Annual Report 2003 Close Report
Financial Highlights
To Our Shareholders
Management's Discussion and Analysis
Financial Results
More About Us
The Future Matters
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Managements Discussion & Analysis

How We Performed
Off-balance Sheet Arrangements
Critical Accounting Policies
Controls and Procedures
How Our Businesses Performed

Personal and Commercial Banking
Wholesale Banking
Wealth Management
Corporate Management

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How We Performed


Expenses include non-interest expenses, such as salaries, occupancy and equipment costs, and other operating expenses.

Operating cash basis expenses exclude non-cash goodwill and identified intangible amortization and restructuring costs related to acquisitions and significant business restructuring initiatives. During the fourth quarter of fiscal 2001, Wholesale Banking announced a restructuring of its operations, which resulted in pre-tax restructuring costs of $130 million, primarily related to employee severance. In fiscal 2001, the Bank incurred pre-tax restructuring costs of $54 million related to TD Waterhouse and $55 million related to the acquisition of Newcrest. Beginning in fiscal 2002, the Bank discontinued the amortization of goodwill as a result of the adoption of the new accounting standard on goodwill and intangible assets.

In 2003, operating cash basis expenses increased $838 million to $7,592 million compared with 2002. The increase in expenses is primarily a result of $624 million in goodwill write downs related to the international unit of the Bank’s wealth management business and its U.S. equity options business in Wholesale Banking recognized in the second quarter of 2003. During the second quarter of 2003, the Bank reviewed the value of goodwill assigned to these businesses and determined that an impairment had occurred. In addition, during the second quarter 2003 the Bank determined that it was necessary to restructure these operations and, as a result, recorded $87 million in restructuring costs in the second quarter and $5 million in the third quarter of 2003. The increase in expenses is also related to increased variable compensation expenses and charges related to systems write-offs, real estate downsizing, legal provisions in the non-core portfolio and costs of streamlining core operations in Wholesale Banking. On a reported basis, expenses increased by $612 million from a year ago to $8,364 million. The impact of non-cash intangible amortization on the Bank’s reported expenses in 2003 was $772 million compared with $998 million last year. Beginning in fiscal 2003, the Bank has applied the fair value method of accounting for stock options and recorded an expense of $9 million.

In 2002, total operating cash basis expenses decreased by $171 million or 2% from 2001 to $6,754 million, primarily as a result of lower incentive compensation expenses in Wholesale Banking. Wealth Management also contributed to the decrease in salaries and employee benefits as a result of its discount brokerage restructuring initiatives. On a reported basis, expenses decreased by $902 million from 2001 to $7,752 million. The impact of non-cash goodwill and intangible amortization on the Bank’s reported expenses in 2002 was $998 million compared with $1,490 million in 2001.

Expenses (billions of dollars)