{"id":4312,"date":"2008-12-04T14:36:23","date_gmt":"2008-12-04T18:36:23","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=4312"},"modified":"2008-12-04T14:36:23","modified_gmt":"2008-12-04T18:36:23","slug":"td-capitalization-4q08","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=4312","title":{"rendered":"TD Capitalization: 4Q08"},"content":{"rendered":"

TD has released<\/a> its Fourth Quarter 2008 Report<\/a> and Supplementary Package<\/a>, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to!<\/p>\n

Step One is to analyze their Tier 1 Capital, reproducing the prior format<\/a>:<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
TD Capital Structure
\nOctober, 2007
\n& October, 2008<\/td>\n<\/tr>\n
 <\/td>\n4Q07<\/td>\n4Q08<\/td>\n<\/tr>\n
Total Tier 1 Capital<\/td>\n15,645<\/td>\n20,679<\/td>\n<\/tr>\n
Common Shareholders’ Equity<\/td>\n131.5%<\/td>\n144.2%<\/td>\n<\/tr>\n
Preferred Shares<\/td>\n6.2%<\/td>\n11.7%<\/td>\n<\/tr>\n
Innovative Tier 1 Capital Instruments<\/td>\n11.1%<\/td>\n13.4%<\/td>\n<\/tr>\n
Non-Controlling Interests in Subsidiaries<\/td>\n0.1%<\/td>\n0.1%<\/td>\n<\/tr>\n
Goodwill<\/td>\n-49.0%<\/td>\n-73.3%<\/td>\n<\/tr>\n
Miscellaneous<\/td>\nNA<\/td>\n+3.9%<\/td>\n<\/tr>\n
‘Common Shareholders Equity’ includes ‘Common Shares’, ‘Contributed Surplus’, ‘Retained Earnings’ and ‘FX net of Hedging’
‘Miscellaneous’ includes ‘Securitization Allowance’, ‘ALLL\/EL shortfall’ and ‘Other’.<\/i><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Next, the issuance capacity (from Part 3 of the introductory series<\/a>):<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
TD
\nTier 1 Issuance Capacity
\nOctober 2007
\n& October 2008<\/td>\n<\/tr>\n
 <\/td>\n4Q07<\/td>\n4Q08<\/td>\n<\/tr>\n
Equity Capital<\/td>\n(A)<\/td>\n12,931<\/td>\n15,489<\/td>\n<\/tr>\n
Non-Equity Tier 1 Limit<\/td>\n(B=A\/3), 4Q07
(B=0.666*A), 4Q08<\/td>\n		4,310<\/td>\n10,326<\/td>\n<\/tr>\n
Innovative Tier 1 Capital<\/td>\n(C)<\/td>\n1,740<\/td>\n2,765<\/td>\n<\/tr>\n
Preferred Limit<\/td>\n(D=B-C)<\/td>\n2,570<\/td>\n7,561<\/td>\n<\/tr>\n
Preferred Actual<\/td>\n(E)<\/td>\n974<\/td>\n2,425<\/td>\n<\/tr>\n
New Issuance Capacity<\/td>\n(F=D-E)<\/td>\n1,346<\/td>\n5,136<\/td>\n<\/tr>\n
Items A, C & E are taken from the table
\n“Regulatory Capital”
\nof the supplementary information;
\nNote that Item A includes everything except preferred shares and innovative instruments<\/em>

\nItem B is as per OSFI Guidelines; the limit was recently increased<\/a>.
Items D & F are my calculations<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

and the all important Risk-Weighted Asset Ratios!<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
TD
\nRisk-Weighted Asset Ratios
\nOctober 2007
\n& October 2008<\/td>\n<\/tr>\n
 <\/td>\nNote<\/td>\n2007<\/td>\n4Q08<\/td>\n<\/tr>\n
Equity Capital<\/td>\nA<\/td>\n12,931<\/td>\n15,489<\/td>\n<\/tr>\n
Risk-Weighted Assets<\/td>\nB<\/td>\n152,519<\/td>\n211,750<\/td>\n<\/tr>\n
Equity\/RWA<\/td>\nC=A\/B<\/td>\n8.48%<\/td>\n7.31%<\/td>\n<\/tr>\n
Tier 1 Ratio<\/td>\nD<\/td>\n10.3% <\/td>\n9.8% <\/td>\n<\/tr>\n
Capital Ratio<\/td>\nE<\/td>\n13.0%<\/td>\n12.0%<\/td>\n<\/tr>\n
Assets to Capital Multiple<\/td>\nF<\/td>\n19.7x<\/td>\n21.6x<\/td>\n<\/tr>\n
A is taken from the table “Issuance Capacity”, above
\nB, D & E are taken from TD’s Supplementary Report
\nC is my calculation.
\nF is from OSFI (4Q07) and my calculation (4Q08) Total Capital ($25,348-million), Total Assets ($563,214-million) less Goodwill ($14,842-million)<\/em><\/td>\n<\/tr>\n<\/table>\n<\/div>\n

The Assets-to-capital multiple has skyrocketted over the quarter:<\/p>\n

\n\n\n\n\n\n\n\n
Assets-to-Capital
Rough Calculation<\/td>\n<\/tr>\n
Item<\/td>\n3Q08<\/td>\n4Q08<\/td>\n<\/tr>\n
Total Assets<\/td>\n508,839<\/td>\n563,214<\/td>\n<\/tr>\n
Goodwill<\/td>\n14,317<\/td>\n14,842<\/td>\n<\/tr>\nNet Assets<\/td>\n494,522<\/td>\n548,372<\/td>\n<\/tr>\n
Total Capital<\/td>\n24,702<\/td>\n25,348<\/td>\n<\/tr>\n
Assets-to-Capital<\/td>\n20.02x<\/td>\n21.63x<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

It should be noted that my rough calculation above is not strictly accurate: as TD noted in their 3Q08 Shareholder Report<\/a>:<\/p>\n

The assets-to-capital multiple is calculated as total assets plus off-balance sheet credit instruments, such as certain letters of credit and guarantees less investments in associated corporations, goodwill and net intangibles, divided by Total adjusted capital.<\/p><\/blockquote>\n

… and they arrived at a figure of 17.9x for 4Q08. OSFI does not require the Assets-to-Capital multiple to be disclosed, let alone reconciled to other data.<\/p>\n

Whatever the level, it is apparent that the multiple has increased, with assets up approximately $55-billion. “Securities” is pretty much a wash, with a $20-billion decline in “Trading” balanced largely by an increase in “Available for Sale” of $15-billion. “Loans” is a similar wash, with a $10-billion decline in “Residential Mortgages” offset by a $8-billion increase in “Business & Government”. The big balloon is a $42-billion increase in “Derivatives”, financed by a similar $35-billion “Derivatives” on the liability side.<\/p>\n

This is probably due to the huge market move of the Canadian Dollar in the third quarter, as individual contracts in a matched book ballooned in value. BMO was also affected by this behaviour<\/a>. However, TD does not address this asset\/liability gross-up, nor does it provide a table showing counterparty strength.<\/p>\n","protected":false},"excerpt":{"rendered":"

TD has released its Fourth 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 …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":["post-4312","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/4312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4312"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/4312\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}