TD has released its Second Quarter 2008 Report and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!
Step One is to analyze their Tier 1 Capital, reproducing the prior format:
| TD Capital Structure October, 2007 & April, 2008 |
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| 4Q07 | 2Q08 | |
| Total Tier 1 Capital | 15,645 | 16,646 |
| Common Shareholders’ Equity | 131.5% | 169.6% |
| Preferred Shares | 6.2% | 10.1% |
| Innovative Tier 1 Capital Instruments | 11.1% | 10.4% |
| Non-Controlling Interests in Subsidiaries | 0.1% | 0.1% |
| Goodwill | -49.0% | -90.2% |
Next, the issuance capacity (from Part 3 of the introductory series):
| TD Tier 1 Issuance Capacity October 2007 & April 2008 |
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| 4Q07 | 2Q08 | ||
| Equity Capital | (A) | 12,931 | 15,069 |
| Non-Equity Tier 1 Limit | (B=A/3), 4Q07 (B=0.428*A), 2Q08 |
4,310 | 6,450 |
| Innovative Tier 1 Capital | (C) | 1,740 | 1,736 |
| Preferred Limit | (D=B-C) | 2,570 | 4,714 |
| Preferred Actual | (E) | 974 | 1,675 |
| New Issuance Capacity | (F=D-E) | 1,346 | 3,039 |
| Items A, C & E are taken from the table “Regulatory Capital” of the supplementary information; Note that Item A includes Goodwill, FX losses, “Other Capital Deductions” and non-controlling interest Item B is as per OSFI Guidelines; the limit was recently increased. Items D & F are my calculations |
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and the all important Risk-Weighted Asset Ratios!
| TD Risk-Weighted Asset Ratios October 2007 & April 2008 |
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| Note | 2007 | 2Q08 | |
| Equity Capital | A | 12,931 | 15,069 |
| Risk-Weighted Assets | B | 152,519 | 178,635 |
| Equity/RWA | C=A/B | 8.48% | 8.43% |
| Tier 1 Ratio | D | 10.3% | 9.1% |
| Capital Ratio | E | 13.0% | 12.7% |
| Assets to Capital Multiple | F | 19.7x | 19.2x |
| A is taken from the table “Issuance Capacity”, above B, D & E are taken from TD’s Supplementary Report C is my calculation. F is from Note 9 of the quarterly report |
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The reported Assets-to-capital multiple reflects that goodwill is deducted from total capital (the denominator) AND FROM TOTAL ASSETS (the numerator); given TD’s huge goodwill, this makes rather a difference!
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