Management’s Discussion and Analysis

Financial Highlights

(Canadian $ in millions, except as noted) 2018 2017 2016

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in prior periods is comprised of both specific and collective provisions. Refer to the Changes in Accounting Policies on page 121 of the Accounting Matters and Disclosure and Internal Control (PDF, 81 KB) section of the MD&A for further details.

Certain comparative figures have been reclassified to conform with the current period’s presentation.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures (PDF, 40 KB) section of the MD&A.

na – not applicable

Summary Income Statement

     
Net interest income 10,313 10,007 9,872
Non-interest revenue 12,724 12,253 11,215
Revenue 23,037 22,260 21,087
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 1,352 1,538 1,543
Revenue, net of CCPB 21,685 20,722 19,544
Provision for credit losses on impaired loans (1) 700 na na
Provision for (recovery of) credit losses on performing loans (1) (38) na na
Total provision for credit losses (1) 662 746 771
Non-interest expense 13,613 13,330 13,041
Provision for income taxes 1,960 1,296 1,101
Net income 5,450 5,350 4,631
Attributable to bank shareholders 5,450 5,348 4,622
Attributable to non-controlling interest in subsidiaries 2 9
Net income 5,450 5,350 4,631
Adjusted net income 5,979 5,508 5,020

Common Share Data ($, except as noted)

Earnings per share 8.17 7.92 6.92
Adjusted earnings per share 8.99 8.16 7.52
Earnings per share growth (%) 3.1 14.5 5.3
Adjusted earnings per share growth (%) 10.1 8.5 7.4
Dividends declared per share 3.78 3.56 3.40
Book value per share 64.73 61.92 59.56
Closing share price 98.43 98.83 85.36
Number of common shares outstanding (in millions)      
End of period 639.3 647.8 645.8
Average diluted 644.9 652.0 646.1
Total market value of common shares ($ billions) 62.9 64.0 55.1
Dividend yield (%) 3.8 3.6 4.0
Dividend payout ratio (%) 46.2 44.8 49.0
Adjusted dividend payout ratio (%) 41.9 43.5 45.0

Financial Measures and Ratios (%)

Return on equity 13.2 13.3 12.1
Adjusted return on equity 14.6 13.7 13.1
Return on tangible common equity 16.2 16.3 15.3
Adjusted return on tangible common equity 17.5 16.5 16.1
Net income growth 1.9 15.5 5.1
Adjusted net income growth 8.6 9.7 7.2
Revenue growth 3.5 5.6 8.8
Revenue growth, net of CCPB 4.6 6.0 7.8
Non-interest expense growth 2.1 2.2 6.5
Adjusted non-interest expense growth 3.4 3.6 5.9
Efficiency ratio, net of CCPB 62.8 64.3 66.7
Adjusted efficiency ratio, net of CCPB 62.2 62.9 64.1
Operating leverage, net of CCPB 2.5 3.8 1.3
Adjusted operating leverage, net of CCPB 1.2 2.0 2.3
Net interest margin on average earning assets 1.51 1.55 1.59
Effective tax rate 26.5 19.5 19.2
Adjusted effective tax rate 20.7 19.8 19.9
Total PCL-to-average Net Loans and acceptances (annualized) 0.17 0.20 0.22
PCL on impaired loans-to-average net loans and acceptances (annualized) 0.18 0.22 0.22

Balance Sheet (as at, $ millions, except as noted)

Assets 774,048 709,580 687,935
Gross loans and acceptances 404,215 376,886 372,464
Net loans and acceptances 402,576 375,053 370,539
Deposits 522,051 479,792 470,281
Common shareholders’ equity 41,387 40,114 38,464
Cash and securities-to-total assets ratio (%) 29.9 28.5 27.1

Capital Ratios (%)

Common Equity Tier 1 Ratio 11.3 11.4 10.1
Tier 1 Capital Ratio 12.9 13.0 11.6
Total Capital Ratio 15.2 15.1 13.6
Leverage Ratio 4.2 4.4 4.2

Foreign Exchange Rates ($)

As at Canadian/U.S. dollar 1.3169 1.2895 1.3411
Average Canadian/U.S. dollar 1.2878 1.3071 1.3251