TD Bank Group Reports Second Quarter 2023 Results

Earnings News Release • Three and six months ended April 30, 2023

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

• Reported diluted earnings per share were $1.72, compared with $2.07.
• Adjusted diluted earnings per share were $1.94, compared with $2.02.
• Reported net income was $3,351 million, compared with $3,811 million.
• Adjusted net income was $3,752 million, compared with $3,714 million.

YEAR-TO-DATE FINANCIAL HIGHLIGHTS, six months ended April 30, 2023, compared with the corresponding period last year:

• Reported diluted earnings per share were $2.54, compared with $4.09.
• Adjusted diluted earnings per share were $4.17, compared with $4.09.
• Reported net income was $4,933 million, compared with $7,544 million.
• Adjusted net income was $7,907 million, compared with $7,547 million.

SECOND QUARTER ADJUSTMENTS (ITEMS OF NOTE)

The second quarter reported earnings figures included the following items of note:

• Amortization of acquired intangibles of $79 million ($67 million after-tax or 3 cents per share), compared with $60 million ($54 million after-tax or 3 cents per share) in the second quarter last year.
• Acquisition and integration charges related to the Schwab transaction of $30 million ($26 million after-tax or 1 cent per share), compared with $20 million ($18 million after-tax or 1 cent per share) in the second quarter last year.
• Acquisition and integration-related charges for acquisitions of $227 million ($179 million after-tax or 10 cents per share).
• Mitigation of impact from interest rate volatility to closing capital on First Horizon acquisition, net loss of $134 million ($101 million after-tax or 6 cents per share).
• Foreign exchange loss related to the Stanford litigation settlement of $39 million ($28 million after-tax or 2 cents per share).

TORONTO, May 25, 2023 /CNW/ - TD Bank Group ("TD" or the "Bank") today announced its financial results for the second quarter ended April 30, 2023. Reported earnings were $3.4 billion, down 12% compared with the second quarter last year, and adjusted earnings were $3.8 billion, up 1%.

"TD's retail businesses in both Canada and the United States continued to show strong revenue and earnings growth this quarter, with robust customer originations and loan volumes," said Bharat Masrani, Group President and CEO, TD Bank Group. "Investments in differentiated wealth and insurance products and the close of the Cowen acquisition expanded our offerings and strengthened the competitive advantages of these businesses."

Canadian Personal and Commercial Banking delivered double digit revenue growth
Canadian Personal and Commercial Banking net income was $1,625 million, an increase of 4% compared with the second quarter last year. Revenue was $4,404 million, an increase of 11% reflecting higher margins and volume growth. The segment delivered a seventh consecutive quarter of positive operating leverage.

Canadian Personal and Commercial Banking continued to deliver growth in the quarter supported by increased customer activity which included record second quarter New to Canada account openings, continued momentum in mortgage originations, and strong credit card loan growth. TD recently launched an exclusive Canadian bank offer with Uber, adding to TD's list of leading partnerships, including Air Canada, Amazon, Expedia, and Starbucks. TD was also recognized in the 2023 Canada's Best Awards by MoneySense, receiving the most awards of any financial institution, including in the best no-fee, flat rate, and travel credit cards categories.

The U.S. Retail Bank delivered another strong quarter despite a challenging environment
U.S. Retail reported net income of $1,412 million, an increase of 3% (US$1,044 million, a decrease of 3% in U.S. dollars) compared with the second quarter last year. On an adjusted basis, net income was $1,528 million, an increase of 28% (US$1,129 million, an increase of 19% in U.S. dollars). Reported net income included acquisition and integration-related charges for the First Horizon Corporation ("First Horizon") acquisition of $154 million or US$113 million ($116 million or US$85 million after–tax). The Bank's investment in The Charles Schwab Corporation ("Schwab") contributed $250 million in earnings, an increase of 12% (US$185 million, an increase of 5% in U.S. dollars) compared with the second quarter last year.

The U.S. Retail Bank, which excludes the Bank's investment in Schwab, reported net income of $1,162 million, an increase of 2% (US$859 million, a decrease of 5% in U.S. dollars) from the second quarter last year. On an adjusted basis, net income was $1,278 million, an increase of 31% (US$944 million, an increase of 23% in U.S. dollars) from the second quarter last year.

The U.S. Retail Bank continued to deliver strong loan growth of 10% year-over-year, supported by personal loan growth of 12% and business loan growth of 9%. Personal deposits declined 3% year-over-year but remained flat from last quarter. Business deposits declined 6% year-over-year; however, business chequing account growth accelerated this quarter.

TD Bank, America's Most Convenient Bank® (TD AMCB), launched two innovative new proprietary credit cards, TD Flex Pay and TD Clear. It also continued to execute on its retail network expansion and wealth strategy by opening five stores, part of a broader plan to accelerate the execution of its organic growth strategies by opening new stores in South Florida, Atlanta and the Carolinas. TD AMCB was again recognized as one of America's Best Employers for Diversity by Forbes in 2023.

As announced on May 4, 2023, the Bank and First Horizon entered into a mutual agreement to terminate the previously announced merger, and all acquisition-related activities are being wound down.

Wealth Management and Insurance delivered solid performance amid challenging market conditions
Wealth Management and Insurance net income was $563 million, a decrease of 16% compared with the second quarter of last year reflecting lower earnings in the wealth management business. This quarter's revenue growth of 2% underscored the strength of the segment's diversified business model as higher insurance revenue and net interest income largely offset the impact of trading normalization and market volatility.

This quarter, Wealth Management and Insurance continued to focus on customer-centric innovation with the launch of Small Business Insurance, delivering a differentiated insurance experience for small business owners from Canada's #1 direct insurer. TD Direct Investing continued to maintain its #1 position across all categories, including Gross New Accounts, Revenue, Trades and Assets Under Administration, with share of new accounts and trades both increasing year–over–year.¹

Wholesale Banking closed its acquisition of Cowen Inc.
Wholesale Banking reported net income for the quarter was $150 million, a decrease of $209 million, or 58%, compared with the second quarter last year. This reflects higher non-interest expenses, which include acquisition and integration costs, partially offset by higher revenues. On an adjusted basis, net income was $213 million, a decrease of $146 million, or 41%. Revenue was up 13%, reflecting the benefit of TD Cowen as well as growth in transaction banking and lending, partially offset by lower trading-related revenue reflecting a weaker market environment.

This quarter, TD Securities was recognized as Lead Manager of the Year, Social Bonds – Sovereign by Environmental Finance's 2023 Bond Awards, demonstrating its continued leadership in Environmental, Social, and Governance. The Wholesale Bank continued to invest in its long-term U.S. growth strategy and further extended its global reach and capabilities with the closing of the Cowen Inc. acquisition on March 1, welcoming 1,700 new colleagues to TD Securities.

Capital
TD's Common Equity Tier 1 Capital ratio was 15.3%.

Conclusion
For fiscal 2023, in light of the mutual termination of the First Horizon merger agreement, and the deterioration in the macroeconomic environment, the Bank does not expect to meet its medium-term adjusted EPS growth target range of 7-10%.

"As we enter the second half of 2023, TD's businesses are strong, and our customer and client relationships continue to expand. We are successfully operating in an unpredictable operating environment, supported by robust capital and liquidity and the best bankers in the industry," added Masrani. "I would like to thank our colleagues for their tremendous efforts, and for delivering the legendary experiences that are the hallmark of TD."

SIGNIFICANT AND SUBSEQUENT EVENTS

Acquisition of Cowen Inc.
On March 1, 2023, the Bank completed the acquisition of Cowen Inc. ("Cowen"). The acquisition advances the Wholesale Banking segment's long-term growth strategy in the U.S. and adds complementary products and services to the Bank's existing businesses. The results of the acquired business have been consolidated by the Bank from the closing date and primarily reported in the Wholesale Banking segment. Consideration included $1,500 million (US$1,100 million) in cash for 100% of Cowen's common shares outstanding, $253 million (US$186 million) for the settlement of Cowen's Series A Preferred Stock, and $205 million (US$151 million) related to the replacement of share-based payment awards.

The acquisition was accounted for as a business combination under the purchase method. As at March 1, 2023, the acquisition contributed $10,848 million (US$7,970 million) of assets and $9,900 million (US$7,275 million) of liabilities. The excess of accounting consideration over the fair value of the tangible net assets acquired was allocated to other intangibles assets of $312 million (US$229 million) net of taxes, and goodwill of $698 million (US$513 million). The purchase price allocation may be adjusted during the measurement period, which shall not exceed one year from the acquisition date, to reflect new information obtained about facts and circumstances that existed at the acquisition date.

Termination of Merger Agreement with First Horizon Corporation
On May 4, 2023, the Bank and First Horizon Corporation ("First Horizon") announced their mutual decision to terminate the previously announced merger agreement for the Bank to acquire First Horizon. Under the terms of the termination agreement, the Bank made a US$225 million cash payment to First Horizon on May 5, 2023. The termination payment will be reported within the Corporate segment financial results for the third quarter ending July 31, 2023.

In connection with the transaction, the Bank had invested US$494 million in non-voting First Horizon preferred stock. During the current quarter, the Bank recognized a valuation adjustment loss of $199 million on this investment based on First Horizon's common share price at the end of the quarter, recorded in Other Comprehensive Income. In accordance with the preferred shares purchase agreement and the terms of the preferred stock, subject to certain conditions, the preferred stock will convert into approximately 19.7 million common shares of First Horizon in the third quarter.

Prior to the announcement on May 4, 2023 to terminate the merger agreement, the Bank had implemented a strategy to mitigate the impact of interest rate volatility to capital on closing of the acquisition.

The Bank determined that the fair value of First Horizon's fixed rate financial assets and liabilities and certain intangible assets would have been sensitive to interest rate changes. The fair value of net assets would have determined the amount of goodwill to be recognized on closing of the acquisition. Increases in goodwill and intangibles would have negatively impacted capital ratios because they are deducted from capital under OSFI Basel III rules. In order to mitigate this volatility to closing capital, the Bank de-designated certain interest rate swaps hedging fixed income investments in fair value hedge accounting relationships.

As a result of the de-designation, mark-to-market gains (losses) on these swaps were recognized in earnings, without any corresponding offset from the previously hedged investments. Such gains (losses) would have mitigated the capital impact from changes in the amount of goodwill recognized on closing of the acquisition. The de-designation also triggered the amortization of the investments' basis adjustment to net interest income over the remaining expected life of the investments.

For the three months and six months ended April 30, 2023, the Bank reported ($263) million and ($1,261) million, respectively, in non-interest income related to the mark-to-market on the swaps, and $129 million and $251 million, respectively, in net interest income related to the basis adjustment amortization. In addition, for the three months and six months ended April 30, 2023, the Bank reported $311 million and $562 million, respectively, in non-interest income related to the net interest earned on the swaps.

Following the announcement on May 4, 2023 to terminate the merger agreement, the Bank discontinued this strategy and reinstated hedge accounting on the portfolio of fixed income investments.

The Bank had also implemented a strategy to mitigate FX risk on the expected USD cash consideration. Following the announcement on May 4, 2023 to terminate the merger agreement, the Bank discontinued this strategy. Given the appreciation of the U.S. dollar during the life of the strategy, the Bank was in a net gain position on the date of hedge termination and cumulative net gains were recognized in Accumulated Other Comprehensive Income.

Implementation of the Canada Recovery Dividend and Change in Corporate Tax Rate
On December 15, 2022, Bill C-32, Fall Economic Statement Implementation Act, 2022, received Royal Assent. This bill enacted the Canada Recovery Dividend (CRD) and increased the Canadian federal tax rate for bank and life insurer groups by 1.5%.

The implementation of the CRD resulted in a provision for income taxes of $553 million and a charge to other comprehensive income of $239 million, recognized in the first quarter of 2023.

The increase in the Canadian federal tax rate of 1.5%, prorated for the first taxation year that ends after April 7, 2022, resulted in a provision for income taxes of $82 million and a tax benefit of $75 million in other comprehensive income related to fiscal 2022, recognized in the first quarter of 2023. The Bank also remeasured certain Canadian deferred tax assets and liabilities for the increase in tax rate, which resulted in an increase in net deferred tax assets of $50 million, which is recorded in provision for income taxes.

Stanford Litigation Settlement
In the US Rotstain v. Trustmark National Bank, et al. action, on February 24, 2023, the Bank reached a settlement in principle (the "settlement" or "agreement") relating to litigation involving the Stanford Financial Group (the "Stanford litigation"). Once the settlement is approved by the Court, the Bank will pay US$1.205 billion to the court-appointed receiver for the Stanford Receivership Estate. Under the terms of the agreement, TD has settled with the receiver, the Official Stanford Investors Committee, and other plaintiffs in the litigation and these parties have agreed to release and dismiss all current or future claims arising from or related to the Stanford matter. As a result of this agreement, the Bank recorded a provision of approximately $1.6 billion pre-tax ($1.2 billion after-tax) in the first quarter of 2023. The Bank recognized a foreign exchange loss of $39 million ($28 million after-tax) in the second quarter of 2023, reflecting the impact of the difference between the foreign exchange rate used for recording the provision (effective January 31, 2023) and the foreign exchange rate at the time the settlement was reached.

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.

Non-GAAP and Other Financial Measures
In addition to reported results, the Bank also presents certain financial measures, including non-GAAP financial measures that are historical, non-GAAP ratios, supplementary financial measures and capital management measures, to assess its results. Non-GAAP financial measures, such as "adjusted" results, are utilized to assess the Bank's businesses and to measure the Bank's overall performance. To arrive at adjusted results, the Bank adjusts for "items of note" from reported results. Items of note are items which management does not believe are indicative of underlying business performance and are disclosed in Table 3. Non-GAAP ratios include a non-GAAP financial measure as one or more of its components. Examples of non-GAAP ratios include adjusted basic and diluted earnings per share (EPS), adjusted dividend payout ratio, adjusted efficiency ratio, and adjusted effective income tax rate. The Bank believes that non-GAAP financial measures and non-GAAP ratios provide the reader with a better understanding of how management views the Bank's performance. Non-GAAP financial measures and non-GAAP ratios used in this document are not defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers. Supplementary financial measures depict the Bank's financial performance and position, and capital management measures depict the Bank's capital position, and both are explained in this document where they first appear.

U.S. Strategic Cards
The Bank's U.S. strategic cards portfolio is comprised of agreements with certain U.S. retailers pursuant to which TD is the U.S. issuer of private label and co-branded consumer credit cards to their U.S. customers. Under the terms of the individual agreements, the Bank and the retailers share in the profits generated by the relevant portfolios after credit losses. Under IFRS, TD is required to present the gross amount of revenue and provisions for credit losses (PCL) related to these portfolios in the Bank's Interim Consolidated Statement of Income. At the segment level, the retailer program partners' share of revenues and credit losses is presented in the Corporate segment, with an offsetting amount (representing the partners' net share) recorded in Non-interest expenses, resulting in no impact to Corporate's reported Net income (loss). The Net income (loss) included in the U.S. Retail segment includes only the portion of revenue and credit losses attributable to TD under the agreements.

Investment in The Charles Schwab Corporation
On October 6, 2020, the Bank acquired an approximately 13.5% stake in The Charles Schwab Corporation ("Schwab") following the completion of Schwab's acquisition of TD Ameritrade Holding Corporation ("TD Ameritrade") of which the Bank was a major shareholder (the "Schwab transaction"). On August 1, 2022, the Bank sold 28.4 million non-voting common shares of Schwab, which reduced the Bank's ownership interest in Schwab to approximately 12.0%. The Bank accounts for its investment in Schwab using the equity method. The U.S. Retail segment reflects the Bank's share of net income from its investment in Schwab. The Corporate segment net income (loss) includes amounts for amortization of acquired intangibles and the acquisition and integration charges related to the Schwab transaction. The Bank's share of Schwab's earnings available to common shareholders is reported with a one-month lag. For further details, refer to Note 7 of the Bank's second quarter 2023 Interim Consolidated Financial Statements.

On November 25, 2019, the Bank and Schwab signed an insured deposit account agreement ("2019 Schwab IDA Agreement"), with an initial expiration date of July 1, 2031. Pursuant to the 2019 Schwab IDA Agreement, the Bank made sweep deposit accounts available to clients of Schwab. Starting July 1, 2021, Schwab had the option to reduce the deposits by up to US$10 billion per year (subject to certain limitations and adjustments), with a floor of US$50 billion. In addition, Schwab requested some further operational flexibility to allow for the sweep deposit balances to fluctuate over time, under certain conditions and subject to certain limitations. Refer to the "Related Party Transactions" section in the 2022 MD&A for further details.

On May 4, 2023, the Bank and Schwab entered into an amended insured deposit account agreement (the "2023 Schwab IDA Agreement"), which replaced the 2019 Schwab IDA Agreement. In comparison to the 2019 Schwab IDA Agreement, the 2023 Schwab IDA Agreement extends the initial expiration date by three years to July 1, 2034 and provides for lower deposit balances in its first six years, followed by higher balances in the later years. Specifically, until September 2025, the aggregate amount of fixed rate obligations will serve as the floor. Thereafter, the floor will be set at US$60 billion. In addition, Schwab has the option to buy down up to US$5 billion of fixed rate obligations by paying the Bank certain fees in accordance with the 2023 Schwab IDA Agreement, subject to certain limits.

The following table provides the operating results on a reported basis for the Bank.

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

Return on Common Equity
The consolidated Bank ROE is calculated as reported net income available to common shareholders as a percentage of average common equity. The consolidated Bank adjusted ROE is calculated as adjusted net income available to common shareholders as a percentage of average common equity. Adjusted ROE is a non-GAAP financial ratio and can be utilized in assessing the Bank's use of equity.

ROE for the business segments is calculated as the segment net income attributable to common shareholders as a percentage of average allocated capital. The Bank's methodology for allocating capital to its business segments is largely aligned with the common equity capital requirements under Basel III. Capital allocated to the business segments was increased to 11% CET1 Capital effective the first quarter of 2023, compared with 10.5% in fiscal 2022.

Return on Tangible Common Equity
Tangible common equity (TCE) is calculated as common shareholders' equity less goodwill, imputed goodwill and intangibles on the investments in Schwab and other acquired intangible assets, net of related deferred tax liabilities. ROTCE is calculated as reported net income available to common shareholders after adjusting for the after–tax amortization of acquired intangibles, which are treated as an item of note, as a percentage of average TCE. Adjusted ROTCE is calculated using reported net income available to common shareholders, adjusted for all items of note, as a percentage of average TCE. TCE, ROTCE, and adjusted ROTCE can be utilized in assessing the Bank's use of equity. TCE is a non-GAAP financial measure, and ROTCE and adjusted ROTCE are non-GAAP ratios.

HOW OUR BUSINESSES PERFORMED

For management reporting purposes, the Bank's business operations and activities are organized around the following four key business segments: Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, and Wholesale Banking. The Bank's other activities are grouped into the Corporate segment.

Results of each business segment reflect revenue, expenses, assets, and liabilities generated by the businesses in that segment. Where applicable, the Bank measures and evaluates the performance of each segment based on adjusted results and ROE, and for those segments, the Bank indicates that the measure is adjusted. For further details, refer to the "How We Performed" section of this document, the "Business Focus" section in the Bank's 2022 MD&A, and Note 29 of the Bank's Consolidated Financial Statements for the year ended October 31, 2022.

PCL related to performing (Stage 1 and Stage 2) and impaired (Stage 3) financial assets, loan commitments, and financial guarantees is recorded within the respective segment.

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 certain dividends, is adjusted to its equivalent pre-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 $40 million, compared with $57 million in the prior quarter and $34 million in the second quarter last year.

Share of net income from investment in Schwab is reported in the U.S. Retail segment. Amounts for amortization of acquired intangibles and the acquisition and integration charges related to the Schwab transaction are recorded in the Corporate segment.

Quarterly comparison – Q2 2023 vs. Q2 2022
Canadian Personal and Commercial Banking net income for the quarter was $1,625 million, an increase of $57 million, or 4%, compared with the second quarter last year, reflecting higher revenue, partially offset by higher PCL and higher non-interest expenses. The annualized ROE for the quarter was 37.4%, compared with 41.8% in the second quarter last year.

Revenue for the quarter was $4,404 million, an increase of $452 million, or 11%, compared with the second quarter last year.

Net interest income was $3,377 million, an increase of $444 million, or 15%, compared with the second quarter last year, reflecting higher margins and volume growth. Average loan volumes increased $31 billion, or 6%, reflecting 5% growth in personal loans and 11% growth in business loans. Average deposit volumes increased $9 billion, or 2%, reflecting 8% growth in personal deposits, partially offset by 7% decline in business deposits. Net interest margin was 2.74%, an increase of 22 basis points (bps), primarily due to higher margins on deposits reflecting rising interest rates, partially offset by lower margins on loans.

Non-interest income was $1,027 million, an increase of $8 million, or 1%, compared with the second quarter last year.

PCL was $247 million, an increase of $187 million, compared with the second quarter last year. PCL – impaired for the quarter was $234 million, an increase of $71 million, or 44%, reflecting some normalization of credit performance. PCL – performing was $13 million, compared with a recovery of $103 million in the prior year. Total PCL as an annualized percentage of credit volume was 0.19%, an increase of 14 bps compared with the second quarter last year.

Non-interest expenses for the quarter were $1,903 million, an increase of $144 million, or 8%, compared with the second quarter last year, reflecting higher spend supporting business growth, including technology and higher employee related expenses, and higher non-credit provisions.

The efficiency ratio for the quarter was 43.2%, compared with 44.5% in the second quarter last year.

Quarterly comparison – Q2 2023 vs. Q1 2023
Canadian Personal and Commercial Banking net income for the quarter was $1,625 million, a decrease of $104 million, or 6%, compared with the prior quarter, reflecting lower revenue and higher non-interest expenses, partially offset by lower PCL. The annualized ROE for the quarter was 37.4%, compared with 39.9%, in the prior quarter.

Revenue decreased $185 million, or 4%, compared with the prior quarter. Net interest income decreased $162 million, or 5%, largely reflecting fewer days in the second quarter and lower margins. Average loan volumes increased $4 billion, or 1%, reflecting relatively flat personal loans growth and 2% growth in business loans. Average deposit volumes were flat compared with the prior quarter, reflecting 1% growth in personal deposits, offset by a 3% decline in business deposits. Net interest margin was 2.74%, a decrease of 6 bps, primarily due to lower margins on deposits.

Non-interest income decreased $23 million, or 2%, compared with the prior quarter, reflecting seasonally lower credit card activity.

PCL decreased by $80 million compared with the prior quarter. PCL – impaired increased by $14 million, or 6%, reflecting some further normalization of credit performance. PCL – performing was $13 million, compared with a build of $107 million in the prior quarter. Total PCL as an annualized percentage of credit volume was 0.19%, a decrease of 6 bps.

Non-interest expenses increased $40 million, or 2%, compared with the prior quarter, reflecting higher non-credit provisions.

The efficiency ratio was 43.2%, compared with 40.6%, in the prior quarter.

Year-to-date comparison – Q2 2023 vs. Q2 2022
Canadian Personal and Commercial Banking net income for the six months ended April 30, 2023, was $3,354 million, an increase of $168 million, or 5%, compared with the same period last year, reflecting higher revenue, partially offset by higher PCL and higher non-interest expenses. The annualized ROE for the period was 38.6%, compared with 42.4%, in the same period last year.

Revenue for the period was $8,993 million, an increase of $1,121 million, or 14%, compared with the same period last year. Net interest income was $6,916 million, an increase of $1,107 million, or 19% compared with the same period last year, reflecting higher margins and volume growth. Average loan volumes increased $34 billion, or 7%, reflecting 6% growth in personal loans and 12% growth in business loans. Average deposit volumes increased $11 billion, or 3%, reflecting 8% growth in personal deposits, partially offset by 6% decline in business deposits. Net interest margin was 2.77%, an increase of 29 bps, primarily due to higher margins on deposits reflecting rising interest rates, partially offset by lower margins on loans.

Non-interest income was $2,077 million, an increase of $14 million, or 1%, compared with the same period last year.

PCL was $574 million, an increase of $482 million, compared with last year. PCL – impaired was $454 million, an increase of $141 million, or 45%, reflecting some normalization of credit performance. PCL – performing was $120 million, compared with a recovery of $221 million in the prior year. The current year provisions reflect some normalization of credit performance and volume growth. Total PCL as an annualized percentage of credit volume was 0.22%, an increase of 18 bps.

Non-interest expenses were $3,766 million, an increase of $318 million, or 9%, compared with the same period last year, reflecting higher spend supporting business growth, including technology and higher employee related expenses.

The efficiency ratio was 41.9%, compared with 43.8%, for the same period last year.