. "In Insurance, we expect good premium growth but face increased uncertainty, including the impact of past and future Ontario auto reforms."

U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated US$392 million in net income for the quarter, an increase of 9% compared with the second quarter last year. Results were driven by strong loan and deposit volume growth, partially offset by lower margins. During the second quarter, TD acquired leading retailer Target's U.S. Visa and private label credit card portfolio, adding $6 billion of high quality assets to TD's balance sheet.

"TD Bank, America's Most Convenient Bank, had a good second quarter, with strong volume growth in both loans and deposits," said Bharat Masrani, Group Head, U.S. Personal and Commercial Banking. "Although we continue to feel the impact of margin pressure, we remain focused on delivering legendary customer service and convenience and achieving productivity improvements."

Wholesale Banking
Wholesale Banking net income for the quarter was $220 million, an increase of 12% compared with the second quarter last year, driven by higher trading-related revenue, improved client activity, and lower non-interest expenses.

"We are pleased with our second quarter results and the continued performance of our strong franchise businesses in a difficult trading environment," said Bob Dorrance, Group Head, Wholesale Banking. "We are encouraged by the gradual improvement in capital markets, and we expect to capitalize on increased market activity as macroeconomic conditions stabilize."

Capital
TD's Common Equity Tier 1 ratio on a Basel III fully phased-in basis was 8.8%, having absorbed the Target U.S. credit card and Epoch acquisitions in the quarter. In view of our demonstrated ability to generate capital, TD is announcing today a 12 million share buyback program which translates to roughly $1 billion in capital.

Conclusion
"We are pleased with our results for the quarter, given the backdrop of low interest rates and slower economic growth. At the half-year mark, we are very pleased with our 7% adjusted earnings growth on a year-to-date basis, driven by our retail businesses," said Clark. "We will continue to build our businesses and focus on managing our expenses prudently while delivering value for our customers, employees, communities and shareholders."

The foregoing contains forward-looking statements. Please see the "Caution Regarding Forward-Looking Statements" on page 3.

This document was reviewed by the Bank's Audit Committee and was approved by the Bank's Board of Directors, on the Audit Committee's recommendation, prior to its release.

HOW WE PERFORMED

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

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

Economic Profit and Return on Common Equity
The Bank's methodology for allocating capital to its business segments is aligned with the common equity capital requirements under Basel III at a 7% Common Equity Tier 1 (CET1) ratio. The return measures for business segments reflect a return on common equity methodology.

The Bank utilizes economic profit as a tool to measure shareholder value creation. Economic profit is adjusted net income available to common shareholders less a charge for average common equity. The rate used in the charge for average common equity is the equity cost of capital calculated using the capital asset pricing model. The charge represents an assumed minimum return required by common shareholders on the Bank's common equity. The Bank's goal is to achieve positive and growing economic profit.

Adjusted return on common equity (ROE) is adjusted net income available to common shareholders as a percentage of average common equity. ROE is a percentage rate and is a variation of economic profit which is a dollar measure. When ROE exceeds the equity cost of capital, economic profit is positive. The Bank's goal is to maximize economic profit by achieving ROE that exceeds the equity cost of capital.

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

SIGNIFICANT EVENTS IN 2013

Acquisition of Target Corporation's U.S. Credit Card Portfolio
On March 13, 2013, the Bank acquired substantially all of Target Corporation's existing U.S. Visa and private label credit card portfolio, with a gross outstanding balance of $5.8 billion. The Bank also entered into a seven-year program agreement under which it will become the exclusive issuer of Target-branded Visa and private label consumer credit cards to Target Corporation's U.S. customers.

Under the terms of the program agreement, the Bank and Target Corporation will share in the profits generated by the portfolios. Target Corporation will be responsible for all elements of operations and customer service, and will bear most of the operating costs to service the assets. The Bank will control risk management policies and regulatory compliance and will bear all costs relating to funding the receivables for existing Target Visa accounts and all existing and newly issued Target private label accounts in the U.S. The Bank accounted for the purchase as an asset acquisition. The results of the acquisition from the acquisition date to April 30, 2013 have been recorded in the U.S. Personal and Commercial Banking segment.

At the date of acquisition the Bank recorded the credit card receivables acquired at their fair value of $5.7 billion and intangible assets totalling $98 million. The gross amount of revenue and credit losses have been recorded on the Interim Consolidated Statement of Income since that date. Target Corporation shares in a fixed percentage of the revenue and credit losses incurred. Target Corporation's share of revenue and credit losses is recorded in Non-interest expenses on the Interim Consolidated Statement of Income and related receivables from, or payables to Target Corporation are recorded in Other assets or Other liabilities, respectively, on the Interim Consolidated Balance Sheet.

Acquisition of Epoch
On March 27, 2013, the Bank acquired 100% of the outstanding equity of Epoch Holding Corporation including its wholly-owned subsidiary Epoch Investment Partners, Inc. (Epoch) for cash consideration of $674 million. Epoch Holding Corporation shareholders received US$28 in cash per share.

The acquisition was accounted for as a business combination under the purchase method. The results of the acquisition from the acquisition date to April 30, 2013, have been consolidated with the Bank's results and are reported in the Wealth and Insurance segment. As at March 27, 2013, the acquisition contributed $36 million of tangible assets, and $12 million of liabilities. The excess of consideration over the fair value of the acquired net assets of $650 million has been allocated to customer relationship intangibles of $149 million and goodwill of $501 million.

Acquisition of HSBC's Consumer Private Label Credit Card Portfolio
The Bank entered into an agreement with HSBC Retail Services Limited, an indirect wholly-owned subsidiary of HSBC Holdings plc, to acquire its consumer private label credit card portfolio, which totalled approximately $495 million at February 28, 2013. The acquisition, subject to regulatory approval, is expected to be completed in the second half of fiscal 2013.

HOW OUR BUSINESSES PERFORMED

For management reporting purposes, the Bank's operations and activities are organized around four key business segments operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, Wealth and Insurance, U.S. Personal and Commercial Banking, and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment. Effective December 1, 2011, results of the acquisition of the credit card portfolio of MBNA Canada (MBNA) are reported primarily in the Canadian Personal and Commercial Banking and Wealth and Insurance segments. Integration charges and direct transaction costs relating to the acquisition of MBNA are reported in Canadian Personal and Commercial Banking. The results of TD Auto Finance Canada are reported in Canadian Personal and Commercial Banking. The results of TD Auto Finance U.S. are reported in U.S. Personal and Commercial Banking. Integration charges, direct transaction costs, and changes in fair value of contingent consideration related to the Chrysler Financial acquisition were reported in the Corporate segment.

Effective March 13, 2013, results of the acquisition of Target's U.S. credit card portfolio (Target) are reported in U.S. Personal and Commercial Banking. Effective March 27, 2013, the results of Epoch are reported in Wealth and Insurance.

Results of each business segment reflect revenue, expenses, assets, and liabilities generated by the businesses in that segment. The Bank measures and evaluates the performance of each segment based on adjusted results where applicable, and for those segments the Bank notes that the measure is adjusted. Net income for the operating business segments is presented before any items of note not attributed to the operating segments. For further details, see the "How the Bank Reports" section, the "Business Focus" section in the MD&A of the Bank's 2012 Annual Report, and Note 28 to the Bank's Consolidated Financial Statements for the year ended October 31, 2012. For information concerning the Bank's measures of economic profit and adjusted return on common equity, which are non-GAAP financial measures, see the "How We Performed" section of this document.

Net interest income within Wholesale Banking is calculated on a taxable equivalent basis (TEB), which means that the value of non-taxable or tax-exempt income, including dividends, is adjusted to its equivalent before-tax value. Using TEB allows the Bank to measure income from all securities and loans consistently and makes for a more meaningful comparison of net interest income with similar institutions. The TEB increase to net interest income and provision for income taxes reflected in Wholesale Banking results is reversed in the Corporate segment. The TEB adjustment for the quarter was $77 million, compared with $74 million in the second quarter last year, and $75 million in the prior quarter.

Quarterly comparison - Q2 2013 vs. Q2 2012
Canadian Personal and Commercial Banking net income for the quarter on a reported basis was $847 million, an increase of $39 million, or 5%, compared with the second quarter last year. Adjusted net income for the quarter was $877 million, an increase of $39 million, or 5%, compared with the second quarter last year. The increase in adjusted earnings was primarily driven by loan and deposit volume growth, favourable credit performance, and effective cost management, partially offset by an elevated MBNA contribution in the second quarter last year from better credit performance on acquired loans and one less calendar day. The reported annualized return on common equity for the quarter was 44.6%, while the adjusted annualized return on common equity was 46.3%, compared with 42.0% and 43.4% respectively, in the second quarter last year.

Canadian Personal and Commercial Banking revenue is derived from personal and business banking, auto lending and credit cards. Reported revenue for the quarter was $2,665 million, an increase of $62 million, or 2%, compared with the second quarter last year. Adjusted revenue for the quarter was $2,665 million, an increase of $40 million, or 2% compared with the second quarter last year. Net interest income growth was driven by portfolio volume growth, partially offset by an elevated MBNA contribution in the second quarter last year from better credit performance on acquired loans and the impact of one less calendar day. The personal banking business generated solid lending volume growth of 3% reflecting a slowing housing market and continued consumer deleveraging. Compared with the second quarter last year, average real estate secured lending volume increased $9 billion, or 4%. Auto lending average volume increased $0.3 billion, or 2%, while all other personal lending average volumes decreased $1 billion or 3% largely driven by managed declines in the MBNA portfolio. Business loans and acceptances average volume increased $5 billion, or 14%. Average personal deposit volumes increased $7 billion, or 5%, while average business deposit volumes increased $5 billion, or 8%. Margin on average earning assets was 2.80%, a 4 basis point (bps) decrease on a reported basis, or a decrease of 7 bps on an adjusted basis primarily due to the impact on deposit margins from the low rate environment and the MBNA credit mark release in the second quarter last year. Non-interest income was up $19 million, primarily due to volume-related fee growth.

PCL for the quarter was $245 million, a decrease of $29 million, or 11%, compared with the second quarter last year. Personal banking PCL was $212 million, a decrease of $52 million due primarily to better credit performance, enhanced collection strategies, and low bankruptcies. Business banking PCL was $33 million, an increase of $23 million, compared with the second quarter last year primarily due to a provision against a single client in the current quarter. Annualized PCL as a percentage of credit volume was 0.33%, a decrease of 5 bps, compared with the second quarter last year. Net impaired loans were $909 million, a decrease of $34 million, or 4%, compared with the second quarter last year. Net impaired loans as a percentage of total loans were 0.30%, compared with 0.32% as at April 30, 2012.

Reported non-interest expenses for the quarter were $1,267 million, an increase of $41 million, or 3%, compared with the second quarter last year. Adjusted non-interest expenses for the quarter were $1,226 million, an increase of $18 million, or 1%, compared with the second quarter last year as volume growth, merit increases, and investment in initiatives to grow the business were largely offset by initiatives to increase productivity.

The average full-time equivalent (FTE) staffing levels decreased by 2,969, or 10%, compared with the second quarter last year, primarily due to a transfer of FTEs to the Corporate segment. Operating FTE declined by 1% due to volume-related reductions and productivity initiatives. The reported efficiency ratio for the quarter was 47.5%, while the adjusted efficiency ratio was 46.0%, compared with 47.1% and 46.0% respectively, in the second quarter last year.

Quarterly comparison - Q2 2013 vs. Q1 2013
Canadian Personal and Commercial Banking net income for the quarter on a reported basis decreased $73 million, or 8%, compared with the prior quarter. Adjusted net income for the quarter decreased $67 million, or 7%, compared with the prior quarter. The decrease in earnings was primarily due to three fewer calendar days and higher non-interest expenses. The reported annualized return on common equity for the quarter was 44.6%, while the adjusted annualized return on common equity was 46.3%, compared with 47.5% and 48.7% respectively, in the prior quarter.

Revenue for the quarter decreased $58 million, or 2%, compared with the prior quarter, due primarily to three fewer calendar days. Compared with the prior quarter, average real estate secured lending volume increased $0.2 billion, or 0.1%. All other personal lending average volumes decreased $0.3 billion, or 1%. Business loans and acceptances average volumes increased $2 billion, or 4%. Average personal deposit volumes decreased $0.5 billion, or 0.3%, while average business deposit volumes decreased $0.3 billion, or 0.4%. Margin on average earning assets was stable at 2.80%. Non-interest income decreased $10 million, primarily due to fewer calendar days.

PCL for the quarter was $245 million, in line with the prior quarter. Personal banking PCL for the quarter decreased $24 million compared with the prior quarter due primarily to better credit performance, enhanced collection strategies, and low bankruptcies. Business banking PCL increased $25 million due to a provision against a single client in the current quarter. Net impaired loans decreased $5 million, or 1%, compared with the prior quarter. Net impaired loans as a percentage of total loans were 0.30%, in line with the prior quarter.

Reported non-interest expenses for the quarter increased $41 million, or 3%, compared with the prior quarter. Adjusted non-interest expenses for the quarter increased $32 million, or 3%, compared with the prior quarter largely due to timing of business investments and higher seasonal marketing costs.

The average FTE staffing levels decreased by 337, compared with the prior quarter primarily due to volume-related FTE productivity gains. The reported efficiency ratio for the quarter worsened to 47.5%, compared with 45.0% in the prior quarter, while the adjusted efficiency ratio worsened to 46.0%, compared with 43.8% in the prior quarter.

Year-to-date comparison - Q2 2013 vs. Q2 2012
Canadian Personal and Commercial Banking reported net income for the six months ended April 30, 2013 was $1,767 million, an increase of $133 million, or 8%, compared with the same period last year. Adjusted net income was a record $1,821 million, an increase of $133 million, or 8%, compared with the same period last year. The increase in adjusted earnings was primarily driven by solid loan and deposit volume growth, favourable credit performance, and effective cost management. These increases were partially offset by an elevated MBNA contribution last year from better credit performance on acquired loans and one less calendar day. The reported annualized return on common equity was 46.1%, while the adjusted annualized return on common equity was 47.5%, compared with 42.8% and 44.2% respectively, in the same period last year.

Reported revenue was $5,388 million, an increase of $215 million, or 4%, compared with the same period last year. Adjusted revenue was $5,388 million, an increase of $179 million, or 3% compared with the same period last year. Net interest income growth was driven by portfolio volume growth and an additional month of MBNA, partially offset by an elevated MBNA contribution last year from better credit performance on acquired loans and the impact of one less calendar day. The personal lending business generated solid lending volume growth of 4% reflecting a slowing housing market and continued consumer deleveraging. Compared with the same period last year, average real estate secured lending volume increased $10 billion, or 5%. Auto lending average volume increased $0.3 billion, or 2%, while all other personal lending average volumes remained relatively stable. Business loans and acceptances average volume increased $5 billion, or 14%. Average personal deposit volumes increased $9 billion, or 6%, while average business deposit volumes increased $5 billion, or 8%. Margin on average earning assets was 2.79%, a 1 bp decrease on a reported basis or a 4bps decrease on an adjusted basis primarily due to the impact on deposit margins from the low rate environment. Non-interest income was up $44 million, primarily due to volume-related fee growth and the inclusion of an additional month of MBNA.

PCL was $489 million, a decrease of $68 million, or 12% compared with the same period last year. Personal banking PCL was $448 million, a decrease of $78 million due primarily to better credit performance, enhanced collection strategies, and low bankruptcies. Business banking PCL was $41 million, an increase of $10 million, compared with the same period last year. Annualized PCL as a percentage of credit volume was 0.33%, a decrease of 6 bps, compared with the same period last year.

Reported non-interest expenses were $2,493 million, an increase of $107 million, or 4%, compared with the same period last year. Adjusted non-interest expenses were $2,420 million, an increase of $70 million, or 3%, compared with the same period last year. Excluding MBNA, expenses increased $29 million, or 1% as volume growth, merit increases, and investment in initiatives to grow the business were largely offset by initiatives to increase productivity and one less calendar day.

The average FTE staffing levels decreased by 2,635, or 9%, compared with the same period last year, primarily due to a transfer of FTEs to the Corporate segment partially offset by an additional month of MBNA. Operating FTE declined by 1% due to volume-related reductions and productivity gains. The reported efficiency ratio was 46.3%, while the adjusted efficiency ratio was 44.9%, compared with 46.1% and 45.1% respectively, in the same period last year.

Business Outlook
We will continue to build on our industry-leading customer service and convenience offering. For the first half of the year, Canadian Personal and Commercial Banking has delivered good performance in a challenging operating environment. We expect second half 2013 earnings growth to be similar to the first half. We forecast moderate revenue growth reflecting a low interest rate environment and slowing demand for retail loans. However, we will target to generate positive operating leverage by maintaining our focus on increasing productivity and tightly managing expense growth. Credit loss rates are expected to remain fairly stable.

Quarterly comparison - Q2 2013 vs. Q2 2012
Wealth and Insurance net income for the quarter was $364 million, a decrease of $1 million, compared with the second quarter last year. Higher earnings from Wealth and TD Ameritrade were offset by lower Insurance earnings. Wealth and Insurance net income excluding TD Ameritrade was $311 million, a decrease of $7 million, or 2%, compared with the second quarter last year. The Bank's reported investment in TD Ameritrade generated net income for the quarter of $53 million, an increase of $6 million, or 13%, compared with the second quarter last year, mainly driven by higher TD Ameritrade earnings. For its second quarter ended March 31, 2013, TD Ameritrade reported net income was US$144 million, an increase of US$7 million, or 5%, compared with the second quarter last year, primarily driven by increased fee-based revenue and lower expenses, partially offset by tax-related items. The annualized return on common equity for the quarter was 25.2%, compared with 22.5% in the second quarter last year.

Wealth and Insurance revenue is derived from direct investing, advice-based businesses, asset management services, life and health insurance, and property and casualty insurance. Revenue for the quarter was $1,091 million, an increase of $43 million, or 4%, compared to the second quarter last year. In the Wealth business, revenue increased mainly from higher fee-based revenue from asset growth and the addition of one month of Epoch. In the Insurance business, revenue decreased due to the sale of the U.S. Insurance business and higher current year claims from a more severe winter, partially offset by premium volume growth.

Non-interest expenses for the quarter were $710 million, an increase of $57 million, or 9%, compared with the second quarter last year, primarily due to the addition of Epoch including certain integration costs, higher variable expenses in the Wealth business driven by increased revenue, and increased costs to support business growth in Wealth and Insurance, partially offset by decreased expenses resulting from the sale of the U.S. Insurance business.

Assets under administration of $275 billion as at April 30, 2013, increased $25 billion, or 10%, compared with April 30, 2012. Assets under management of $247 billion as at April 30, 2013 increased $45 billion, or 22%, compared with April 30, 2012. These increases were mainly driven by the addition of $28 billion of Epoch assets under management, net new client assets, and an increase in the market value of assets.

Gross originated insurance premiums were $923 million, an increase of $46 million, or 5%, compared with the second quarter last year. The increase was primarily due to organic business growth.

The average FTE staffing levels decreased by 252, or 2%, compared to the second quarter last year, primarily due to the sale of the U.S. Insurance business, partially offset by an increase in staffing from business growth. The efficiency ratio for the current quarter worsened to 65.1%, compared with 62.3% in the second quarter last year.

Quarterly comparison - Q2 2013 vs. Q1 2013
Wealth and Insurance net income for the quarter decreased $13 million, or 3%, compared with the prior quarter. Earnings declined in both Wealth and Insurance, partially offset by higher earnings from TD Ameritrade. Wealth and Insurance net income excluding TD Ameritrade decreased $19 million, or 6%, compared with the prior quarter. The Bank's reported investment in TD Ameritrade reflected an increase in net income of $6 million, or 13%, compared with the prior quarter, mainly driven by lower capital allocation charges. For its second quarter ended March 31, 2013, TD Ameritrade reported net income decreased US$3 million, or 2%, compared with the prior quarter driven by an increase in expenses, largely offset by higher transaction-based revenue from increased trading volumes. The annualized return on common equity for the quarter was 25.2%, compared with 25.3% in the prior quarter.

Revenue for the quarter increased $14 million, or 1%, compared with the prior quarter. In the Wealth business, revenue increased mainly due to higher fee-based revenue from asset growth, the addition of one month of Epoch, and higher trading revenue mainly from increased trading volume, partially offset by lower net interest income primarily due to the impact of fewer calendar days. In the Insurance business, revenue decreased due to unfavourable prior years' claims development in the Ontario auto insurance market and the impact of fewer calendar days.

Non-interest expenses for the quarter increased $40 million, or 6%, compared to the prior quarter, primarily due to the addition of Epoch including integration costs and higher variable expenses in the Wealth business driven by increased revenue.

Assets under administration of $275 billion as at April 30, 2013 increased by $5 billion, or 2%, compared with January 31, 2013. Assets under management of $247 billion as at April 30, 2013 increased $36 billion, or 17%, compared with January 31, 2013. The increases were driven by the addition of Epoch assets under management, an increase in the market value of assets and net new client assets.

Gross originated insurance premiums increased $116 million, or 14%, compared with the prior quarter due largely to seasonality.

The average FTE staffing levels for the current quarter increased by 168 compared with the prior quarter primarily to support business growth. The efficiency ratio for the current quarter worsened to 65.1%, compared with 62.2% in the prior quarter.

Year-to-date comparison - Q2 2013 vs. Q2 2012
Wealth and Insurance net income for the six months ended April 30, 2013 was $741 million, an increase of $27 million, or 4%, compared with the same period last year, reflecting higher earnings in both Wealth and Insurance, offset by lower earnings in TD Ameritrade. Wealth and Insurance net income excluding TD Ameritrade was $641 million, an increase of $29 million, or 5%, compared with the same period last year. The Bank's reported investment in TD Ameritrade generated net income of $100 million, a decrease of $2 million, or 2%, compared with the same period last year, mainly driven by taxes on higher dividend distribution, and a stronger Canadian dollar. For its six months ended March 31, 2013, TD Ameritrade reported net income was US$291 million, an increase of US$2 million compared with the same period last year, primarily driven by lower expenses, largely offset by tax related items. Wealth and Insurance's annualized return on common equity was 25.2% compared with 21.9% in the same period last year.

Revenue was $2,168 million, an increase of $121 million, or 6%, compared to the same period last year. In the Wealth business, revenue increased mainly from higher fee-based revenue from asset growth and the addition of one month of Epoch. In the Insurance business, revenue increased due to lower claims from weather-related events and premium volume growth, partially offset by decreased revenue due to the sale of the U.S. Insurance business.

Non-interest expenses were $1,380 million, an increase of $88 million, or 7%, compared with the same period last year. The increase was primarily due to higher variable expenses in the Wealth business driven by increased revenue, the addition of Epoch including integration costs, and increased costs to support business growth in Wealth and Insurance, partially offset by decreased expenses resulting from the sale of the U.S. Insurance business.

Gross originated insurance premiums were $1,730 million, an increase of $90 million, or 5%, compared with the same period last year. The increase was primarily due to organic business growth.

The average FTE staffing levels decreased by 284, or 2%, compared with the same period last year, primarily due to the sale of the U.S. Insurance business, partially offset by an increase in staffing from business growth. The efficiency ratio was 63.7%, or relatively flat, compared with 63.1% in the same period last year.

Business Outlook
We will continue to build upon our market leadership positions in Wealth and Insurance and good underlying growth fundamentals.

In our Wealth business, despite continuously challenging trading and interest rate environments, we expect continuing positive momentum from growth in new client assets in the advice-based and asset management businesses, which is further strengthened by the addition of Epoch. We also continue to focus on customer experience and prudent expense management.

In our Insurance business, we continue to see good premium growth, although the business faces increased uncertainty, including the impact of past and future Ontario auto reforms and lower demand for credit-related insurance products.

Quarterly comparison - Q2 2013 vs. Q2 2012
U.S. Personal and Commercial Banking reported and adjusted net income, in Canadian dollar terms, for the quarter was $398 million, an increase of $42 million, or 12%, compared with the second quarter last year. In U.S. dollar terms, reported and adjusted net income for the quarter was US$392 million, an increase of US$34 million, or 9%, compared with the second quarter last year. Results include activity related to our ongoing arrangement with Target Corporation subsequent to the acquisition of approximately US$5.6 billion of credit card receivables on March 13, 2013. Revenue and expenses related to Target are reported on a gross basis on the income statement and non-interest expenses include TD's expenses related to the business, and amounts due to Target under the credit card program agreement. The increase in earnings was primarily due to strong loan and deposit volume growth, an improvement in credit quality and a lower effective tax rate, partially offset by lower margins. The annualized return on common equity for the quarter was 8.6% compared with 8.2% in the second quarter last year.

U.S. Personal and Commercial Banking revenue is derived from personal banking, business banking, investments, auto lending, and credit cards. In U.S. dollar terms, revenue for the quarter was US$1,707 million, an increase of US$110 million, or 7%, compared with the second quarter last year primarily due to the first-time inclusion of revenue from the Target asset acquisition, strong organic loan and deposit growth and good fee growth, offset by lower product margins and acquired loan accretion. Excluding Target, average loans were up 14%, compared with the second quarter last year, with a 22% increase in personal loans and a 9% increase in business loans. In the current quarter, US$6 billion in Target credit cards outstanding were added. Average deposits increased US$17 billion, or 10%, compared with the second quarter last year driven by 10% growth in personal deposit volume, 7% growth in business deposit volume and 15% growth in TD Ameritrade deposit volume. Margin on average earning assets was 3.67%, a 7 bps decrease compared with the second quarter last year. Excluding Target, the margin decreased 48 bps due to the low interest rate environment and the impact of security sales.

PCL for the quarter was US$193 million, flat with the second quarter last year. Personal banking PCL was US$146 million, an increase of US$77 million, or 112%, compared with the second quarter last year primarily due to Target-related PCL and increased provisions in auto loans. Business banking PCL was US$44 million, a decrease of US$77 million, or 64%, compared with the second quarter last year reflecting improved credit quality of commercial loans. Annualized PCL as a percentage of credit volume for loans excluding debt securities classified as loans was 0.75%, a decrease of 18 bps, compared with the second quarter last year reflecting improving credit quality trends and growth in the portfolio. Net impaired loans, excluding acquired credit-impaired loans and debt securities classified as loans, as a percentage of total loans were 1.2%, compared with 1.3% as at April 30, 2012. Net impaired debt securities classified as loans were US$1,252 million, a decrease of US$92 million, or 7%, compared with the second quarter last year.

Reported and adjusted non-interest expenses for the quarter were US$1,052 million, an increase of US$93 million, or 10%, compared with the second quarter last year primarily due to increased expenses related to the Target asset acquisition and investments in growth initiatives, offset by productivity gains.

The average FTE staffing levels decreased by 65, as planned declines in the store network and TD Auto Finance U.S. were partially offset by increases related to investments in growth initiatives. The efficiency ratio for the quarter worsened to 61.7% on a reported and adjusted basis, compared with 60.1% in the second quarter last year.

Quarterly comparison - Q2 2013 vs. Q1 2013
U.S. Personal and Commercial Banking reported net income, in Canadian dollar terms, for the quarter increased $83 million, or 26%, compared with the prior quarter. Adjusted net income for the quarter increased $13 million, or 3%, compared with the prior quarter. In U.S. dollar terms, reported net income for the quarter increased US$76 million, or 24%, and adjusted net income for the quarter increased US$5 million, or 1%, compared with the prior quarter. The reported and adjusted annualized return on common equity for the quarter was 8.6%, compared with 7.0% on a reported basis and 8.6% on an adjusted basis in the prior quarter.
In U.S. dollar terms, revenue for the quarter increased US$168 million, or 11%, compared with the prior quarter primarily due to credit card revenue from the Target asset acquisition. Excluding Target, average loans were up 2%, compared with the prior quarter, with a 3% increase in personal loans and a 1% increase in business loans. In the current quarter, US$6 billion in Target credit cards outstanding were added. Average deposits increased US$4 billion, or 3%, compared with the prior quarter. Margin on average earning assets increased by 39 bps to 3.67%, compared with the prior quarter. Excluding Target, margins were relatively flat compared to the prior quarter as additional margin compression from personal and commercial products was offset by improved net interest income on both acquired credit-impaired loans and debt securities classified as loans.

Reported and adjusted PCL for the quarter increased US$16 million, or 9%, compared with the prior quarter. Personal banking PCL increased US$34 million, or 30%, from the prior quarter primarily due to provisions for credit card loans acquired from Target. Business banking PCL decreased US$18 million, or 29%, compared with prior quarter reflecting improved credit quality of commercial loans. Annualized adjusted PCL as a percentage of credit volume for loans excluding debt securities classified as loans was 0.75%, an increase of 1 bp, compared with the prior quarter. Net impaired loans, excluding acquired credit-impaired and debt securities classified as loans, as a percentage of total loans were 1.2%, flat compared with January 31, 2013. Net impaired debt securities classified as loans were US$1,252 million, a decrease of US$48 million, or 4%, compared with the prior quarter.

Reported non-interest expenses for the quarter increased US$51 million, or 5%, compared with the prior quarter. Adjusted non-interest expenses increased US$149 million, or 17%, compared with the prior quarter primarily due to increased expenses related to the Target asset acquisition and timing of planned initiatives, partially offset by productivity gains.

The average FTE staffing levels decreased by 534, or 2%, compared with the prior quarter due primarily to planned declines in the store network and TD Auto Finance U.S. The reported efficiency ratio for the quarter improved to 61.7%, compared with 65.0% in the prior quarter, while the adjusted efficiency ratio worsened to 61.7%, compared with 58.6% in the prior quarter.

Year-to-date comparison - Q2 2013 vs. Q2 2012
U.S. Personal and Commercial Banking net income, in Canadian dollar terms, for the six months ended April 30, 2013 was $713 million on a reported basis, an increase of $185 million, or 35%, and $783 million on an adjusted basis, an increase of $75 million, or 11%, compared with the same period last year. In U.S. dollar terms, reported net income was US$708 million, an increase of US$185 million, or 35%, and adjusted net income was US$779 million, an increase of US$76 million, or 11%. The increase in adjusted earnings was primarily due to strong loan and deposit volume growth and a lower effective tax rate due to higher tax advantaged investments, partially offset by lower margins and higher non-interest expenses. The reported and adjusted annualized return on common equity were 7.8% and 8.6%, respectively, compared with 6.0% and 8.1%, respectively, in the same period last year.

In U.S. dollar terms, revenue was US$3,246 million, an increase of US$184 million, or 6%, compared with the same period last year primarily due to strong organic loan and deposit growth and gains on sales of securities, partially offset by lower net interest margins. Excluding Target, average loans were up 15%, compared with the same period last year, with a 23% increase in personal loans and a 10% increase in business loans. In the current quarter, US$6 billion in Target credit cards outstanding were added. Average deposits increased US$15 billion, or 9%, compared with the same period last year driven by 10% growth in personal deposit volume, 6% growth in business deposit volume and 13% growth in TD Ameritrade deposit volume. Margin on average earning assets decreased by 21 bps to 3.47%, compared with the same period last year. Excluding Target, the margin decreased 40 bps due to continued pressure on loan and deposit margins and the impact of security sales.

Total PCL was US$370 million, an increase of US$22 million, or 6%, compared with the same period last year. Personal banking PCL was US$258 million, an increase of US$99 million, or 63%, from the same period last year due primarily to credit card loans acquired from Target and increased provisions in auto loans. Business banking PCL was US$106 million, a decrease of US$77 million, or 42%, from the same period last year reflecting improved credit quality in commercial loans. Annualized PCL as a percentage of credit volume for loans excluding debt securities classified as loans was 0.72%, a decrease of 9 bps, compared with the same period last year.

Reported non-interest expenses were US$2,053 million, a decrease of US$72 million, or 3%, compared to the same period last year primarily due to lower litigation costs and productivity gains, partially offset by increased expenses related to the Target asset acquisition, new stores and other planned initiatives. Adjusted non-interest expenses were US$1,955 million, an increase of US$126 million, or 7%, compared with the same period last year due primarily to increased expenses related to Target, new stores and other planned initiatives, partially offset by productivity gains.

The average FTE staffing levels increased by 25, reflecting investments in growth initiatives partially offset by planned declines in the store network and TD Auto Finance U.S. The reported efficiency ratio improved to 63.2% compared with 69.4% in the same period last year, while the adjusted efficiency ratio was 60.3%, or relatively flat, compared with 59.8% in the same period last year.

Business Outlook
We will continue to build on our strength of industry-leading convenience banking, providing superior customer service through efficient, local decision-making and evolving the product offering to our customers, which should contribute to continued good growth in loans and deposits. We intend to continue to execute on our strategy which includes the sale of securities, reinvestment into growth of high quality loans and shortening the duration of our balance sheet. The acquisition of Target's U.S. credit card portfolio and the agreement to become Target's exclusive U.S. card issuer, which closed during the second quarter of 2013, is expected to continue to increase net interest margins, PCL, and non-interest expenses during the remainder of fiscal 2013. Excluding Target, we anticipate net interest margins to remain compressed. We expect regulatory and legislative actions to continue to impact the operating environment resulting in higher compliance costs. Despite these increased compliance costs, excluding any costs added by acquisitions, the rate of organic expense growth in U.S. dollar terms is expected to be lower than last year due to productivity improvements. In the second half of 2013, we are on course to match the level of earnings of the first half.

Quarterly comparison - Q2 2013 vs. Q2 2012
Wholesale Banking net income for the quarter was $220 million, an increase of $23 million, or 12%, compared with the second quarter last year. The increase in earnings was primarily due to higher trading-related revenue and lower non-interest expenses, partially offset by higher taxes. The annualized return on common equity for the quarter was 20.9%, compared with 19.5% in the second quarter last year.

Wholesale Banking revenue is derived primarily from capital markets services and corporate lending. The capital markets businesses generate revenue from advisory, underwriting, trading, facilitation, and trade execution services. Revenue for the quarter was $643 million, an increase of $35 million, or 6%, compared with the second quarter last year. The increase in revenue was primarily due to higher fixed income and credit trading on improved client flows and strong loan fees during the quarter. This was partially offset by reduced mergers and acquisitions (M&A) and advisory fees as compared with a strong quarter last year.

PCL for the quarter was $3 million, compared with $6 million in the second quarter last year. PCL in the current quarter primarily consisted of the accrual cost of credit protection partially offset by a modest recovery.

Non-interest expenses for the quarter were $375 million, a decrease of $9 million, or 2%, compared with the second quarter last year due to lower variable compensation commensurate with revenue mix.

Risk-weighted assets were $49 billion as at April 30, 2013, an increase of $1 billion, or 2%, compared with April 30, 2012. The increase was primarily due to the implementation of the Basel III regulatory framework.

Quarterly comparison - Q2 2013 vs. Q1 2013
Wholesale Banking net income for the quarter increased by $61 million, or 38%, compared with the prior quarter. The increase was largely due to higher trading-related revenue and lower non-interest expenses, partially offset by lower security gains in the investment portfolio. The annualized return on common equity for the quarter was 20.9%, compared with 15.0% in the prior quarter.

Revenue for the quarter increased $44 million, or 7%, compared with the prior quarter, primarily due to higher trading revenue in fixed income, currency and credit, benefitting from higher clients flow and tightening credit spreads. The increase was partially offset by reduced trading revenue in equities and commodities impacted by a difficult trading environment and lower security gains in the investment portfolio. Investment banking results were lower due to a decline in industry-wide volumes.

PCL for the quarter was $3 million, compared with a recovery of $5 million in the prior quarter. PCL in the current quarter primarily reflected the accrual cost of credit protection, while PCL in the prior quarter included a recovery of previously recorded provisions.

Non-interest expenses for the quarter decreased by $18 million, or 5%, compared with the prior quarter, due to reduced variable compensation and operating expenses.

Risk-weighted assets as at April 30, 2013 decreased $1 billion, or 2%, compared with January 31, 2013.

Year-to-date comparison - Q2 2013 vs. Q2 2012
Wholesale Banking net income for the six months ended April 30, 2013 was $379 million, a decrease of $12 million, or 3%, compared with the same period last year. The decrease was primarily due to lower revenue, partially offset by lower non-interest expenses. The annualized return on common equity was 17.9%, compared to 19.1% in the same period last year.

Revenue was $1,242 million, a decrease of $49 million, or 4%, compared with the prior year. The decrease was largely attributable to reduced M&A and advisory fees due to a decline in industry-wide volumes, partially offset by improved credit originations and underwriting fees.

PCL was a recovery of $2 million, compared with an $18 million provision in the same period last year. PCL in the current year included recoveries in the corporate lending portfolio, while PCL in the same period last year largely comprised the accrual cost of credit protection and a single merchant banking exposure.

Non-interest expenses were $768 million, a decrease of $22 million, or 3%, largely due to reduced variable compensation commensurate with reduced revenue.

Business Outlook
We are encouraged by the gradual improvement in capital markets and the economy, but a combination of fiscal challenges in Europe and the U.S., increased market pressures, and the impact of regulatory reform will affect trading conditions in the medium term. The instability in the macro-economic environment may impact overall corporate and investor activities; however, we expect that our strong franchise businesses will continue to deliver solid results. As economic conditions stabilize, we expect improvement in advisory and underwriting fees. We continue to stay focused on serving our clients, being a valued counterparty, growing our franchise, managing our risks and reducing expenses in 2013.

Quarterly comparison - Q2 2013 vs. Q2 2012
Corporate segment's reported net loss for the quarter was $106 million, compared with a reported net loss of $33 million in the second quarter last year. Adjusted net loss was $26 million, compared with an adjusted net loss of $20 million in the second quarter last year. The increased loss was due to higher net corporate expenses driven by increased employee benefit and strategic initiative costs, partially offset by favourable Other items. The increased income from Other items was due to positive tax results and the reduction of the allowance for incurred but not identified credit losses relating to the Canadian loan portfolio, partially offset by unfavourable treasury and other hedging activities.

Quarterly comparison - Q2 2013 vs. Q1 2013
Corporate segment's reported net loss for the quarter was $106 million, compared with a reported net income of $19 million in the prior quarter. Adjusted net loss was $26 million, compared with an adjusted net income of $51 million in the prior quarter. The increased loss was due to unfavourable Other items including treasury and other hedging activities, partially offset by lower net corporate expenses.

Year-to-date comparison - Q2 2013 vs. Q2 2012
Corporate segment's reported net loss for the six months ended April 30, 2013 was $87 million, compared with a reported net loss of $96 million in the same period last year. Adjusted net income for the six months ended April 30, 2013 was $25 million, compared with an adjusted net loss of $3 million in the same period last year. The increased income was largely due to the reduction of the allowance for incurred but not identified credit losses relating to the Canadian loan portfolio and positive tax results, partially offset by higher net corporate expenses driven by increased employee benefit and strategic initiative costs.

SHAREHOLDER AND INVESTOR INFORMATION

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General Information
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Access to Quarterly Results Materials
Interested investors, the media and others may view this second quarter earnings news release, results slides, supplementary financial information, and the Report to Shareholders on the TD website at www.td.com/investor/.

Quarterly Earnings Conference Call
TD Bank Group will host an earnings conference call in Toronto, Ontario on May 23, 2013. The call will be webcast live via TD's website at 3 p.m. ET. The call and webcast will feature presentations by TD executives on the Bank's financial results for the second quarter, discussions of related disclosures, and will be followed by a question-and-answer period with analysts. The presentation material referenced during the call will be available on the TD web site at www.td.com/investor/qr_2013.jsp on May 23, 2013, by approximately 12 p.m. ET. A listen-only telephone line will be available at 416-644-3415 or 1-877-974-0445 (toll free).

The webcast and presentations will be archived at www.td.com/investor/qr_2013.jsp. Replay of the teleconference will be available from 6 p.m. ET on May 23, 2013, until June 24, 2013, by calling 416-640-1917 or 1-877-289-8525 (toll free).The passcode is 4615862, followed by the pound key.

About TD Bank Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Group (TD). TD is the sixth largest bank in North America by branches and serves approximately 22 million customers in four key businesses operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Auto Finance Canada; Wealth and Insurance, including TD Wealth, TD Direct Investing, an investment in TD Ameritrade, and TD Insurance; U.S. Personal and Commercial Banking, including TD Bank, America's Most Convenient Bank, and TD Auto Finance U.S.; and Wholesale Banking, including TD Securities. TD also ranks among the world's leading online financial services firms, with approximately 8 million active online and mobile customers. TD had CDN$826 billion in assets on April 30, 2013.The Toronto-Dominion Bank trades under the symbol "TD" on the Toronto and New York Stock Exchanges.

SOURCE: TD Bank Group