Rudy J. Sankovic - Senior Vice President of Finance - Wealth Management W. Edmund Clark - Chief Executive Officer, President and Non-Independent Director Colleen M. Johnston - Chief Financial Officer and Group Head of Finance Mark R. Chauvin - Chief Risk Officer and Group Head of Risk Management - Corporate Office Timothy D. Hockey - Group Head of Canadian Banking, Auto Finance & Credit Cards, Chief Executive Officer of Td Canada Trust and President of Td Canada Trust Bharat B. Masrani - Group Head U.S. Personal & Commercial Banking, Chief Executive Officer of America's Most Convenient Bank(R) and President of America's Most Convenient Bank(R) Robert E. Dorrance - Group Head of Wholesale Banking, Chairman of TD Securities, Chief Executive Officer of TD Securities and President of TD Securities

Peter D. Routledge - National Bank Financial, Inc., Research Division Andre-Philippe Hardy - RBC Capital Markets, LLC, Research Division Michael Goldberg - Desjardins Securities Inc., Research Division Jason Bilodeau - TD Securities Equity Research John Reucassel - BMO Capital Markets Canada Darko Mihelic - Cormark Securities Inc., Research Division Robert Sedran - CIBC World Markets Inc., Research Division Steve Theriault - BofA Merrill Lynch, Research Division Sumit Malhotra - Macquarie Research Gabriel Dechaine - Crédit Suisse AG, Research Division Mario Mendonca - Canaccord Genuity, Research Division

Good afternoon, and welcome to TD Bank Group Second Quarter 2013 Investor Presentation. My name is Rudy Sankovic, and I'm the Head of Investor Relations for the bank. We will begin today's presentation with remarks from Ed Clark, our CEO; after which, Colleen Johnson, the bank's CFO, will present second quarter operating results. Mark Chauvin, Chief Risk Officer, will then offer comments on credit quality. We will then entertain questions from those present in the room and prequalified analysts and investors on the phone. Also here today to answer your questions are Tim Hockey, Group Head, Canadian Banking, Auto Finance and Credit Cards; Mike Pedersen, Group Head, Wealth, Insurance and Corporate Shared Services; Bharat Masrani, Group Head, U.S. P&C Banking; and Bob Dorrance, Group Head, Wholesale Banking. Please turn to Slide 2. At this time, I'd like to caution our listeners that this presentation contains forward-looking statements. 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 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 any other purposes. I'd also like to remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results to assess each of our businesses and to measure the bank's overall performance. The bank believes that adjusted results provide the reader with a better understanding of how management views the bank's performance. Ed will be referring to adjusted results in his remarks. Additional information on items of note, the bank's reported results and factors and assumptions related to forward-looking information are all available on our Q2 2013 report to shareholders. With that, let me turn the presentation over to Ed.

Thank you, Rudy, and welcome, everyone, and thank you all for joining us here today. Now Colleen's going to be up shortly to review our second quarter results in detail, but I thought I would start by sharing my thoughts on how we're doing and how the second half of the year is shaping up. First, I should note, there had been several milestone events since the first quarter, and I'd like to take a moment just to remark on them. We closed the Target and Epoch acquisitions in March, and I would like to welcome members of both teams to TD. We are absolutely delighted that you're with us. We also will announce our plans for the CEO succession. And as I said at the time, and I still really think it's terrific, I couldn't be more pleased with the choice of my successor and, frankly, the process itself, which has underscored our commitment to continuity with change. Now to the quarter. Earnings were up 6% on a year-over-year basis. For the first half of the year, earnings were up 7% and earnings per share were up 6%. In my view, a pretty good result. Our Canadian retail bank had a good quarter. Earnings increased by 5%, driven by healthy volume growth in business banking, improved credit performance and good expense management. The underlying results were even stronger, with growth closer to 9%. Colleen is going to go into that in some more detail. For the first half of the year, earnings were up 8%, and we would expect similar year-over-year growth in the second half. A very good result given the environment in which we're operating. Wealth also had a good quarter, as well as a good first half. On a year-to-date basis, earnings were up 8%, including…

Thanks very much, Ed, and good afternoon, everyone. Please turn to Slide 4. Our results in the second quarter were solid with adjusted EPS of $1.90, up 4% year-over-year, and total bank adjusted net income of $1.8 billion, up 6% from last year. Retail-adjusted earnings of $1.6 billion were up 5% from last year, and wholesale net income was $220 million, up 12%. The Corporate segment had a loss of $26 million. It was a solid result in a challenging environment. Please turn to Slide 5. This slide presents our reported and adjusted earnings this quarter, with a difference due to 3 items of note. None of these are new this quarter. Please turn to Slide 6. Canadian P&C delivered a good quarter, with adjusted net income of $877 million, up 5% year-over-year. Excluding the MBNA credit mark release and one extra day last year, revenue grew by 4%, and net income grew by 9%. Loan and deposit growth were good this quarter. Real estate secured lending volumes were up 4% versus last year, and we maintained our leadership position in this category. Business lending growth was strong, up 14%. Retail deposits increased 5%, and business deposit growth was 8%. Credit performance continues to be strong, with PCL and Personal Banking down $52 million from last year, primarily due to better credit performance, enhanced collection strategies and low bankruptcies. Business Banking PCLs were $23 million higher due to a provision for a single client. Adjusted expense growth was 1% year-over-year as volume growth, merit increases and investment in the business were largely offset by broad-based productivity gains. NIM was stable versus Q1, up 1 basis point sequentially due to seasonal factors. Our expectation remains that NIM will decline by 1 to 2 basis points per quarter. For the first half…

Thank you, Colleen, and good afternoon, everyone. Please turn to Slide 14. Once again, this quarter was quite strong from a credit perspective. Excluding the impact of the Target acquisition, bank-wide PCL rates remained stable quarter-over-quarter, representing the lowest rates experienced in more than 5 years. In Canada, while we continue to closely monitor the high level of consumer indebtedness and the residential real estate market, we're not seeing any concerning trends in our credit metrics. To the contrary, during the quarter, gross impaired loans declined in each of the personal credit portfolios. Delinquency improved across the board. Canadian credit cards continued their positive momentum, leading to a further reduction in loss rates. And commercial and wholesale loss rates remained at historically low levels. To sum up, credit quality of the Canadian personal, commercial and wholesale credit portfolios remains very strong. Turning to the U.S., we are seeing continued improvement in the legacy portfolios as evidenced by a reduction in loss rates when adjusted for the Target acquisition and the normal course build up of reserves for the growing Indirect auto portfolio. Key portfolio highlights include: the quality of residential mortgage originations remains strong while we experienced some lumpiness in commercial impaired formations during the quarter; the improving trend remains on track; and the acquired portfolios continue to perform well within our expectations. Now, I'll turn the presentation back to Rudy.

Great. Thanks, Mark. We'll now open it up for questions. And to give everyone a chance to participate, please keep to one question and then requeue. For those participating in person here in the room, can I ask you to identify your name and firm before asking your question. And before ending the call today, I will ask Ed to offer some final remarks. So why don't we get started in the room? So let's start with Peter.

Peter Routledge from National Bank Financial. A question, Colleen, on [indiscernible] to your disclosure, and then I also have the Supp Pack, a line where you show the impact of the 100-basis-point rising rates [indiscernible] and that number has gone from something near 0 to around 4%, let's say, which is not massive, but it strikes me as somewhat uncharacteristic of TD and TD's asset and liability management principles. So maybe, can you talk about how you're thinking about that sensitivity? I'm not suggesting it's a bad thing, it's just different from where TD was traditionally on that issue. And two, how high could that number get? It's 262 now in your Supp Pack. How much higher could that get before you start to pull back?

So Peter, I'm going to start off just to respond to your question about the Supp Pack, and then Ed's going to talk about the broader philosophy. So the numbers in the Supp Pack are really not representative of what would happen in the case of a rate change, and they really assume that every -- that when rates move, everything moves up. In fact, customer rates move at the same rate and, obviously, market rates move. So it's not really a helpful number in terms of simulating what would happen with rate increases. And obviously, it doesn't model in all the other variables around customer behavior, et cetera. So the models that we have internally, and again, the many variants of that, give you, I think, a little bit more of an idea of, again, in this case, what we're modeling 25 basis points. Having said that, that isn't linear, again, because even if you think about what happens if you go to 50 or 100, you don't necessarily take that multiple. Again, you have to factor in all of the changes in behavior, et cetera. And this isn't just a NIM game. Obviously, it affects -- these things affect volume as well. So what we really wanted to do through this process is just -- again, without trying to drill too much into our models, at least give you an indication that there is a fair amount of NII upside. And I think on the philosophy, Ed would like to walk through that.

There's no question that as we shorten up the duration, we start affecting that number. The way you're required to report that number, what it basically says is that the U.S. would go to a minus 80-basis-point interest rate, and you can come to your own conclusion if that's a realistic number to assume. And so we don't believe it is. And so in turn, in terms of our own models, we look at a world in which, definitely, if the Canadian rates could come down and it's possible that the U.S. goes down to 0, but we think it's -- you're starting to get into quite a different world if you say you're going to run the bank on the assumption that we're going to have large negative interest rates in the United States. So as we shorten up the duration, though, that number does expand. But what we do is the internal measure we use is a measure that says well, let's have a base of 0 for the United States and a number somewhat higher than that for Canada and hold that as our constraint of how short we'll actually go duration. The reality is, it would -- it's a judgment call. There is clearly, as you shorten up duration, you are running higher risk that interest rates will fall here, but you are also getting potentially 3 to 4 times upside if interest rates start to move. And we're saying explicitly, the market, to hold your position and say I want it to be neutral, which means go out long duration here, I think -- we think is the wrong positioning for the bank, and that's why we're trying to be explicit with you that, yes, we've shortened duration and we are willing to give up earnings in the short run to have a better percentage leverage on interest rates rising. Constrained, though, we have an internal measure that's not the one in that supplementary pack.

We'll just go across the row. So, John [ph]?

Ed, in terms of the share repurchase program, keeping in mind TD's historic prudence on capital, but when we take a look at what you've announced today as lower than what your peer group has done, how aggressive can we assume that you're going to be on the share repurchase program? And secondarily, can we characterize this as underscoring your recent statements about large acquisitions in the U.S.?

Well, I don't think -- well, first off, I would say, when we announce something, we'll probably actually do it. So you can expect that we will actually implement this buyback program rather than announce one. But I think we are in a different position than the other banks, and so we're not going to try to imitate the other banks in this. They're running their strategy, which is -- they believe is good for their bank, and we're running ours. And you start with the fact that we do earn a higher rate of return on risk weighted assets or regulatory capital, however you want to mention them. So, therefore, we have a superior ability to generate capital. So in some sense, we have a bigger issue than everyone else. But corresponding to that, we also have more opportunities. And so I think we're – as you know, we have a balance sheet in the United States. It's long deposits and short assets. We've been very, very prudent and will continue to be very prudent, but we're obviously in the market all the time to say can we in fact acquire more assets? Because clearly, our return on the U.S. investment would be significantly higher if we could fill in that balance sheet. Right now, those are difficult to find at returns, risk-adjusted returns that are acceptable to us, but we wouldn't want to run our capital down to a point where we couldn't afford to buy one. We'd have to issue shares for this kind of small -- I mean, these tend to be small acquisitions. I'll put Target as a small acquisition as a certain order of magnitude. You don't want to have to issue share. So we will probably carry a somewhat bigger cushion. We probably have a smaller cushion in terms of the volatility of our capital than some of our competitors, but we would want more of a cushion to be able to do small asset acquisitions. In today's market, we don't see large acquisitions of anything that's of interesting to us. I think what I'm trying to say in my statement -- though when we look at that, we certainly wouldn't rule it out, that as we look at all those factors, as we generate this capital faster than other people, that we would decide, well, the best thing to do is to give it back. And I do think there's a change in the world that we're in, is that we're in a world of -- a fairly capital-intensive world. And so lugging excess capital around waiting for a deal doesn't seem like a very good thing to be doing. And so if we have a cushion that will allow us to do small acquisitions, I don't know why we'd keep a whole lot more than that.

Just go -- Andre?

Andre Hardy, RBC Capital Markets. A question on the credit card business. It used to be a business that you described as underpenetrated, made that statement again in justifying the MBNA acquisition in Canada. Is that still a business you view as being underpenetrated? And if yes, is it the right time to be looking to increase that business given the high consumer leverage?

So I'll take that. I'd say, in Canada, we used to talk about it being underpenetrated relative to its market share versus our sort of traditional 21%, 22% share. We now have #1 share in the credit card space. So we would see that as being, yes, still a growth opportunity, but certainly not one that we would have had, say, 5 years ago. The question for us is North American and in that case, we certainly believe that there are great growth opportunities in the U.S. ahead of us, if nothing else other than just penetrating our existing customer base in our U.S. store base.

I guess the one follow-up comment I'd make is it's probably -- I mean, the MBNA turned out to be a terrific acquisition for us. So it's been a very good acquisition. And I think it -- and it was a factor in our winning the Target deal, combined with Target, which also has turned out to be a very good deal. I mean, it's clearly put us in a position where there are more -- there are opportunities coming our way in North America. And given my earlier comments being we have a deposit-rich bank, and so that's obviously an area that prudently -- and I think there, it's a matter of building your operational capability to take advantage of the opportunities that are coming our way.

We'll start in the front row here.

Michael Goldberg, Desjardins Securities. To get back to capital for a second, do you want to reiterate what you probably said in the past, how does continuing dividend growth fit into your capital plans in addition to the share buyback? And in relation to looking at the asset expansion, if you are going to do something and you've been successful with auto loans, cards and mortgages in the U.S., would it most likely be in those areas? Or would you want to start adding to your capability in U.S. C&I?

I'll start and then I can put Bharat. So on -- first off, our dividend policy hasn't changed. And as you know, it's a pretty good new story for the shareholders that we've said that we would -- we've moved our dividend payout ratio range, and so we've got to get ourselves more in the middle of that range. As always, we're going to do it the TD way, which is just every year, methodically, go up to that range. But that implies that our dividends will grow faster than our earnings per share, which is exactly what has been happening. But there's probably a couple of years left where that will continue to happen. So we've always separated out your dividend strategy and your capital strategy. If you have surplus capital that you don't think you're going to use in the near future, then buy back shares. If you have great earnings growth, you can have great dividend growth. In our case, it's supplemented by the fact that we've decided to change the payout ratio. I think we don't rule out entering the new spaces of asset generation. But clearly, you have to be a lot more careful about doing that, in a sense, buying asset-generation capability that you don't have, than you are expanding it where you already have demonstrated capability. So your threshold of returns would be, obviously, much higher where you're going into a new piece of territory than it would be if you're just adding on to a portfolio.

Michael, the only thing I'd add is that there are, apart from the 3 asset classes you talked about, there are other areas that are of focus for us. We already have existing capability, but we are adding to those capabilities. And those would be in health care. We have an interest in building that business even more than what we have today. The other one is asset-based lending. We do have a small team that we've been adding on to it. And the third one there has become a new focus area for us, given that we have TD Auto Finance, is dealer floor plan in the U.S. So those are the types of businesses where we are building out capabilities. And if there were suitable portfolios or assets available in those areas, we would certainly look at it seriously.

Jason?

Jason Bilodeau, TD Securities. For Tim, your residential secured lending growth was sort of 4% year-on-year. I don't want to slice this too finely, but if you marry that with sort of Ed's comments that it looks like housing is in a process of decelerating, could we see this number be slipping into low-single digits in the back half of the year? And how does that frame up for your revenue picture? And I know we haven't seen the rest of the group yet, but how do you feel your market share in that category has been performing the last few months?

So I will start with the second question. Market share actually -- and overall, real estate secured lending is actually basically flat, slightly up year-over-year. So it might be an industry-type statement. So yes, we have seen a deceleration in real estate secured lending growth, probably slightly faster than we expected if you'd asked us this time last year. And so -- but we are still expecting that number to be in the, call it, high end of the middle -- I don't know how to say that. Call it 3% to 5%, 4% to 6%, somewhere in there. But it's decelerating, absolutely.

Okay. And 1% to 2% seems to you to be sort of a downside case?

Yes, that's -- certainly not this year.

John?

John Reucassel from BMO Capital Markets. Don't know if it's a question for Colleen or Bharat, just the non-interest income in the U.S. business, it looked like it was up $30 million this quarter versus Q1 and $50 million, call it, versus Q2 last year. Is that all Target-related? And Target was halfway through the quarter, so what else is going on there? Or should we expect this -- is there a bigger jump coming in this number for the rest of the year?

So if you look at the quarter-over-quarter increase, that was largely Target. And to your question, Target, we really have half a quarter of Target now. So you'll see the full effect in Q3.

So is there -- not to put too -- so instead of $30 million, was there really -- there's really $60 million additional, non-interest income fees on this Target portfolio per quarter? If I looked at it Q1 versus...

So the increase was about $40 million, I think, quarter-over-quarter. And yes, you double that for the full impact of Target on a full quarter basis.

Anyone else in the room? Darko.

It's Darko from Cormark Securities. Just wanted to follow-up with Tim on the residential mortgage question. And really, what I'm after here is -- I just kind of want to understand what's happening on the ground with respect to Ed's comments earlier about the government changes and sort of what we're seeing at the really ground level. I'll give you an example. Table 18 of your shareholders' report provides for us the breakdown of your insured and your uninsured residential mortgage portfolio. If you compare that to last quarter, what you see is your insured actually went down, and your uninsured portfolio went up and not by an immaterial amount. That would sound surprising to me relative to what would have been the behavior, say, 1 year or 2 ago. Is the first-time home buyer being kicked out here in the market? Can you talk to where these originations are coming from? Is the broker origination -- the broker-originated mortgages, is that slowing as a percentage of overall originations? I'm just looking for some sort of a flavor for what the government changes have brought about.

So I'm tempted to just say it's moderating as expected, but I think there's an expectation of a more fulsome answer. So if you want color on the ground -- and you've asked a bunch of different questions in there. So what we're seeing is -- so we're now into what I would consider to be a late spring market. But if you step back and say what's been happening over a multiple number of years, as Ed said, we've been quite concerned about the overall growth rate of real estate secured lending for the last number of years. And so the regulatory changes that have actually been taking place over a number of years, quite prudently implemented over a long period of time, are actually having almost precisely the effect that we would have expected, which is a slow landing. So to your point about things like what's happening with the first-time homebuyer and origination shift, so I'll give you -- we don't actually track. There's no good stats on first-time versus not. But clearly, because of the changes around the high-ratio mortgage versus conventional, all the mortgage originations are down year-over-year, but conventional are down less. So in other words, what you would sort of ascribe to be -- subscribe to be first-time homebuyers have actually had more of an impact, which you could say is probably bang on what the regulatory changes would have expected. Overall, we're clearly seeing that even notwithstanding a low interest rate environment, and obviously there's been lots of conversation about that, the rate that consumers are not backing up the truck and actually creating a frothy housing market as low interest rates are usually incenting them to do. And in other asset classes, obviously, the growth rates are even slower. In terms…

Yes. The only thing I would add on the stress test, it's really not the mortgage portfolio that you're worried about. And that if you paint that type of scenario where you have such a reduction in house prices across the country, it's really your other credit portfolios that would be more of a concern, the unsecured credit portfolios and your commercial portfolio. So we stress that as well. And really, through the deepest scenario that we can paint, the Canadian operations remain profitable. I mean, it's not a good picture, but it's a profitable picture.

Operator, why don't we go to the phones now, please?

Absolutely. Your first question is from Robert Sedran from CIBC.

Tim, there's been a -- I wanted to come back to the credit card issue. There's been a fair bit of chatter in the market about the travel cards and loyalty programs and such. I wonder if you can just give us a sense of whether you're satisfied with your positioning in that segment, how the card has been performing? And then I wonder if I can paraphrase your earlier answer to the credit card question as we definitely are looking to gain share in that business, but perhaps not necessarily in Canada.

So we're quite comfortable with our travel card portfolio, it's growth rate. But as opportunities come up and for market share expansion, whether it be in the U.S. or in Canada, we continue to be interested. We think this is a great space even at this point in the credit cycle.

What segment of the credit card market is growing more rapidly, Tim?

I would say the high-end spend cards. I mean, Canadians love their point programs, and they continue to use them probably more so than almost any other nation on the planet.

Your next question comes from the line of Steve Theriault from Merrill Lynch Canada.

A capital markets question for Bob Dorrance, please. So, Bob, a nice trading number this quarter, exceptional really on the fixed income side and from what I can see, without any big jump in vol, without any big jumps in originations. So I was hoping you could tell us, is there something specific to TD here you can highlight for us on the fixed side? Or was the environment just better than what I think we've been expecting here for Q2?

Okay. I'm not sure I can say whether there's anything specific to TD because I haven’t seen other results. As you've mentioned, the strength in the trading results was driven by the interest in credit category. The real tailwind in the market thus far during the year and globally has really been in the credit space, broadly speaking. So corporate credit, financial institution credit have all experienced spread compression or price increases. So good volumes in secondary markets, as well as very good volumes in origination markets. So when you combine strong origination of credit with positive trends, it's really the secret sauce to having good trading results in that marketplace.

So nothing unusual as far as you can tell, just a nice, supportive environment?

No. I think a very just strong supportive environment in credit across the spectrum, high-yield investment grade leveraged loan. So all those markets I think is -- I think many of you have been pointing out in reports, are very strong. So the participation in that is really what's driven our results.

Your next question comes from the line of Sumit Malhotra from Macquarie Capital.

2 hopefully quick ones for Colleen. A lot of talk about expense management and how the bank has put an increased emphasis on that over the -- or coming into what we expected to be a slower growth revenue year. If I look ahead to Q3, in the last 2 Q3 conference calls you've told us about a large expense uptick that we should expect in Q4. If I look ahead to that, in planning -- certainly planning through expense management much more coming into this year, has it developed to the point where we're not going to see that kind of increase? Do you expect it to be more of a steady state as far as your expense growth is concerned?

So, Sumit, we're working very hard to sort of even out our expenses over the course of the year, in particular as it relates to initiative and project spend. And I know the last couple of years, we've had a bit of that snowplow effect in the fourth quarter, and we'd like to try to remedy that. I think the consequence this year is obviously, as I think we've had some success in doing that, then our expense growth rates earlier in the year look a bit higher. I'd like to show you better proof points at this stage in the year around what we're going to achieve on a full year basis. So my sense is that, probably, in Q3, just given that phenomenon, you'll probably still see a bit of an elevated rate of expense growth. So I doubt on a Q3 year-to-date basis I'll be showing you a rate of growth at 3%, but certainly on a full year basis. So in other words, what I'm saying is we are really actively managing our expenses so that we don't have that kind of a blip in the fourth quarter. So again, in fact, I would expect -- I would definitely expect that expenses will be down in the fourth quarter versus the prior year. So that's what we're looking at, at the moment. And I think some very good efforts to I think -- I believe that spreading that expense just means that we can spend that money more wisely and more prudently, and we've made a lot of progress on that.

No, I agree. That makes sense. And the second very quick numbers one for you is within the U.S. segment. So it's somewhat down the same path John Reucassel was on. When I look at the Canadian dollar adjusted expense growth sequentially, it's about $175 million. I know you had warned us that the Target accounting would be somewhat different. So of that $175 million linked quarter, how much of that would you attribute to Target? And whatever that number is, is it fair to say that it just doubles next quarter with the full quarter impact?

So, Sumit, why don't I just do a quick line-by-line review of Target? I think it'd just be helpful to have it on the record, and we haven't gone into more detailed disclosure on this, just for some competitive pricing reasons. But if you look at -- I prefer to use U.S. dollars because it's more directly comparable. So if you look at quarter-over-quarter in the U.S. P&C, I'd say if you look at the revenue increase quarter-over-quarter, you could sort of chalk that up pretty much entirely to Target. If you look at the PCL line, our PCLs were up. If you exclude Target -- or actually, our PCLs would be down on a quarter-over-quarter basis. And if you look at our expense growth, which was about USD $150 million, about 2/3 of that would be Target-related, and the other increase was really more timing-related to expenses. So if you strip out the Target-related expenses, in fact, our expenses were down about 1% on a year-over-year basis in the U.S., which I think was a fantastic result when you consider all of the investments that we're making in that franchise. If you look at the Target contribution overall, I know when we announced the deal, we had talked about a 1% ROA on the deal. And I'm happy to say that we're actually achieving a result that's in excess of that number. So we're actually quite pleased with where we've started off with Target in the first couple of months.

That's very helpful. Any impact on the tax line because of Target? Or is that 15%-ish level in the U.S. a reasonable run rate for your business right now?

So, no, it didn't have any impact on the tax line. But I would just remind everyone that in the U.S., first of all, our tax rate is sustainable roughly at that level, I'd say probably in the sort of 15% to 18% effective tax rate. And that effective tax rate has come down certainly versus last year and a little bit quarter-over-quarter, and that's because we're doing more of these tax-advantaged loans and investments, partly which is a requirement under The Community Reinvestment Act. And the way that works from a reporting standpoint is that actually, it creates losses at the revenue level, and all of the benefit goes into the tax lines. So even just the way the mechanics work would suggest a -- as you ramp up that business, would suggest a lower effective tax rate. But I would assure you, it's sustainable at roughly that level. And so what that does, when you look at the -- all bank tax rate, and I would say the best way to look at that is on the adjusted TEB basis, which may look a little low, but I would say is partly, it's a decline in the U.S. rate. Partly, wholesale was down a bit, and then mix of business is really driving that rate. I've had a number of questions today, so I thought I would just expand my answer on that.

[Operator Instructions]

Your next question comes from the line of Gabriel Dechaine from Crédit Suisse. Gabriel Dechaine - Crédit Suisse AG, Research Division: Okay. Commercial real estate in Canada, you've got $21 billion of loans. It's growing pretty fast. Can you just tell me what's been driving that growth? And it's in 2 buckets, residential and non-residential. And then a quick one for Al Jette if he's in the house. 17 -- Page 17 on the supplement, Mortgages Securitized and Retained. It's up $7 billion quarter-over-quarter. What's driven that? I guess, relatedly, are you securitizing loans with the anticipation of using more capacity in the CMB program because industry growth has gone down, something like that, that might help your NIM down the road?

So, Gabriel, it's Mark. I'll address the real estate question. So on the -- as you pointed out, the -- in Canadian residential real estate, we have about $13 billion. That consists about 3/4, or roughly about that amount, is operators of multi-unit residential buildings. They're apartment buildings. And they would all be secured with mortgages. The maximum loan-to-value would be 75%, but it would average below that. And it would all generally be recourse. The balance of it, of about -- the remaining 25% to 30% would be the residential homebuilder or developer, and our condo exposure would be in that area, would be in that segment as well. Again, this is an area that's remained relatively constant over the years for us. We have a pretty constant customer base. We continue to do transactions that we think are strong, and there are strong transactions out there. And the loan quality across that portfolio was quite strong and remained strong. In terms of the non-residential, about $8.4 billion. I'd say 60%, 70% of that is commercial mortgages. So they would be against income-producing properties secured by mortgages. Maximum mortgage would be loan-to-value at origination, but the average would be closer to about 65%, and they would be recourse. The balance of that is generally where we deal with a real estate company that wants an operating line of credit that we secure by taking a charge on real estate within our normal real estate lending guidelines. Again, the quality in both of these portfolios is -- well, as across the entire Canadian Commercial, as I indicated earlier, is very strong, but we've had a very good track record in these 2 segments as well. Gabriel Dechaine - Crédit Suisse AG, Research Division: Okay. So 3 quarters of that '13 apartment buildings, basically?

Correct on the first number, yes.

Just speaking on behalf of Al Jette here. The increase in the MBS holdings that you called out, Gabriel, was mainly in Canada and reflects liquidity management actions in part related to various wholesale funding maturities later in the year. So the increase doesn't really reflect any change in strategy in terms of the way we're running the bank. And just in the interest of time, I'm happy to follow-up with you later if you want to probe that a bit more. It's pretty straightforward, though.

Your final question will come from the line of Mario Mendonca from Canaccord Genuity.

If you could help me think through some of your disclosures, first on Page -- Slide 6 of the presentation, you referred -- and this is very likely for Tim again, you refer to a 4% revenue growth if you exclude the M&A credit mark release and 1% adjusted expense growth. I don't think the message you're sending is that you think 3% operating leverage in domestic retail is reasonable. Would that be a fair statement?

No, that's right. But if you look at the headline numbers, you're essentially saying it looks like it's flat. But in actual fact, it's more like 1.5 points. And I guess if you're asking how do I feel about the operating leverage going forward in the second half, I believe that, that's achievable at that level, even at lower revenue growth rates.

Sort of the 1.5?

Yes, about there.

Okay. And then -- and sorry, If I could just squeeze in one other quick one, that sort of threw me off, in the presentation, Page 25, you also refer to operating -- or not operating leverage, I'm sorry. You refer to loan-to-values in domestic mortgages or real estate secured as about 40 -- sorry, just bear with me, 47% average current loan to values. But in the report to shareholders, also Page 25, the loan to values look obviously very different. What difference are we looking at here? The newly originated, newly acquired? Is that the difference? And if so, what does newly mean? What time period are you talking about?

Yes. The difference is the latter is originations, and that would be during the last quarter.

Oh, so everything disclosed on Page 25 is a last quarter disclosure?

On 25 of the...

Report to shareholders.

Yes.

Yes.

Great. Thank you very much. And Ed, over to you for final remarks.

Great. Thank you, and thank you for staying on. It's a little bit past 4 o'clock here. So I guess our main message is that we foreshadowed most of the issues that are in the industry here and that we ended up so far in the first half about where we expected. If we look forward, we believe that if interest rates stay flat, which we keep underscoring, it has to be a planning assumption if it isn't a forecast, we probably have one more year of NIM compression. And by that point, by the end of 2014, we will have actually worked through the NIM compression for the Bank. And so we won't have this downward pressure. I think there is a possibility that the U.S. recovery, if it keeps on coming on as strong as it has, that, that assumption that flat rates are here for that period of time will turn out to be erroneous. But it's the right basis to run the bank. And we are adjusting to that environment, and you have -- we have to adjust in terms of how we manage expenses and how we manage the expense structure of the bank. And we have to adjust in how we manage capital. And we want to do that in the TD way, which is a way that says -- but at the same time, we're not going to give up future growth. And so we're willing to take short-term earnings hits as we are, and are managing our duration to position ourselves when rates finally move there in a good position. But we are also going to keep on investing on the business because we're about building great franchise. And getting this balance is a hard thing to do in the environment. But as I said before, that's what we get paid to do for a living. Thank you very much.

Thank you, Ed. And with that, we will end the meeting. So thank you very much for your time today. Appreciate it. Good day.