How We Performed

Net interest income

The Bank calculates net interest income by adding the interest and dividends it earns from loans and securities, and subtracting the interest it pays on deposits and other liabilities.

Net interest income is calculated on a taxable equivalent basis (TEB), which means that the value of non-taxable or tax-exempt income such as dividends is adjusted to its equivalent before tax value. This allows the Bank to measure income from all securities and loans consistently and makes for a more meaningful comparison of net interest income with other institutions.

See supplementary information page 45 and 46, tables 2, 3 and 4(pdf)

Net interest income (TEB) was $5,846 million in 2003, a year-over-year increase of $324 million or 6%. The increase in net interest income is related to Personal and Commercial Banking where average personal loan volumes – excluding securitizations– increased $5 billion from a year ago; however this growth was partially offset by a 14 basis point reduction in the net interest margin to 3.28%. The increase is also related to higher interest income in Wealth Management due to higher cash balances in domestic operations combined with higher yields earned on the investment of the cash balances. In addition, the increase in net interest income related to interest income from income tax refunds and taxable equivalent and securitization adjustments in 2003. Net interest income excluding the TEB adjustment for 2003 was $5,616 million, an increase of $316 million compared with 2002.

Net interest income (TEB) was $5,522 million in 2002, a year-over-year increase of $886 million or 19%. Net interest income reported by Wholesale Banking increased by $607 million as compared with 2001, primarily related to an increase in interest income from trading securities. Net interest income for Personal and Commercial Banking increased by $107 million as compared with 2001. The increase in Personal and Commercial Banking was attributable to personal loan volumes, excluding securitizations, which increased by $5 billion, and the net interest margin improvement of four basis points to 3.42%. Net interest income excluding the TEB adjustment for 2002 was $5,300 million, an increase of $909 million compared with 2001.

Net interest income (millions of dollars)