Q1 2022 Toronto-Dominion Bank Earnings Call
This conference is being recorded.
Schools. They host it don't go as you see.
All participants please standby your conference is ready to begin good afternoon, everyone and welcome to the TD Bank Group Q1, 2022 earnings Conference call I would now like to turn the meeting over to MS. Brooke Hales. Please go ahead Michelle.
Thank you operator, good enough good afternoon, and welcome to TD Bank group's first quarter 2022, Investor presentation. We will begin today's presentation with remarks from Burton Ronnie the bank's CEO after which Calvin trends the bank's CFO will present, our first quarter operating results.
I'm, a wildly chief risk Officer will then offer comments on credit quality after which we will invite questions from prequalified analysts and investors on the phone.
Also present today to answer your questions are Michael Roach Group head Canadian personal banking, Paul Douglas Group head Canadian business banking, Raymond Shine group head wealth and insurance, we owe Salon, President and CEO TD Bank America's most convenient bank and react on that group had wholesale banking please turn to.
Slide two.
At this time I would like to caution our listeners that this presentation contains forward looking statements that there are risks that actual results could differ materially from what is discussed and that certain material factors or assumptions were applied in making these forward looking statements any forward looking statements contained in this presentation represent the views of them.
Management and are presented for the purpose of assisting the bank's shareholders and analysts in understanding the bank's financial position objectives and priorities and anticipated financial performance forward looking statements may not be appropriate for other purposes. I would also like to remind listeners that the bank uses non-GAAP financial measures such as adjusted result.
To assess each of its businesses and to measure overall bank performance. The bank believes that adjusted results provide readers with a better understanding of how management views. The bank's performance Barrett will be referring to adjusted results in his remarks.
No information on items of note the bank's use of non-GAAP and other financial measures. The bank's reported results and factors and assumptions related to forward looking information are all available in our Q1 2022 report to shareholders with that let me turn the presentation over to Barrett.
Thank you Brook and thanks, everyone for joining us today.
Like to welcome Michael Roads Group head Canadian personal banking in the U S alone President and CEO TD Bank America's most convenient bank, who are joining us for the first time, they're also including two additional participants on the call is beginning this quarter, Paul Douglas, who leads Canadian business banking and right, John who leads wealth and insurance.
We are here to answer more specific questions you may have about their businesses and results.
Before we review the quarter I want to once again express to all Ukrainians around the world and across our footprint, our sincere hope that the violence will come to an end as soon as possible.
Support humanitarian efforts, we have donated more than a quarter of million dollars to agencies, what are on the ground, providing urgent care to the people of Ukraine.
Customers can make donations to the Canadian Red Cross in our branches in Canada.
Soon to the American Red Cross in all U S stores.
Our collective efforts can make a real difference.
Let me now turn to our first quarter performance.
Q1 was a great quarter for TD earnings were $3 8 billion and EPS was $2 eight up 13, and 14% respectively from the first quarter of last year.
Revenue increased across our retail and wholesale segments as customers and clients brought us more of their business and PCL remained low.
Reflecting good credit performance against the backdrop of an improving economic outlook.
Reflecting the strong results our CET one ratio ended the quarter at 15, 2%, including a 17 basis point impact from the repurchase of $7 5 million common shares during the quarter.
Our proven business model anchored by our diversified business mix, North American scale and risk discipline has enabled us to continue to invest in transforming the bank for the digital age.
This quarter, we announced an acceleration of our strategy to establish an enterprise level data platform on Microsoft Azure. This initiative to modernize our data infrastructure, which includes a multiyear agreement with data breaks to unlock data at scale will further enhance our analytical capabilities and deliver a richer.
Insights driving better better customer experiences and enabling colleagues to collaborate with more agility across the bank.
We're also investing in our colleagues building on our brand as an employer of choice with top technology talent.
We are hiring more than 2000 technology roles.
In 2022 to drive investments that will help power the future of banking with a focus on skills and cloud machine learning and automation as.
As we continue to evolve the colleague and customer experience growing and empowering skilled technology talent will remain a corner store cornerstone of our forward focused strategy.
Let me now turn to each of our businesses and review some highlights from Q1.
Our Canadian retail segment earned $2 3 billion delivering record revenue and earnings.
A personal bank had a strong quarter.
Real estate secured lending business, we have been encouraged by the early response to the introduction of our popular flex line hybrid lending product into the broker channel channel in January .
Our cards business is performing very well balances rose year over year for the first time since Q1, 2020, and God retail sales were up 23% year over year.
Customers are highly engaged with our loyalty programs, including our Amazon shop with points offer what have you seen approximately 2 million redemptions to date.
Even as we continued to grow with personal deposits, we took market share in mutual funds as we leverage our one <unk> strategy to help more Canadians meet their long term investing goals.
And we strengthened our new to Canada, offering bundling of digitally convenient way to send money to over 200 countries by our award winning TD Global transfer service since launch we have seen increased customer acquisition and volume growth with over 200000 customers.
Conducting more than 1.8 million transfers to date.
Yeah.
It was also a very strong quarter for the business being with double digit growth in both loans and deposits.
And our wealth business revenue increased 7% as strong net asset growth in mutual fund sales helped offset the moderation in direct investing trading volumes, our web broker platform again took top spot among Canadian banks in the globe and mail.
Annual ranking of digital brokers and we are excited to have extended those capabilities into a fully mobile environment with the launch of the DD easy trade App. This quarter, we've seen strong take up of the App, which is designed to make investing simpler for new and emerging investors.
Turning to the U S. Our U S retail bank earned $806 million in Q1, an increase of 31% year over year commercial loan origination volumes improved with mid single digit growth in middle market offset by continued PPP run off and lower commercial real estate.
Exposures line of credit utilization rates also increased modestly quarter over quarter.
This quarter, we piloted a next generation digital platform for U S commercial clients, providing them with an end to end view of the relationship with TD, including access to treasury applications and the ability to transact across products.
We also announced additional enhancements to our overdraft policies.
He has built on the changes we introduced last August including the launch of TD essential banking, a low cost deposit accounts designed to meet the needs of unbanked or underbanked households, the lasers in the hands of enhancements are intended to help customers better manage their accounts and make informed financial choices.
And we continue to see good take up of a double a credit card double up has become a primary driver of new bank garlic gowns for U S retail bank with almost 100000 accounts added to date since its launch last spring.
And with the contribution from our investment in Schwab of U S $200 million of U S retail segment earn.
Earnings were $1 billion this quarter.
Let me turn briefly to our announcement this week of the agreement to acquire first horizon headquartered in Memphis, Tennessee.
I was in Tennessee. This week meeting with first Horizon Associates and I was incredibly impressed with the talented people I met with their passion for their customers and communities.
Regarding our U S aspirations for years I've been sharing on these calls and elsewhere that one of our goals is to expand in the fast growing southeast of the United States.
This week, we delivered on that promise with the announcement of our agreement to acquire first horizon. Upon closing, we will achieve leadership positions in key markets strengthen our presence in states, such as Florida, and the Carolinas and gain footholds in the large, Georgia and Texas markets in.
And as you heard on Monday first Horizon's banking centers are located in markets with populations are projected to grow 50% faster than the U S National average.
First of all Ryzen is a fantastic bank customer centric deeply committed to the communities in which they operate and focus on growth just like D. D. With this acquisition, we extend our reach acquire new commercial and specialty banking capabilities.
At over 400 branches and expand to serve 1.1 million more customers and as we said on Monday, we expect to achieve $610 million U S.
In annual cost synergies. The main drivers of these savings are expected to be technology and vendor cost as we reap the benefit of scale across our platforms and vendor relationships and corporate real estate with overall bank costs across the industry migrating to the center and away from the branch network over the past few years.
The benefits of consolidation.
Increasingly achievable in market adjacent deals without significant impact to the frontline.
As outlined in our first horizon Investor presentation. This transaction is expected to deliver 10% plus fully synergize adjusted EPS accretion in fiscal 2023, and the deal is immediately accretive to adjusted EPS at closing.
This transaction is strategically compelling financially attractive within our risk appetite and culturally aligned first horizon is a terrific fit for TD and will enable us to further accelerate our growth in the U S.
Let me now return to our Q1 results.
And wholesale banking earnings were $434 million this quarter business activity and markets remained robust, resulting in strong revenue performance and continued lower PCL.
U S dollar strategy and investments continue to bear fruit and have contributed significantly to the revenue growth or the last three years. In addition, TD securities won several mandates in the quarter and Canada, We acted as joint lead book runner on escalators in Israel.
Radio dollar offering a successful 2 billion dollar issuance.
Securities continued to demonstrate his advisory and financing capabilities into sustainable finance space acting as adviser to Clearway energy.
One 9 billion U S dollar sale of Clearway community energy to KKR.
Further, reflecting our commitment to the to embed ESG principles across our business. This quarter TD securities debt capital markets team partnered with a syndicate of underwriters. The majority of which were diverse owned businesses to lead a $500 million Green bond offering by TD Bank.
This offering was the first time that a syndicate group for a Canadian bank offering bond offering included minority women and veteran owned businesses as active joint book runners and this was just one of the D is making up a record quarter for our debt capital markets team and financial institutions, which participated in.
Underwriting almost $40 billion of investment grade debt for the sector.
Overall as I reflect on our performance this quarter I'm pleased with our strong start to fiscal 2022 and encouraged by the momentum in our businesses. It's been two years since the COVID-19 pandemic transform the way we work and live while there's still challenges ahead, including inflation labor market and supply chain.
Pressures are serious geopolitical tensions macroeconomic conditions remain positive as we evolve our approach to COVID-19, and economies recover with the strength of our business model and balance sheet, we remain well positioned.
To continue executing on our growth strategies.
At the same time, we know the impact of the pandemic has not been evenly distributed in particular it is disruptive education across North America and the transition to alternative ways of teaching has created challenges for both students and teachers due to uneven implementation an unequal access to technology.
That's why the focus of the 2021 TD ready challenge wasn't supporting innovative solutions to address the predicted learning loss in math and reading for the four disproportionately impact our students in grades K to 12. This quarter, we were pleased to announce $10 million in grants to 15.
<unk> to help them develop innovative solutions to address these inequities.
We're also promoting equitable and inclusive innovation through TD labs, new equity diversity and inclusion resource hub a platform to support the inclusion of the unique perspectives and experiences are different community groups into the development design and build of our products and services. This platform has been pile.
With success and we look forward to leveraging it more broadly we also continue to focus on inclusion and diversity across the bank. Most recently through a series of well attended black history month events and initiatives.
It is a commitment to diversity and inclusion and environmental social and governance initiatives more broadly continues to receive recognition. This quarter. We were proud to be recognized within S&P global silver class distinction in the 'twenty to 'twenty, two S&P global sustainability yearbook.
One of the most comprehensive annual publications on the state of corporate responsibility the only North American Bank together, the S&P global gold or silver class distinctions.
Our strategy is centered on our vision purpose and shared commitments and I'd like to thank our 90000 bankers across the globe, who bring those commitments to life every day their hard work dedication and strong performance sustain and strengthens our winning culture.
With that I'll turn things over to Kelvin.
Thank you Barrett good afternoon, everyone and please turn to slide 10.
This quarter.
The bank reported earnings of $3 $7 billion and earnings per share of two Oh too up both up 14%.
Adjusted earnings were $3 8 billion and adjusted earnings per share was $2 eight up 13% and 14% respectively.
Revenue increased 4%, reflecting higher volumes and fee based revenue in the banking and wealth businesses and higher insurance volumes, partly offset by a normalization in direct investing trading activity and lower retail margins.
Provision for credit losses was $72 million.
Expenses increased 3% year over year, reflecting higher spend supporting business growth and higher employee related expenses.
Partially offset by prior year store optimization cost.
And the impact of foreign exchange translation.
Adjusted expenses also increased 3%.
The retailer partners net share of the profits from the U S. Strategic card portfolio did not have a notable impact on expense growth this quarter as PCL was stable across both periods.
Absent the partner's share.
Adjusted expense growth was 3% year over year or three 7% ex FX.
For the same reason the accounting for the U S strategic card portfolio had only a minimal impact on pretax pre provision earnings and operating leverage this quarter.
Slide 24 shows how we calculate total bank P. T P P and operating leverage removing this impact along with the impact of foreign currency translation and the insurance fair value change.
Total bank <unk> was up 6% year over year before these modifications and 7% after reflecting strong volume growth.
<unk> was up 6% quarter over quarter on both measures, mainly reflecting higher wholesale trading related revenue.
Please turn to slide 11.
Canadian retail net income for the quarter was $2 3 billion up 11% year over year.
Revenue increased 6%, reflecting higher fee based revenue in the banking and wealth businesses.
And higher loan deposit and insurance volumes, partially offset by lower direct investing transaction volumes and lower margins.
Average loan volumes rose, 9%, reflecting 8% growth in personal volume and 14% growth in business volume.
Average deposits rose, 9%, including 7% growth in personal volumes, 13% growth in business volumes and 9% growth in wealth deposits.
Wealth assets increased 14%.
Net interest margin was 253% down four basis points compared to the prior quarter, reflecting lower loan market.
Total PCL of $33 million declined $20 million sequentially.
Total PCL as an annualized percentage of credit volume was 0.03% down one basis point sequentially.
Insurance claims decreased 3% year over year, primarily reflecting a decrease in the fair value of investments supporting claims liabilities, which resulted in a similar decrease in non interest income partially offset by more severe weather related events.
Noninterest expenses increased 8% year over year, reflecting higher spend supporting business growth, including technology, and marketing costs and higher employee related expenses and variable compensation.
Please turn to slide 12.
U S retail segment reported net income for the quarter was $1 billion you are up.
Up 30% year over year.
U S retail bank net income was $806 million up 31%, primarily reflecting higher revenue lower PCL and lower noninterest expenses.
Revenue increased 6% year over year, reflecting higher deposit volumes and margins and increased earnings on the investment portfolio and higher fee income from rising customer activity, partly offset by lower margins are low margin.
Average loan volumes decreased 6% year over year, reflecting an 11% decline in business loans, primarily due to PPP loan forgiveness and paydowns on commercial loan.
Personal volumes were flat.
Average deposit volumes, excluding sweep deposits were up 13% year over year.
Personal deposits were up 15%, including 21% growth in consumer checking.
Deposits were up 12%.
Sweep deposits declined 6%.
Net interest margin was 221% flat sequentially as the impact of lower accelerated fee amortization from PPP forgiveness was offset by higher deposit margins and increased earnings on the investment portfolio.
On slide 28, we've continued our disclosure on the impact of the PPP program.
This quarter PPP revenue contribute approximately $65 million.
To net interest income and 10 basis points to the NIM.
We expect most of this benefit to be realized by the second quarter of this year.
Total PCL was $17 million.
Up $79 million sequentially.
U S retail net PCL ratio, including only the bank's share of PCL for the U S strategic cards portfolio as an annualized percentage of credit volume was 0.04% higher by 19 basis points sequentially.
Expenses decreased 4% year over year, primarily reflecting a prior year store optimization costs of $76 million and productivity savings in the current year, partly offset by higher employee related expenses and investments in the business.
The contribution from Td's investment as Schwab was $200 million you are up 24% from a year ago. Please turn to slide 13.
Wholesale net income for the quarter was $434 million, a decrease of 1% year over year, reflecting higher revenue and lower PCL offset by higher noninterest expenses.
Revenue was $1 $3 billion up 3% year over year, primarily reflecting robust client activity and market.
DCF for the quarter was the recovery of $5 million compared with a recovery of $77 million in the prior quarter.
Expenses increased 7% year over year, primarily reflecting higher employee related costs and continued investment in the wholesale banking U S dollar strategy, including the investment in TD Securities automated trading the electronic fixed income trading business, we acquired from headwinds last year.
Turning to slide 14.
The corporate segment reported a net loss of $227 million in the quarter compared with a reported net loss of 197 million in the first quarter of last year.
The year over year increase reflects a lower contribution from other items, partially offset by lower net corporate expenses.
The decrease in other items, primarily reflects lower revenue from treasury and balance sheet management activities this quarter.
Adjusted net loss for the quarter was $127 million compared with an adjusted net loss of $94 million in the first quarter last year.
Please turn to slide 15.
The common equity tier one ratio ended the quarter at 15, 2% flat sequentially.
We had strong organic capital generation this quarter, which added 45 basis points to CET one capital.
This was offset by the repurchase of $7 5 million common shares under our share buyback program higher R. W E and a reduction in the scholar for Aussies transitional adjustment for ECL reclassified from tier two to see CET, one capital, which declined to 25% from 50 per.
Effective this quarter.
<unk> increased 2% quarter over quarter, mainly reflecting higher credit risk and market risk I'll give you a.
Progress at <unk> increased $7 billion, or 2%, mainly reflecting higher volumes, partly offset by a decrease in U S retail our W. A due to a parameter update for the non retail portfolio.
Market risk <unk> increased $2 $8 billion or 17%, reflecting higher wholesale exposure.
The leverage ratio was four 4% this quarter and the LCR ratio was 124% both well above regulatory minimums.
I will now turn the call over to Andre.
Thank you Kelvin and good afternoon, everyone. Please turn to slide 16.
Gross impaired loan formations increased five basis points quarter over quarter to 16 basis points.
Given by U S commercial.
Similarly related to government guaranteed paycheck protection program loans, which are now largely resolved.
U S wrestle reflecting loans exiting deferral programs.
And some early signs of credit normalization, including the re emergence of seasonal trends in the U S card and auto portfolios.
Please turn to slide 17.
Gross impaired loans were stable quarter over quarter at 33 basis points.
Meaning at cyclically low levels.
Please turn to slide 18.
Recall that our presentation reports PCL ratios, both gross and net of the partner's share of the U S. Strategic card Pcl's, we remind you that <unk> recorded in the corporate segment.
Fully absorbed by our partners and do not impact the bank's net income.
The bank recorded provisions of $72 million this quarter compared with a recovery of 123 million last quarter.
The quarter over quarter increase reflects higher impaired PCL rising from a cyclical low in the prior quarter, coupled with a smaller performing allowance release this quarter.
Please turn to slide 19.
The bank's impaired PCL was 329 million, increasing by $109 million quarter over quarter, reflecting some normalization of credit performance, including the re emergence of seasonal trends in the U S card and auto portfolios.
Performing PCL was a recovery of $257 million compared to a recovery of $343 million last quarter.
The current quarter recovery reflects additional allowance releases across all segments.
Please turn to slide 20.
The allowance for credit losses decreased 107 million quarter over quarter to $7 1 billion or 93 basis points.
Selecting a more favorable economic outlook.
Partially offset by the impact of foreign exchange.
The bank's allowance coverage remains elevated from pre COVID-19 levels, given ongoing uncertainty that could affect the economic trajectory and the ultimate credit impact of the pandemic.
In summary.
The bank exhibited strong credit performance again, this quarter with key credit metrics remaining at or near cyclically low levels.
However, as expected early signs of credit normalization our image.
Including modestly higher early delinquencies and impairments in certain portfolios and more typical consumer behavior, including higher seasonal spending.
While credit results may vary by quarter I continue to expect <unk> to be higher for fiscal 'twenty, two increasing from unsustainably low levels last year as credit conditions continue to normalize.
To conclude.
<unk> remains well positioned given we are adequately provisioned, we have a strong capital position and we have a business that is broadly diversified across products and geographies.
With that operator, we are now ready to begin the Q&A session.
Thank you.
We will now take questions from the telephone lines. If you have a question and you are using a speaker phone. Please Mr handset before making your selection.
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It wouldn't be a brief pause while participants register for questions. We thank you for your patience.
Our first question is from many Roman <unk> from Scotiabank. Please go ahead.
Hi, Good morning, just wanted to ask about our rental growth in Canada year over year, It's underperforming the peer group and then when I look at that gap opened up early in the pandemic, but it's it looks like it actually has widened recently so I'm wondering as you look at that.
What is your assessment of what's driving that what's the reason for that.
Okay.
Hi, This is Michael roads are nice to meet over the phone at least.
So your question about wrestle first.
First of all you know it's interesting when you look at the numbers and you see almost 9% Russell grows to see if I can see it was elsewhere in the market I think that was pretty good but the truth of matter is we do have an opportunity and we do expect to do better.
And in terms of why.
Branch network I think everyone knows has been historic sources strength and this was clearly disproportionately impacted during COVID-19 .
But then coming out of Covid, but we do look to create a momentum in all channels and that's why I said, we expect to do better as the hours returned to normal.
As our mobile mortgage specialist productivity continues to improve and we are seeing improvement.
And as we continue invest in training operations account management and again, we've seen improvements in account management and retention.
And see the benefits of the recent product enhancements such as flex line in the brokerage channel.
Barrett had referred to this in his remarks, so you will not see any actuals in our financial numbers, but we are pleased with what we're seeing there.
And so.
It up by saying, we expect to do better and I'll conclude with that.
Comment I would make is if you look just over the past year or so and just look at the sequential.
Performance in the past year, or so I think you will see some momentum.
And and it's certainly my job new enroll my job is to ensure that momentum continues.
Thanks for that Mike and just as a follow up is your assessment that part of the issue is maybe a more cautious approach to risk and how do you is that something that needs.
It needs to be fixed or that you've addressed.
I'm sure you've heard before we're through the cycle lenders and and I think that narrative stays the same today as it has last year it'll be a year from now.
Realistically.
We are closing down and the loss of capacity for in hours and the branch has just fortunately impacted us we were more reliant.
And so it would be through the cycle lenders due to see us be relatively consistent with our credit approach.
And then just in terms of how you approach fixing the problem you mentioned the flex line in the broker channel.
How important is that in order to get you back to the peer.
So to get you back into the peer range or even above.
Yes.
Well, we're optimistic that flex line of broker channel will drive some of them.
So some nice performance on a go forward basis.
At the end of the day and look I don't want I'm new to this call, but you would have heard before that we'd like to be in all channels would be everywhere, where our customer is and certainly brokers a channel where you wanna be up I don't want to just finish the importance of our core retail franchise and we expect to see strong performance of our core retail franchise and I'd also.
Offer that to our mobile mortgage specialists you know I said this is true our productivity is improving and so we're looking to see performance in all channels and in <unk>.
<unk> performance in all channels brokers, one of those and flex line will certainly be helped there.
And just a final one just as a follow up just in terms of timing there in terms of when you think you'll be able to close that gap with the peer group.
Yeah, So I might play the new Guy who card here so.
Wanna get too too precise on timing.
I will just offer that you should expect to see continued momentum.
Thanks, Sean.
Thank you.
Following question is from Gabriel <unk> from National Bank Financial Please go ahead.
Hi, Good afternoon. My question is for Leo during the quarter you made some additional adjustments to the.
Overdraft fee structure.
And and your business I'm wondering if you can quantify the potential revenue impact and the timing thereof are used to yet I know there was some changes last.
Arguing with them at the time you guys said it was about $40 million to $50 million in part just wondering what the latest round would be.
Great. Thank you very much for the question let.
Let me just describe very quickly what we what we actually announced on February the first.
We made a series of changes we changed the minimum threshold.
By which a client.
It would be charged an overdraft to $50. We indicated that we will implement a 24 hour grace period.
We also announced that we're launching real time alerts to keep clients informed with regards to overall balances in overdraft <unk>.
Events, and then finally, we implement to cap them to no more than three overdrafts in any given day, we feel that this was an appropriate set of changes we thought it both gives clients.
<unk> and convenience and so we're comfortable with the changes that we made.
To your question about the overall impact.
Our estimate at this point is that.
If I add the changes that we made in 2021 and these most recent changes the in year impact will be $165 million and if you annualize that just to get a sense of what that total number would be on an annual basis would be about $250 million, that's about 45% of what our.
Pre COVID-19 overdrafts levels were.
Once again quite comfortable with the changes and I think we were trying to be responsive to client needs and certainly to the marketplace.
Alright.
I imagine yes. It is.
And is there a timing.
But you have in mind.
Behaviors change because of some of the changes you you introduced where were included launching an overdraft fee products and maybe some switching involved so I don't I don't know if this stuff happens overnight or what how do you feel it's a very good question. We did a we did launch the tedious central checking account product.
Late last year, which is essentially a no overdraft product.
About 10% of all of our accounts are now in that in that product. We think it gives us once again, when we talk about optionality between the TD essential product as well as these changes that we made in the introduction of real time alerts I really do believe that that's it yeah.
We'll be launching a series of other real time alerts overdraft is one specific area once again, giving clients greater control and greater options. Okay.
This is phased in over time.
Just so I can model it.
So we actually announced that the that the 50 dollar threshold, which will trigger them not all of the impact but most of the impact would go into effect on April the FERC.
Oh no.
Switching to the quick one on rate sensitivity, thanks for putting the slide in there Kelvin and others I imagine.
I just I don't think I think it does but.
What we would have called surge deposit, but one point is that included in that sensitivity or did you back that out the benefit from rising rate. Yeah. So that's that side includes all deposits, we don't get back get out it's a constant balance sheet basis, Okay and then the last one on the acquisition.
The 494 million a preface you're buying from first time horizon, 30% of that goes to.
And in employee retention mechanism and the other 70% goes to what I'm wondering if you can kind of help me understand where that money goes okay. If I can certainly take this.
This is Leo.
Youre right.
The first.
The first $150 million was really earmarked around around retention, which is critically important to us we wanted to ensure that.
That we were.
Retaining what is the real asset of.
First horizon, which is their bankers there there their frontline staff.
And so that was key the balance was really reflection of the fact that we've got a great deal of confidence in the model that first horizon is pursuing and their organic growth plans and we wanted to facilitate the acceleration of those whether that's organic branch expansion.
Whether that's increasing of commercial banking coverage teams or simply getting after day, two enhancements that would potentially position.
The firm for for a more rapid feature integration so.
We're quite comfortable with Brian's discretion to actually execute against those those items I would also say maybe just one last point on this is that we wanted to signal very clearly our commitment to this transaction to first horizon.
To the management team and to the 8000 colleagues that will soon become a TD colleagues because we do believe this is a world class franchise and one that will be very additive to TD bank.
Thank you Bill.
Just a couple just.
On the overdraft system.
I think Leo said, it but just to clarify the 10% is on 10% of new accounts are not all at gowns.
10% of new accounts and gave you know this is memory lanes for me I think you and I talk many many years ago when I was in the U S.
Product changes as just a normal course, it I remember the Durbin Amendment and Ricky who are saying you know how much money is that better and how much money is that and I'll really offset it I think the key message on on how we manage these changes that are relatively regular in the U S business is through growth.
One of the main characteristic of TD Bank America's most convenient bank is still a lot more customers. Every day, then would be had yesterday. So that's another way to look at it and the C. D. Essential banking is 10% of all new accounts now carries a fee. So at some point you know all of these things kind of square up in March.
So it just want to make sure that some of our historic conversations are not forgotten.
When I look at the <unk>.
Handling fear and it shows the.
Overdraft is actually becoming a smaller percentage.
The fee income in the business, so youre doing well.
Thanks.
Yeah.
Thank you.
The following question is from Ebrahim <unk> from Nomura from Bank of America. Please go ahead.
Good afternoon.
I guess, maybe sticking with you Leo on looking at the slide 28.
Talk to us.
Business lending ex PPP was fairly weak and it has been very weak.
You saw some strong growth from some of your peers, we've seen strong growth from the U S. Banks why are we not seeing the same commercial scale.
In the lending book.
Just your outlook on that business and also would love to hear if you think of first horizon adds anything on the commercial lending side.
Thank.
Thank you very much yeah, let me, let me just frame a couple of things first.
There's two primary factors that really point to.
Our performance on a year on year basis, as you rightly point out.
We are seeing the unwind of the PTP portfolio.
We extended 130000 PPP loans for nearly $14 billion.
At a time that those clients needed it and certainly we're very proud of that but we did over index in other words, we had a greater percentage of PPP loans as a percent of our commercial banking book than both our big bank as well as our regional competitors and so as that's unwinding that is creating a bit of a structural drag for us now that drag is all but.
<unk>.
We would expect that the majority of that portfolio to be completed by the end of the second quarter I think the other piece.
Which which we've also worked through as our commercial real estate book.
Our commercial real estate book did experience.
Lower origination volumes, particularly in the office and retail space and we've seen faster.
Payback activity on that on that portfolio.
We do have a slightly shorter duration in terms of the overall book than some of our competitors and that obviously weighed on that portfolio. In this period of time. So there's two two big structural.
Areas that are contributing I did want it.
Just give you a sense of some of the green shoots that we're experiencing though because I think it's important to just look at it.
We experienced a sharp increase in gross loan originations in the first quarter in fact back to above pre COVID-19 levels, which is very encouraging.
We started seeing a bit of a plateau in terms of line utilization and in fact, we saw a little bit of an increase in the first quarter and that trends continuing into the month of February and in certain lines of businesses, particularly the middle market segment, which seems to be reacting a little bit more quickly on a quarter on quarter basis, we saw a 5% increase in terms of overall loan balances. So.
I'd say it is early.
But we are seeing greater demand and as I suspect. It is the liquidity conditions in the marketplace continue to stabilize I would expect that our community banking segment, our middle market, our asset based lending areas would all see increased activity and loan balanced growth through the course of this.
This year and I'm certainly optimistic that that's the case to your point with regards to first horizon.
I do think the first ryzen will absolutely be additive to us from a commercial banking perspective, just the the geographic attractiveness of the first horizon footprint.
The capabilities that they have in the commercial or the quality of their commercial banking franchise, and then the abilities for us to potentially overlay, whether that'd be TD securities, whether that'd be just our balance sheet and giving them the ability to be a ranger in the lead on more transactions or simply some of the combinations in the vertical categories.
I think all of that will be very attractive and very additive to our current commercial bank.
But so do you expect as you think about and I'm looking at X P. P b business loans should.
Should we expect mid to high single digit type of loan growth that your peers are talking about or not.
I would expect that we would see a gradual improvement quarter on quarter, and we should be able to get to loan growth levels that we're achieving pre COVID-19 .
Got it and I guess, just one question on Canadian detail.
Mike.
Revenues up 6% expenses up 8% and if you think about the outlook for the rest of the year just give us a sense of how youre thinking about operating leverage going forward and any puts and takes around what drivers of expense growth versus where you see potential savings.
Savings.
I guess I'll start out with this so in terms of expense growth in Canadian retail and you referenced the 8% you have to disaggregate that a bit because there's the components, so and I've I've right here with me too and wealth and insurance like Canadian personal and commercial bank.
If you look the last page the sub pack there was actually a breakdown as it can be Canadian personal bank, which actually shows about a 4% expense growth if my Memory's correct on.
On a year over year basis, and that's between Paul and myself.
And on the on the business banking side, it's just ease the operating leverage of that is strong and look we continue to keep on investing in the business and we would expect it.
We generated positive operating leverage on an ongoing basis, obviously, some puts and takes here and there I'll bet to make that disaggregation to see that and then you know ray maybe it actually hand, it over to you to kind of talk about some of the dynamics you have because I.
I gave one piece of the equation or the other piece for Michael.
It's ray.
From a wealth and insurance perspective on a year on year expenses were up 14% and it's mainly driven by investments in really the right areas across both wealth and insurance to drive better exceptional client experiences new acquisition and accelerate our growth.
And one thing I'll do is I'll, just remind everyone. The TD wealth results include the direct investing business, which do impact our reported earnings and expenses. So in wealth expense growth was mainly driven by the variable compensation.
Due to higher fee based revenue growth and shift in our revenue mix from transactions to fee based revenue.
Considering that wealth earnings remained stable year on year.
Fight direct and investing trading levels, normalizing, which was down 28% year on year, which we do anticipate will continue in 2022.
We'll call out the trades per day are still double what they were pre pandemic and.
So we're also investing in new products, adding more advisors nationally and investing in digital and technology really to respond to the changing client expectations, while meeting the ever increasing regulatory requirements across wealth.
I'll, just point out and I am Barry called out one of the key investments that we made.
In the quarter was the launch of TD easy trade mobile trading App designed to make investing easier and simpler for all new and emerging investors. We launched that in January and we've seen very strong early uptake of new accounts and net asset growth, which really demonstrates that it's resonating with the emerging investors.
Let's say on the wealth side, although expenses are up our Q1 results demonstrate the strength of our diversified wealth business model, if I shift to TD insurance business continues to grow.
And there, we're making the right investments to support the number one direct to consumer insurer in Canada.
And that includes increased investments in marketing building Legion, leading digital capabilities and we made a significant investment in our insurance advisors in our contact centers to ensure we're delivering exceptional experiences that will deepen our customer relationships. So I hope that gives you a sense of where we're making investments Abraham on.
Both wealth and insurance.
That was helpful and I guess is this is the net of debt that we should see the efficiency ratio improved year over year versus the $43, one last year or unclear where that may shake out.
Yeah. So.
I think it depends on the number of assumptions that youre going to have over the next.
Next little while and because other than volume growth you're going to have right.
Your expectations on rates are going to be.
And then I would say also if you look at last year.
The peak trading revenue, we're actually in Q2.
So you're going to see another another quarter like that.
Our goal is to.
Generate that positive operating leverage in the medium term.
Well, thanks for taking my questions.
Thank you.
Following question is from John Aiken from Barclays. Please go ahead.
Good afternoon couple of quick questions Calvin on the Oh on the interest rate sensitivity a couple of the banks have actually produced year to impacts from from rising rates.
Able to provide any any order of magnitude in terms of what the impact might be on TV. So stay in sensitivity for you too.
Sure.
So in terms of a 100 basis point, a sharp increase in interest rate across the curve on a static balance sheet, our number would be $2 $8 billion.
But I would say just a little bit of caution on how you use that number.
Because as you know the the assumption there is a 100 basis point increase across the entire curve.
Right and and as you know went forward rate changes whatever you've seen so far people expect the short end of the rate.
To increase but the longer end of the curve has not increased by that much. So you have to take that into account and then the other thing to take into account is what we've talked about in the past is whatever johan off rates are.
Because as your hedges mature or you are or you.
<unk> mature in terms of rate do you need to think about how those rates mature versus the new rate that you put on them.
Hopefully that answers your question, yes, now understood Kevin Thank you and just one follow on.
I know you've been exceptionally busy over the last little while but have you had a chance to take a look at Palm Beach St sensitivity disclosures for first horizon and how they are calculated and would you anticipate any any major differences, if you've actually been able to dive into the into weeds, where should we take those Ah Ah shall we take those two sensitivities is fairly soon.
How TD calculate something.
Yeah. So we've looked at their interest rate sensitivity.
Until we're comfortable with including those into our model, we know that they do hedge their balance sheet as well and as we work through the integration plan, we would look at that and take into account and how we're gonna operation or anything.
Great. Thanks for your help I appreciate it.
Thank you.
Following question is from Paul Holden from CIBC. Please go ahead.
Yeah. Thank you first question is going back to Mike I really appreciate the candid answers on.
Residential mortgage opportunity.
I wanted to ask you a broader question as you think about the Canadian retail bank as a whole.
Has there been has there been any evidence of deterioration in market share more broadly or maybe something out on Ted you see broader opportunities to catch up and surpass peers.
But no. It's a good question and actually are.
It's good I mean, if you pull up and take a look overall.
Look I'd say first of all that there was a lot of things were very very pleased with house of what's performing the Canadian personal bank in fact, including share increases and some things that really matter.
Take a look at our deposit franchise.
Our deposit franchise.
Share gain on a year over year basis is actually quite attractive and we're getting the right types of deposits.
We like that the other thing is if we look at and I'm here with my friend Ray across the table from me is we're gaining share in deposits at the same time, we're actually creating a mutual fund referrals in fact, the mutual fund origination we had during the quarter has been very very strong and so we're very pleased with that in fact, we call ourselves a market leading with a combination of both our deposit.
Business in our mutual fund generation.
If you look at the other asset classes and.
Look I'd say that the cards business as an example.
I looked at every one's competitive data everyone's in a reasonably tight range, but if you look our spend it's up 23% on a year over year basis, and its actually definitely up over pre pandemic periods.
And we're feeling good about how we're positioned with cards and we expect to see growth there.
And overall there is a lot to like about our deposits are retail franchise.
We were the best physical network in the marketplace. We have number one position in 79% of all markets with 500000 people or more in the Canadian marketplace. We have more web traffic, we have number one share of voice on social channels.
And we've got a great great frontline very purpose, driven and take care of the customer every single day.
And as I say look we have opportunities in Russell.
Agree with that.
And with cards, we were number one market share.
Not right now but.
You May know I have a lot of card experience and I'm looking forward to recapturing that position.
Okay.
That.
And then question for you.
Oh sort of similar strategic.
Opportunity type question.
Arguably TD is underpenetrated in U S wealth management, I think now $41 billion.
<unk>, which is relatively small given the footprint there any indications you can give us on the ability to grow.
Grow that piece of the U S business.
Is there anything in first horizon that helps on that venture.
Paul Thank you very much for the question.
As you know I spent the last 10 years running our wealth franchise here in Canada, and I'd say, we've got.
Got an enormous opportunity in the U S.
I'd say I'd say fundamentally when you think we've got a $9 5 million retail clients.
Mass affluent and high net worth SKU on that is as much as 35% of the overall book the.
The ability to bring systematically.
Financial planning another mass affluent investment solution to that client base, both in the stores and via other direct.
Digital platforms.
It's very compelling we've been building out that team in fact, we added over 130 advisors just over the past 12 months, we will accelerate that pace because I I believe that we need to achieve a critical mass of advisors to support our retail mass affluent clients and likewise I think the high net worth opportunity.
And the partnership with the commercial bank, making sure that we're bringing not only commercial banking solutions.
Bringing along the way that the business transfer solutions and the other wealth management investment management solutions and to do that at scale and consistently is going to be a big priority for us. So I think as I think about trying to build out the fee business in the U S.
Our wealth management opportunity. He has got to be one of the most significant levers that we're gonna pool.
Great.
We're gonna be asking with us more often.
<unk>.
111 final question I guess for you.
The U S bank closed the number of stores roughly a year ago right early 2021 notice at the store counts growing in each of the last two quarters.
And sort of giving some sense of.
What the strategy is there I'm, assuming it's into new geographies, but maybe you can just kind of clarify that.
That's absolutely right.
So think of when we do store optimizations, it's us looking at the entire network and deciding where we could potentially consolidate certain locations.
I'm still keeping the client at the center of that decision.
And then redeploying those investment dollars into geographies that have higher growth profiles.
And with the view on Densification and something that we're very proud of is that you know.
79% of our deposit base are in markets that were either number one two or three and the only way you can do that is by being very purposeful around thinking through your distribution network and investing.
Around certain msas and achieving critical mass I'd say I know, we talk a great deal about the branch network there and that was that was the basis of your question, Paul but I'd say that the investments, we're making in digital marketing.
And digital acquisition are also critically important in terms of being able to achieve the full potential of our branch network and there I have to say I'm extremely pleased with what the U S team has been able to do over the past two or three years. We are a leader in terms of customer checking account acquisition, the United States and to the extent that we can get that network model.
<unk> bring digital marketing to bear and maximize our presence in the marketplace. I think I think that will put us in a very good position.
Very good I'll leave it there. Thanks, thanks for your answers.
Thank you.
<unk> question is from Scott Chan from Canaccord Genuity. Please go ahead.
Thank you Leo and just a couple of follow up questions on first horizon. How big is your wealth management platform is that kind of I kind of read wealth management solutions, but I don't know if you can help quantify it.
Scott to give you a sense their total revenue base by strip out what is the institutional trust business.
It's comparable to ours is a little smaller than ours, but in terms of.
The model that they run they run a brokerage or a model very similar to ours.
They they partner in their structure their wealth advisors are very.
Aligned to the commercial bank and they create a very effective partnership to almost a deal team around certain clients and they've been very successful in growing their wealth business using that model, we've historically leveraged our retail network.
And the retail alignment piece, so I think there's a complimentary aspect.
Their model that we can leverage over time, but clearly, bringing those two groups together and obviously continuing to invest.
In our wealth distribution, our coverage will be a priority.
And you talked about the wealth opportunity, but when I look at the <unk>.
AUM on the us side.
Sense, if there is a significant opportunity there, but every time I look at it it's always declining significantly.
Significantly underperforming peers in terms of assets and maybe you can update on why that is happening and is there anything strategic.
Or anything or any initiatives going on with our platform.
I think theres two things when you look at the AUM number we do run an asset manager in the in the U S.
And I can certainly ask ray to elaborate a little bit more but the two factors that are weighing on our AUM level. One is the fact that we don't really run a independent U S asset manager it is part of <unk>.
TD asset management and.
TD asset management from time to time might balance mandates from one part of our manufacturing plant to another and so you could see movements between the U S and Canada, but that that is independent of our approach and the way. We're we're trying to approach our solutions in the marketplace. The other factor is that epic is <unk>.
More has historically been more aligned to our value orientation and up until recently that that that style has been out of favor now we are very encouraged by what we're seeing more recently, where you're starting to see real discrimination in the marketplace.
And I think that that operating model is likely to get much more traction in the short term, but I've probably stolen some of race Ray's Thunder. So ray I don't know, if there's anything you'd add to that.
Oh, I think you've captured it well I think the big opportunity for us will be and have been and it's been a work in progress is really to bring epic and TD asset management together and.
Leverage the expertise that actually is in TD asset management, while we grow our U S asset management business and so that'll be the work that we'll do over the next.
A few years on that side of it but significant opportunities on that side also Scott.
And then just lastly, maybe for Calvin it seems like intra quarter.
Expenses has been a focus and I think a theme on this call has been on investing in your hiring 2000.
<unk> people.
I Wonder if it's all bank level Kelvin if you can offer us some expense guidance.
Following your fiscal Q1.
Yeah. So.
We don't like as I think we've talked about that previously we don't look at expenses on its own.
So our goal again is to look at are driving positive operating leverage and if we do see growth revenue growth opportunity then we would.
Increase our investment and like we talked about already are on a there are a few buckets of expenses that we look at there is the table stake expenses that you just need to stay.
And to run the bank and that's one bucket that is always there.
Our strategic expenses that you have that that you invest for the long term. So that's another bucket and then the last bucket would be a more discretionary but really important if you see that the economy is recovering you see revenue opportunities you see rising rate environment, then you would dial up those <unk>.
And then to really capture of market share because those opportunities are ripe for the taking them. So that's where I would leave it.
Okay. Thank you.
Yeah.
Thank you.
<unk> question is from Nigel D'souza from Veritas investment Research Research. Please go ahead.
Thank you good afternoon, I had a question for Ajay and I wanted to turn to your allowances.
So you noted that your allowances are running at elevated level relative to pre COVID-19 .
And I'm wondering why we haven't seen a more aggressive release of those allowances. If I look at your forward looking indicators those have improved so I'm wondering why that didn't drive a bigger release and then second based on your guidance.
Should we take from your guidance that T cells are higher this year should be higher this year that there's a possibility you won't be able to fully release those excess allowances before credit conditions normalize.
It's a good question. So let me respond and I'll start with the allowance and I'll go back to PCL.
So I'd say the main reason, we haven't released our allowances because theres still.
A tremendous amount of uncertainty there.
Sources of that uncertainty still changing okay. So barak talked about geopolitics inflation.
There is we don't know what the ultimate economic trajectory will be as a result of this war. So there's quite a bit of uncertainty out there, which is why we're releasing our results gradually having said that.
If the macro continues to improve if this uncertainty reduces we will be releasing more reserves.
The exact timing of it is very difficult to tell and then I'll go back to <unk>. So.
I look at <unk>, what I would say is I expect a gradual increase in <unk> and I say that because.
We think with normalization embedded <unk> are going to rise again, I'm not expecting a sudden increase but gradual increase in impaired PCL. So we feel that is going to happen. The reason, we're seeing the number could be higher is that performing PCL that could be a bumpy right.
Okay, and because there are various drivers of performing PCL theres volume there is migration.
Parameters, there's macro so you are right in saying I can't say for sure we're not going to release the reserves is not pre determined but the reason we're being we're being cautious in what we're saying is that performing PCL on what happens with that is going to be a bit bumpy. So I hope that's helpful to you.
That's very helpful and if I could just focus on one one variable here.
And your forward looking indicators when we look at your policy Central Bank policy interest rate assumption base case versus upside scenario.
You also have scenario assumes a higher policy right. Now can you help me understand why that is because I would think that.
And if a higher policy rate would be an adverse scenario because it increases that.
Servicing costs, so could you just explain that.
For our upside again these scenarios are developed by economists reusing overheated.
Economy, and that overheated economy, this high inflation, but there's high interest rates.
As well so.
In that case, we actually assume in Canada rates go up 150 basis points and in the U S 125.
Basis points, our downside case is a pretty stringent case, it's a global slump.
And in that case, the inflation actually unwind quite quite fast.
Base case as well you know, we do assume a high inflation in the base case.
It's almost I think it starts or being at around 6% for the U S. At Q4, and then sort of tapers off.
From there, but it's it's the assumptions we've made for the upside case.
Overheated brisk economy.
Is what we're assuming.
Oh, Okay. So any comments on then Stagflationary scenarios, you have high interest rates and decelerating growth how does that affect your credit loss modeling yeah. Good. Good question. So what I would tell you is we're giving it a lot of thought and we are going to be running sort of stagflation scenario.
This year and it is a plausible scenario, we would be concerned with that kind of a scenario and we're doing more work on that front right now.
That's helpful. Thank you.
Thank you.
One question.
Go ahead.
Yes.
Our following question is from Sohrab <unk> from BMO capital markets. Please go ahead.
Thank you I just wanted maybe to do a couple of cleanup questions. Chad I'll start off with Leo you talked about the opportunity or maybe ray and you both talked about the opportunities between TD asset management epic and.
Really leveraging the franchise in the U S.
Yeah.
What's unique about it is it just a new set of eyes looking at this or Peter.
It's always been there and the focus Watson there or is there.
Is there a particular reason why the next 12 months will be better than the last 12 months so to speak.
Sure I can certainly start this layout I'd say that the reality is if you look at the growth trajectory of the U S business over time, whether it be expanding the footprint adding capabilities.
The U S has been on a journey.
Two two.
Round out its core capabilities for some time, we just think this is a terrific opportunity to lean into the wealth lever both ray and I worked together for many years.
I think we see clearly an opportunity in the U S marketplace from a demographic standpoint, I think we've got the capabilities. We just implemented a next generation advisor support platform.
Which we're really excited about that went into production just a month and a half ago and so we're making the investments to be able to scale that business.
Looking at having having looked after the wealth business for 10 years in Canada I look at the U S. A U S opportunity and in many ways I see it as larger certainly as it as a growth contributor I see it as a as a very significant opportunity.
I think you mentioned.
Addition of advisors.
When when these advisers come on how long before they are productive.
Well I think I think it depends on whether you're talking about mass affluent or high net worth learning curve is a little different on each and whether you're trying to build from within or your hiring seasoned seasoned advisers I wouldn't want to speculate on what we tried to do in the in the mass affluent space, we've tried to take some.
Our strong retail talent put them through a bit of an internal investment academy prepare them for their licensing both.
On an.
As well as the series seven licensed and then prepare them to be able to deliver against our financial planning framework as opposed to a brokerage framework and that and we've been quite successful with that with that operating model and if anything what I wanted to do is try to accelerate that in the high net worth space, we tend to bring individuals on board and recruit individuals that are seasoned and.
So the learning curve there is much shorter there they are really learning how to operate within TD as opposed to how to be able to deliver against client expectations and so I would say they're there. The key is just making sure that you're creating you're identifying youre recruiting top talent and and I think.
TD when when when a advisor thinks of TD and they think of our network. They think of our presence where we operate our client base. It's an extremely attractive proposition for an advisor to want to bring that investment capabilities to bear.
Yeah on our client base and and that's our proposition what we're hiring.
Okay and then Jay for you can you just talk a little bit about the effort that you and your team would have put in around the due diligence for that.
First Horizon acquisition Amendment. The number of weeks you were involved our spend percentage of the book reviewed a number of accounts that kind of stuff.
Thank you.
Sure I'll make a few comments so what I would tell you is that at the bank we are.
Have a tried and tested due diligence framework reviews. It for many acquisitions, we use it here.
And again it was detailed it was thorough there.
There were teams from across the banks that have been involved in the whole process. So this is not just risk, but but everyone and including risks there were quite a few people I don't have exact numbers with a U S team.
The Canadian team as well wouldn't walk so I'm I'm quite satisfied that the process was was robust and the.
Outcome is is a good outcome for the bank.
And does that address your question in terms of files that can give you a little bit of color. If you want yeah, yeah I'd like to know like did you spend $1000 was it 200 hours from a risk perspective.
80% of their largest accounts or did you review, 50% of the industry groups.
Yeah, I would say if you have it handy I'd like a lot more detail.
Well I'll give you a little bit of color.
We looked at we've looked at quite a few files. So I'd say approximately 20, 20% of the funds were reviewed by US and we were very sort of thoughtful in our approach on what files. We wanted to wanted to review and we were satisfied based on the file review that the credit quality here at first horizon was entirely acceptable.
We just didn't do a file review we looked at credit policies, we looked at underwriting standards, we compare them to ours. So all of that led us to the conclusion that across there.
The retail book, which is largely vessel C&I, which is a big book and of course Korea, as well that the underwriting standards and quality.
And the team.
Future duty colleagues, we were quite pleased with that so hope that helps.
Alright, just to add you know this is a core strength of TD and know how.
We do acquisitions, there's a whole process, we follow the number of people in the world, who is going to be involved who's going to be leaving each of the teams. So.
It's a very thorough process that has been reviewed by many many stakeholders to feel very comfortable as to how this particular due diligence was scared and what kind of results we got out of it.
Thank you.
Thank you.
Our last question is from Mike <unk> from Stifel. Please go ahead.
Hi, Good afternoon, I want to go back to Lee on the overdraft fees. So what I'm wondering is how concerned are you that this <unk> line and I. Appreciate the added color on the new guidance, but how concerned are you that this may actually end up going to zero if youre thinking.
One or two years out just with respect to seeing more banks actually eliminate the ski altogether.
It's just hard for me to understand how we can get this divergence where some banks charged a fee and others don't so.
How concerned would you be that theres more downside here on that fee line.
Thanks for the question I'd say the <unk>.
Our objective when we launched the TD essential checking account was in fact to provide clients with a.
With a product that would.
Give them a zero overdraft option.
So it was it was by design and now we give clients choice, whether they want the TD essential checking product or they want our core core checking.
From our standpoint, I think choice is what's critical obviously, we'll continue to monitor the market with regards to how things develop we need to be competitive and obviously to the extent that we believe we need to revisit that.
But at this point in time, we feel very comfortable with the decisions we made.
Okay I appreciate that and then a quick one for Ray just wanted to ask about the.
<unk> revenue being strong obviously I would suspect part of that is driven by the.
By the fact that you are the only Canadian bank that underwrites, P&C insurance and you've outperformed your peers quite a bit here.
Wondering how much of that do you think possibly comes back is driving returns to normal auto clean start to return to normal.
What's the sort of downside if you could quantify that would be helpful.
Thanks, Mike for the question and I'd say, our insurance business. As you said just continues to grow and take market share.
And before I get there I mean, just to give you a sense to your question TD is I mean, where you have our earnings very strong earnings were up 15% year on year core revenue growth of 8%.
And that's really on the strength of our underwriting our pricing sophistication and claims excellence.
And so.
You know that's you know when you overlay. The fact that Q1 was an unusually high catastrophe activity for this quarter, it's actually the highest cat quarter since 2014 for Q1.
So we have been monitoring closely the easing of the COVID-19 public health restrictions across the country.
And pandemic has certainly impacted driving behavior and it continues to disrupt the supply chain I would say in the auto sales new auto sales and certainly in the auto parts industry and so we're watching that carefully.
But in addition to this claims are also impacted as you know by many other factors and seasonality being one weather events and I think you would have all have seen that over the last few years, we've expanded our market leading auto centers across the country and certainly that will help us as driving returns and then we do it.
Dissipate that as Covid dissipates, the driving world resumed to pre pandemic levels.
And we do anticipate that claims or claims are going to normalize and I think the advantage that we have is that we will have over the course of this year 28 auto centers across the country handling about 40% to 50% of our auto claims which is a real advantage from a client experience and from a claims management.
Great. Thank you.
Thank you.
And we have.
No more questions in the queue at this time I would now like to turn the call over to Mr. Bharat <unk> for closing remarks.
Thank you operator.
Oh, great engagement on the questions great job by the team here at TD and our folks are in new positions, whether you can see that they certainly are well prepared and raring to go is a terrific to see that.
From my perspective, a great start to the year very happy with how we are performing in various lines you saw what our opportunities are we had a good discussion on that and really really excited about the announced acquisition of first horizon.
This does a you know it takes all of our business in the U S to a new level as to the opportunity in a very very exciting.
So when I'm happy to report that you know we will get some of these are businesses, where we've lagged and go back to two with Didi normally is in the pandemic as it certainly is in a in.
At an outsize impact on us because of our brand cetera centric models, particularly in Canada.
Before we close I'd like to take this opportunity to thank Julian Manning as he heads off to a new role with TD asset management.
The last few years Julian has built a strong and award winning IR team that is respected by our analysts and investors I'd like to thank Julian for his leadership and wish her all the best that TD asset management.
I'm also delighted to welcome broke hales as our new head of IR and she is off to a flying start having just done her second call in one week.
Thanks for joining us and we'll talk to you all again in 90 days. Thank you.
Thank you.
France has now ended please disconnect your lines at this time and we thank you for your participation.
Yeah.