March 29, 2007
Ed Clark, President & CEO, TD
Bank Financial Group
Remarks at 2006 Annual General Meeting in
Montréal
Introduction
Merci, John. It’s great to be here in
Montreal.
Notre présence dans cette ville ne
date pas d’hier. La TD a ouvert sa
première succursale ici même, en mille huit
cent-soixante, sur la rue Saint-Jacques.
Je crois qu’à la TD, nous pouvons nous
inspirer de Montréal.
En tant que deuxième plus grande ville francophone au
monde…
En tant que ville qui produit plus de vingt-cinq pourcent de tous
les diplômes universitaires
canadiens… En tant que lieu de naissance de nombreux
grands Canadiens – Oscar Peterson, Mordecai Richler,
Louise Arbour et Céline Dion - … sans parler
des Habs …
Montréal se démarque par sa
différence. Et vous célébrez cette
différence. À la TD, nous sommes fiers
d’être une banque
différente.
2006 – Fantastic Year
Let me start by telling you how that difference showed last year
in our financial results. 2006 was a fantastic year for us.
We set a long-term goal of growing earnings per share by 7 to 10%.
But over the last couple years, we’ve been able to grow
earnings and dividends by more than that.
In 2006, total adjusted earnings were up 18%.
Adjusted earnings per share jumped 13%.
And our dividend moved up by 13% as well. This reflects our
philosophy that to consistently outperform on dividends, you have
to consistently outperform on earnings.
And those adjusted earnings have been increasing an average of 21%
per year since 2002. Over that time, our average total shareholder
return was almost 27% per year.
Clearly the market has recognized the value in Canadian banks -- so
strong earnings have translated into even stronger total
shareholder return. In 2006, TD’s total shareholder
return was 20%.
Fantastic Q1…Fantastic 2007
Overall we feel unbelievably good about what the future holds.
Why? Well first off, we started the year with a bang. A 20%
increase in earnings per share in the first quarter of 2007. We
signaled to the market that we again see ourselves growing earnings
well above our 7 – 10% target.
But our real optimism reflects our belief that we have a
well-thought-out strategy that’s clearly working.
For us, being different means being better. Each day getting
closer to our vision of being a leading North American financial
institution. One with an integrated, customer focus. What Makes Us
Different
When I meet with investors, I tell them: if you’re
investing in TD, you’re investing in a growth company. A
growth company with a difference. One that didn’t get
that growth by extending out the risk curve. So what does drive our
growth? First, we are franchise builders. We create
strong businesses and embed in each of them the same philosophy of
what to do. We focus on their organic growth.
We know our success all starts with a customer focus. We listen to
our customers. And we take action to meet their needs.
We focus on operating with excellence. Shareholder value in
financial services is created by executing better. By constantly
looking at your processes and figuring out how to do it
better. Fourth, we have a balanced and actively
managed risk strategy. Our goal is to maximize our return for every
dollar of risk we take. TD has the highest return on risk weighted
assets of all the banks. And we have a premium retail earnings
mix. Over 80% of TD’s earnings come from our retail
operations.
Our risk management approach has been recently recognized by both
Moody’s and Standard and Poor’s Ratings
Services, who in raising our credit ratings, commented on our
earnings stability and proactive management of risk.
We invest constantly for the future. It’s
enormously important to us to make decisions today that will ensure
we have growth for the bank two or three years from now.
Yes, we know the market has short term earnings expectations. But
investing in the future is what building the better bank is all
about. If you do that, you’ll have consistently better
short term results – as our first quarter earnings
showed. Domestic Businesses That
Deliver
Is the strategy working? Definitely. Let’s start with
our domestic businesses. Personal & Commercial Bank
TD Canada Trust – our personal and commercial
bank in Canada – led the way for TD with record earnings
in 2006. Not only do the record earnings continue -- the first
quarter of 2007 was TDCT’s 17th consecutive quarter of
double-digit earnings growth. Indeed, in the last 4 years, TD
Canada Trust has doubled its earnings. None of the other big five
banks in Canada can say either of those statements.
We are focused on growth. Over the last 3 years, we’ve
opened 63 new branches including 15 in “la belle
province.” All the other big five banks combined,
opened only 59 branches. This year we’ll open
another 30 branches – with 7 of them in Quebec.
Last year we added hundreds more customer-facing employees.
We’re exploiting other opportunities for accelerated
growth -- businesses where we have less than our natural market
share. And by leveraging our strong core businesses and being
prepared to invest in those businesses, we can have super growth in
these other areas over the longer term.
TD Meloche Monnex
Insurance is one of those super growth areas. And
I’d like to take this opportunity to highlight a
particular success story – TD Meloche Monnex.
Meloche Monnex représente notre société
d’assurance de biens et de dommages. Elle a
été fondée par Jean Meloche ici
même, au Québec, en mille neuf cent
quarante-neuf. Quarante-huit ans plus tard, Meloche Monnex
était acquise par Canada Trust.
À cette époque, elle occupait le
quatorzième rang de l’industrie.
Aujourd'hui, elle est parmi les trois premières
sociétés d'assurance habitation et auto au
Canada. Et elle est la première société
d’assurance de biens et de dommages à marketing
direct au Canada.
Elle est aussi réputée comme un joueur de classe
mondiale. Meloche nous confère un avantage
stratégique tandis que nous poursuivons notre expansion
dans le domaine de l’assurance. Quelle belle
réussite, et ça se passe ici, à
Montréal. Our strong earnings momentum in TDCT reflects
the strength of our customer-focused franchise. Our own surveys
tell us that customers believe we’re becoming better
every day. Our customer satisfaction scores are almost 10
percentage points higher than they were 5 years ago. External
surveys tell us we are the best in the industry.
In 2006 we were named #1 in overall customer service in Canada by
Synovate for the second year in a row;
We were named #1 in overall customer service by JD Power and
Associates in their new survey;
We were named the best consumer internet bank in Canada for the
third year in a row according to Global Finance magazine;
And we were named #1 in call center customer satisfaction in the
North American banking sector, according to the Service Quality
Measurement Group.
TD Canada Trust has proven itself to be a powerhouse. But it
is clear that the competition also recognizes this and is highly
focused on trying to catch us.
That’s why we’re working so hard to put more
distance between us and the competition.
I’m confident we’ll keep outperforming all
the other retail banks. Domestic Wealth
Management
Our Wealth Management team in Canada also has a great story to
tell. We have the fastest-growing wealth management group
among the Canadian banks, growing 30% a year for the last 3 years.
This is a story about the power of integration, focus on customer
and client needs, and consistent investment in the future -- all
executed perfectly.
We continue to grow our two large businesses -- discount brokerage
and mutual funds. Despite facing challenges on pricing, our
discount brokerage operation grew its share of trades in 2006 and
recorded a huge profit increase – 30% higher than the
previous year. We continue to have supergrowth in our mutual fund
business, taking the #2 spot in net sales of long term mutual funds
for the 4th year in a row. And that’s across all the
industry – banks and non-banks. That has made us the
number 4 player in Canada. 7 years ago, we were ranked
8th.
Our strategy has been to invest in aggressively growing our advice
capability. We added 145 net new client facing advisors in 2006,
with another 130 expected to join us this year.
We’ve been able to attract advisors and improve the
return on this investment by being best-in-class at referring
customers to our wealth management channels.
The result -- customers are being better served by each business
and our advice business is a growing source of profitability. Our
cross-business referrals have become a clear competitive
advantage. We continue to grow our customer base and
last year client assets grew 16% – exceeding our
target. As with TDCT, we’re confident this business will
have another great year in 2007.
Canadian Retail
If you step back and look at TD Canada Trust and domestic
Wealth Management together, you have a complete picture of our
Canadian retail businesses. And what a picture it is. For the past
4 years, we’ve been clearly outperforming our
competition. I hear financial analysts commenting that all the
banks are the same. No one bank can consistently outperform. But
that’s not true. TD has consistently outperformed its
peers on both revenue and earnings. Clearly there is one bank that
is different.
Wholesale Bank
Our Wholesale strategy is also a differentiator for us. We
have exited the areas where we didn’t like the
risk/return trade-off. We have focused on building our franchise
and trading businesses where we believe we have a sustainable,
competitive advantage. The result? Great earnings. Great returns on
equity. And recognition from the market that our earnings are
not dependent on assuming we’ll always be operating in a
perfect world.
2006 was a milestone year for the Wholesale Bank. We set out 3
years ago to be a top 3 dealer in Canada. Today we have achieved
that recognition.
We are:
- #1 in equity block trading
-#1 in fixed income trading
-#2 in government and corporate debt underwriting
-#3 in equity underwriting
-#3 in advising on mergers and acquisitions
We began 2007 determined to re-prove our top 3 status. Calendar
year-to-date we were involved in 27 underwriting deals and have had
excellent trading results in the first quarter.
We’re going to take advantage of our strong trading
skills and growing investment banking arm to keep building the
dealer. We expect another strong year from the Wholesale bank in
2007.
Now let’s turn to our U.S. strategy. U.S.Platform
Clearly our U.S. strategy sets us apart from other banks. We
believe that becoming a North American financial institution will
provide a better diversity of earnings options –
ensuring that we fulfill our goal of consistent 7 to 10% earnings
per share growth over the longer term.
We also believe being a North American retail player offers better
returns with lower risk than a U.S. strategy focused on Wholesale
lending. We believe it is advantageous to build sustainable
franchises in both Wealth Management and retail banking
– providing better diversification and utilizing our
proven skills in these areas.
TD Banknorth
Let me comment on our banking operation in the United
States – TD Banknorth. Today it’s a mid-sized
bank in the Northeastern United States with solid market positions
in 8 states, and opportunities to grow. Clearly banking in the
United States has been challenging – as the inversion of
the yield curve, and the disintermediation of assets has narrowed
spreads. The recent sub-prime meltdown creates credit risk that
could spill over into other parts of the market.
But in our view, while these market conditions make short-term
earnings growth tough, they’ll also create
opportunities. We understand retail banking. We’re
confident of our ability to compete with the best in the United
States. This means focusing on growing revenues and reducing
costs.
The measures needed to be successful in retail banking in the
United States are the same as Canada: - Become more efficient through process
re-engineering. TD Canada Trust has improved its efficiency ratio
from almost 62% in 2001 to under 55% in 2006. TD Banknorth has
announced that it’s begun a re-engineering process. Its
goal is to reduce operating expenses by 5 to 8% by
2008.
- You have to focus on providing better
service and convenience. Longer hours produce a better customer
experience and better returns to the bank. We’re world
leaders in running an extended hour branch network
- You have to optimize the location of your
branches and you have to continuously grow your network. TD Canada
Trust has the largest market share of personal deposits among the
Canadian banks. And we have higher deposits per branch than any
bank in Canada and such banks as Bank of America and Wells
Fargo.
- You have to manage your sales process to
improve productivity and cross sell.
- You have to develop a suite of products that
cover off every customer’s needs. TD Canada Trust
matches the best cross-sell ratios in North America. And our wealth
management strategy proves our ability to be a leader in referring
customers between channels.
Last November, we announced that TD had been
invited by the independent directors of TD Banknorth to make an
offer to take our ownership up to 100%. The minority shareholders
of TD Banknorth will vote on the privatization at a shareholders
meeting on April 18th. If the vote is successful, TD Banknorth will
become a wholly owned subsidiary of TD Bank. With 100% ownership or
not, we’re confident that in a few years investors will
look back and be pleased with the position TD Banknorth has
achieved. TD Ameritrade
So let me turn to the second prong of our U.S. strategy -- TD
Ameritrade.
They had a great year in 2006. This was TD Ameritrade’s
fourth consecutive year of record earnings. In 2005 TD owned
100% of TD Waterhouse and earned $108 million. Last year we
earned $180 million owning less than 40% of TD
Ameritrade.
TD Ameritrade is known for having the best technology platform in
the brokerage business. That was recognized this month when
Barron’s magazine named TD Ameritrade the best web-based
broker in America.
We want TD Ameritrade to continue to be a top 3 player in the U.S.
on-line brokerage business. To do that it has to maintain its
leadership in the active trader space and grow share in the
long-term investor segment. The combination of TD Waterhouse and
Ameritrade gives us the ability to do that.
World Player in Wealth Management
There’s a very compelling story here when you
look at TD Ameritrade and our Canadian Wealth Management business
together. What you see is THE world leader in discount brokerage.
Compared to the other top players in the world, these businesses
together are: #1 in trades per day and #1 in accounts.
That’s an outstanding achievement. And a leadership
position we won’t easily let up on.
Making a Difference Together
Clearly our businesses are delivering. But the numbers
don’t tell the whole story. Being the better bank is
about a lot more than financial results. It’s about how
we conduct our business. How we make TD a great place to work for
our employees. How we act as a member of
society. At TD we have a simple goal. Offer the
consumer the best in service, convenience, price and choice in
retail banking in North America. We believe we offer that.
Because it all starts with customers. What do theywant? For
example, customers have told us they want extended branch hours.
TD’s branches are open on average 30% longer than the
big five banks in Canada.
Customers tell us they want great service. How do we make sure we
deliver great service? We ask about 8,000 customers for feedback on
our service every single week of the year. And my pay, and that of
every employee at TD, is tied directly to what those customers say
every week. I ask you: is there any other bank in North America
that does that? That’s why we have better service at TD
than anyone else.
Seniors told us that they wanted a package tailored to their needs.
We listened. Our Plan 60 account has no, NO, monthly fee. It gives
seniors unlimited transactions at TD branches and our ABMs at no
cost. Seniors bank for free at TD Canada Trust. You know,
it’s hard to beat “free” or to
improve on “unlimited transactions” -- and
our seniors love our package. It’s the best plan on the
street.
It’s a similar story for students. We have a specific
package for them too. For a monthly fee of $3.45 – less
than a latte -- students can perform up to 25 transactions a month
at any of our branches or ABMs at no cost. We also have a value
package for the rest of our customers at $3.95 a month –
a price which has been frozen for 7 years. Compare that to other
services you acquire for a monthly fee – what can you
buy for $3.95? Have those prices stayed the same for 7
years?
Since I know that I will be questioned by journalists about the
political debate suggesting that the government should regulate ABM
fees, both for banks and non-banks, let me take a moment to comment
on this issue.
The industry has been built around choice, price and convenience.
For those who wish to enjoy low cost banking, indeed free banking
for seniors, we offer our own machines. For those who wish expanded
coverage, there are white label machines. The white label industry
was created by the growing Interac network. Today, white label
machines account for about 70% of all the ABMs in Canada. In
addition, Canadian banks provide more than 4,500 machines outside
their branch networks. Canada now has the highest number of ABMs
per capita in the world. It also has THE best debit card system in
the world, providing thousands of opportunities for cash back at
retailers with no additional charges.
Now it’s always tempting for governments to quote
“solve” issues by legislating lower prices.
But the consequences would be pretty clear – less
convenience, significant damage to the non-bank ABM industry, and
economic hardship for the tens of thousands of small businesses who
are paid rent for having white label machines on their
premises.
Isn’t there a better solution – one that
builds on what the industry has been doing – ensuring
that bank customers have a choice not to use external machines? We
constantly poll our customers – and they have not said
this is a major concern to them. But we are open to hearing about
specific areas where there are gaps that we could fill.
In that respect, we believe Minister Flaherty, in our recent
meeting, raised a legitimate concern. In some cases, students are
isolated in post-secondary campuses with only one ABM machine
available – and it’s often a white label
machine. So we will be looking to ensure that we have ABMs on, or
near, all major campuses across Canada – an addition of
about 50 ABMs to our network of over 2500 TD Green Machines.
All this to say, we do care enormously about our customers.
Our employees. Our shareholders. And about Canada. We never for a
moment forget that it’s because of them that we have had
the privilege to operate, and be successful, in this country for
over 151 years. But let’s find a market solution which
builds on what customers actually want. Let me now turn to one issue in particular
that I think is enormously important to our country –
and that’s the environment.
Dévoués à
l’environnement
Les Canadiens ont toujours eu l’environnement
à cœur. Maintenant plus que jamais, nous
avons des preuves concrètes du changement climatique
– un concept abstrait il y a quelques années
à peine. Mais cela est clairement devenu un
véritable défi pour notre
planète.
À la TD, nous nous soucions de l’environnement
depuis longtemps. Cette année, notre Fondation des
amis de l’environnement célèbre son
seizième anniversaire. Nous sommes très
fiers de cette fondation. Elle est le fruit d’un
partenariat entre nos clients et les communautés
locales. Depuis sa création, elle a permis
d’amasser plus de quarante millions de dollars qui ont
été remis à plus de seize mille projets
collectifs au Canada.
Au cours de la dernière année,
l’environnement a été au
cœur de nos préoccupations. Nous finalisons
présentement un Système de gestion
environnementale pour la Banque. Ce système
établit comment nous allons gérer et
réduire l’impact des risques et des questions
d’ordre environnemental dans nos
activités.
Dans le cadre de cette initiative, nous mettons aussi la touche
finale à un plan de suivi et de rapport de notre empreinte
environnementale – spécialement pour notre
consommation d’énergie et la gestion des
déchets. La prochaine étape sera
d’établir des objectifs de réduction
précis.
We are also adopting the Equator Principles as a component of our
broader Environmental Management System. They provide a framework
for dealing with environmental and social risk in project
financing. We see ourselves as responsible for considering our
clients’ environmental policies and track record. And we
take that role very seriously.
We have been consulting with a number of environmental groups
including ethical investment companies, non-government
organizations and research centres. We want them to know we
appreciate their input and intend to continue to have an active
dialogue with them.
Closer to home -- you’re seeing our environmental
efforts in action here in Montreal. Yesterday we announced a
$200,000 donation to the Montreal Biodome. It houses four live
ecosystem exhibits. Our donation will help ensure that thousands of
Canadian visitors learn more about those ecosystems and their
conservation.
I’m pleased with the progress we made this year. We
recognize, though, that this is a long journey. We all have so much
more to do on the environmental front. At TD, we’re
committed to doing our part. Being the Better
Employer
Being the better bank is also about having top notch people and
engaged employees. I’m incredibly proud to stand here
today and tell you we have a truly outstanding group of employees
at the TD Bank. They are 58,000 individuals around the world. They
work as a tremendous team and it never ceases to amaze me just how
well they do it. So I want to thank them for all they do. With
them, I know TD Bank’s future is in good
hands. 60 of those employees are in the audience
today. You saw their pictures as you walked into today’s
meeting. They’re our Vision in Action recipients for
2006 – the highest recognition we have at TD to
celebrate excellence. To them, I want to say thank you. You are
truly remarkable. And to their spouses, partners and guests
– thank you as well for supporting our people on their
path to be the best. I’d ask our Vision in Action
recipients to stand. Please join me in a round of applause for
them. Thanking our people isn’t
enough. We have to continually focus on making TD a great
place to work. We want to be THE employer of choice. That
means supporting our employees as they grow their careers. Having
them satisfied and engaged in their work. Developing
tomorrow’s leaders. That is a priority for us.
There’s lots more work to do. But we’re on
the right track. We were tremendously pleased to be the only
national financial institution on last year’s list of
“Top 30 Companies to work For” in
Canadian Business magazine. Not to mention being the
only North American bank among the top 200 best regarded companies
in the world, according to the Reputation Institute. These laurels
do not come about by accident. They’re the result of
dedicated employees and satisfied customers. Diversity Focus
Part of what makes us a great place to work is our continued focus
on diversity. We want to be a place where employees and customers
alike feel comfortable and supported in all their diversity
– whether they are men, women, people with disabilities,
gays, lesbians, or visible minorities. I’m proud to say we made a great
deal of progress on diversity this year. Here in Quebec: - We’re a major sponsor of a
program at Equitas – formally known as the Canadian
Human Rights Foundation. The program is about preventing
discrimination and promoting multiculturalism among children in
Montreal.
- We were also very honoured to be recognized
by the Quebec Gay Chamber of Commerce. They presented us with the
Phenicia Award for our support of diversity in the
province.
Strong Board
Before closing I would like to thank my board of directors
for yet another year of tremendous support and wise
counsel. I am very fortunate to be able to work with
such a strong and independent board of directors -- one that sets
the right tone at the top and whose integrity is so vital to our
corporate culture. John Thompson talked about the external
recognition that our TD Board received last year. I have to tell
you that makes me, and all our management team, enormously
proud. So, to John and the other members of the board,
congratulations and thank you again.
Closing
In closing, I want to acknowledge our customers and shareholders
who are on this journey with us to build the better bank. You have
my commitment that we will continue to work hard to live up to your
high expectations. You have given us your trust and loyalty and we
thank you for it. In 2006 we showed we are a different kind of
bank – staffed by spirited employees and backed up by a
powerful brand. We have better growth at lower risk than our
competitors, we’ve proven ourselves as an earnings
growth leader. And we have a strong base on which to grow our U.S.
platform.
We’re unbelievably optimistic about our future. We have
what it takes to create the best run bank in North America. A place
that delivers shareholder value year in and year out; where people
aspire to work; and where customers and employees are proud of what
we stand for. We will build the better bank.
Thank you. | 