TD Capitalization: 2Q08

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
  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):

Tier 1 Issuance Capacity
October 2007
& April 2008
  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

and the all important Risk-Weighted Asset Ratios!

Risk-Weighted Asset Ratios
October 2007
& April 2008
  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

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!

2 Responses to “TD Capitalization: 2Q08”

  1. […] on the heels of their second quarter report comes a new issue announcement: it has entered into an agreement with a group of underwriters led […]

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