Good afternoon, ladies and gentlemen and welcome to TD Bank Group’s Q4 2016 Investor Presentation. Please be advised that this call is being recorded. I would now like to turn the meeting over to Ms. Gillian Manning, Head of Investor Relations. Please go ahead Ma'am.

Thank you. Good afternoon and welcome to TD Bank Group’s Fourth Quarter 2016 Investor Presentation. My name is Gillian Manning and I'm the Head of Investor Relations at the Bank. We’ll begin today's presentation with remarks from Bharat Masrani, the Bank’s CEO after which, Riaz Ahmed, the Bank’s CFO, will present our fourth quarter and fiscal 2016 operating results. Mark Chauvin, Chief Risk Officer, will then offer comments on credit quality after which, we will invite questions from prequalified analysts and investors on the phone. Also present today to answer your questions are Teri Currie, Group Head, Canadian Personal Banking; Mike Pedersen, Group Head, U.S. Banking; and Bob Dorrance, Group Head, Wholesale Banking. Please turn to Slide 2. At this time I would like to caution our listeners that this presentation contains forward-looking statements that 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 other purposes. I would also like to remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results to assess each of its businesses and to measure overall bank performance. The bank believes that adjusted results provide readers with a better understanding of how management views the bank's performance. Bharat 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 in our Q4 2016 report to shareholders. With that let me turn the presentation over to Bharat.

Thank you, Gillian and thank you everyone for joining us today. I'm very pleased with our Q4 and fiscal 2016 results, which reflect the power of our low-risk franchise, a geographically diversified business model and a good execution in each of our businesses. Let me speak to the results. During Q4, we earned $2.3 billion up 8% from a year ago and EPS was $1.22, up 7% reflecting strong performances in our U.S. retail and wholesale segments and stable earnings in Canadian retail. For the full year, earnings were $9.3 billion and EPS was $4.81, both up 6% from 2015. Revenue increased across all our businesses. Expense growth excluding FX and acquisitions was 2% and we maintained positive operating leverage while continuing to invest in our businesses for future growth. Provisions for credit losses stabilized in the second half of the year and credit quality overall remains strong. Our capital and liquidity positions ended the year on an equally strong footing. Our CET1 ratio was 10.4% and our leverage and liquidity coverage ratios remain above target. We increased our dividends paid per share by 8% in 2016 and we delivered an 18% total shareholder return at the top of the Canadian peer group. Let me turn to the segments. Canadian retail earnings increased 1% this fiscal year and personal and commercial bank net income rose 2%. We continue to grow revenue and manage expenses in a slow growth economy, while making investments to optimize our branch network and improve the customer and employee experience. Our wealth business performed very well. Earnings growth was 9% and we achieved record asset levels and enhanced our advisory and client trading capabilities. Our insurance business also did well, increasing pretax earnings by 6%. Overall the fundamentals of our Canadian retail business remained strong. We’re…

Thank you, Bharat. Good afternoon, everybody. Please turn to Slide 4. In 2016 the bank reported earnings of $8.9 billion and EPS of $4.67. Adjusted earnings were $9.3 billion and adjusted EPS was $4.87 both up 6% year-over-year. Revenue increased 9% in across all of our segments led by volume growth. Expenses increased 4% or 2% on an adjusted basis, excluding currency and acquisitions, resulting in 200 basis points of operating leverage. PCL increased year-over-year, primarily reflecting volume growth, provisions related to oil and gas exposures and the impact of foreign exchange. Most of the increase occurred in the first half of the year as loss rates have since stabilized. Canadian Retail and U.S. Retail delivered net income of $6 billion and $3 billion for the year respectively, while wholesale reported over $900 million in earnings. Please turn to Slide 5. This quarter the bank reported earnings of $2.3 billion and EPS of $1.20. Adjusted earnings are $2.3 billion up 8% and adjusted EPS was $1.22 up 7% year-over-year. Adjusted revenue increased 6% excluding FX and acquisitions led by volume growth and adjusted expenses increased 5% excluding FX and acquisitions resulting 100 basis points of operating leverage. Expenses ticked up this quarter raising seasonality as well as investments in our business and infrastructure. These investments will continue into fiscal 2017 and as a result, expense growth is expected to be higher on a year-over-year basis in the first half of the year, particularly in our retail businesses. PCL decreased 1% quarter-over-quarter, segment reported earnings were $1.5 billion for Canadian retail, approximately Canadian $700 million for U.S. Retail and $238 million for wholesale. The corporate segment reported a loss of $138 million or $94 million on an adjusted basis. Please turn to Slide 6. Canadian Retail segment net income was $1.5…

Thank you, Riaz and good afternoon, everyone. Please turn to Slide 11. Credit was strong throughout the year continuing into the fourth quarter. On a year-over-year basis, gross impaired long formations are down three basis points or $111 million driven by reductions in U.S. Legacy interest only HELOC formations. For the quarter, gross impaired loan formations are flat at $1.2 billion or 21 basis points. U.S. retail formations are up $65 million due to seasonal trends in the credit card portfolio and the negative impact of foreign exchange. There were no new formations in the wholesale portfolio. Turning to Slide 12; gross impaired loans ended the year at $3.5 billion stable at 58 basis points on both the year-over-year and quarter-over-quarter basis. The U.S. retail gross impaired loans are up $101 million in the quarter, primarily driven by seasonal trends in the credit card portfolio and the negative impact of foreign exchange. The increase was partially offset by a $48 million decrease in wholesale gross impaired loans due to resolutions in the oil and gas sector. Moving on to Slide 13, as indicated in previous quarters, U.S. strategic card PCL are reported on a net basis for segment reporting, including only the bank's contractual portion of credit losses. For the purpose of the credit slides, we continue to report gross losses to better reflect portfolio credit quality. The full-year loss rate is 41 basis points, up seven basis points from 2015, driven by credit losses for exposures impacted by low oil and gas prices, reserve build for incurred, but not identified credit losses in the retail and nonretail portfolios and the negative impact of foreign exchange. Provisions for credit losses were $554 million for the quarter, down two basis points quarter-over-quarter to 37 basis points. The primary factors impacting PCL in the quarter were reductions in reserve build, offset by a $35 million increase in U.S. retail PCL driven by seasonal trends in the credit card and auto portfolios. Moving to Slide 14, we’re continuing to see improvement in the performance of our oil and gas producer and services portfolios as evidenced by resolutions in some of our impaired loans attributable in part to the recent stabilization and prices and more positive market tone. Consumer losses in oil impacted regions are stable and continue to be offset by favorable performance in the rest of Canada. To conclude, the key takeaways for the quarter are credit quality remained strong, the credit impact associate with low oil and gas prices continues to moderate and we are well-positioned for continuing growth going into 2017. With that operator, we are now ready to begin the question-and-answer session.

Thank you. [Operator Instructions] We’ll go first to Ebrahim Poonawala with Bank of America Merrill Lynch.

Good afternoon. I was wondering if you could start with your comments around growth outlook for the U.S. as you look into 2017. And I was wondering if you can provide some color around what areas do you expect U.S growth to really maybe pick up in 2017 or probably stay the same as we've seen in 2016?

Yes, so it's Mike. So we’ve obviously seen very good revenue growth in the U.S. this year and based on what I see right now, I expect that to continue, but I expect our volumes to continue to be strong. I also expect our margins to increase based on what we’re seeing. It’s possible we'll see a bit of moderation in categories like commercial and auto finance lending, but not seeing that yet. There are some signs that there's a bit of pricing pressure in some of those sectors. So that may adjust our flows a bit but broadly speaking, I expect good growth across the categories that have produced good growth this year with improving margins. The fee growth will be I think also robust with the caveat that we made a move this year to time order posting for overdraft charges and that’s had an effect this year and we’ll see the full year effect of that in 2017 and then I would say that all of which I had -- all of what I’ve just said is assuming no rate increases. If there is a rate increase that’s upside to what I’ve said.

And do care to quantify what that upside could be if we get maybe multiple rate hikes at the short end in the U.S. next year?

No. The comments that Bharat and Riaz have made with respect to the upside, includes our assumptions of what that'll be, but we’re not disclosing anything more than that.

Understood and if I can quickly ask question just in terms of capital I guess to Riaz, if you can remind us in terms of what the targeted capital ratio is? If I recall correctly, Scottrade is going to consume about 30 basis points of CET1. So where do you want that ratio to be as we think about ending 2017?

Ebrahim, the way I look at capital is you were well above the minimums that are required and when we look at the risk factors in our bank I feel very comfortable with capital ratio where it is. I don't generally tend to run any particular target in my mind about capital. We look at our surplus capital position and determine its best use from time-to-time, which can be prioritized by way of funding growth and then with which could include potential acquisitions and then returning capital to the shareholders.

Understood. Thanks for taking my questions.

We will go next to Gabriel Dechaine with Canaccord.

Good afternoon. Also a question on the capital, we saw this disclosure for the first time, that the impact of the regulatory floor $5 billion increase in RWAs, that kind of popped up and I believe that's in relation to the impact of Basal 1 floors on your AIRB, RWAs that were recently transitioned in the U.S. Is that correct first of all?

Yes that would be correct, Gabriel. As you know what every Basel III compliant bank has to do is calculate its risk weighted assets using internal risk-based model and compare that against the risk weighted assets that it would calculate under the old Basel I framework and the benefits that one can draw from moving to internal risk based models is capped by reference to this floor. And when you have a low-risk bank like ours, you would expect that we would get that at some point and you'll remember that in the last quarter, we transitioned our U.S. retail portfolio from standardized to internal risk based methodologies as well. So no surprise that at some point we would get to this floor.

I'm a little bit dumb on this. I guess why would this happen so soon and I've never seen anything like this from Canada like for example real estate secured loans are risk weighted anywhere between 10% to 15% depending on the bank and standardize is 35%. I'm just cherry picking an example, but I've never seen an impact from these floors having an effect on the banks and then what's the difference and then why is it happening, why did this happen so soon after your AIRB transition in the U.S.?

Well I think the calculation Gabriel is in relation to the entire balance sheet and so you know that Canadian portfolio is transitioned some years ago. So we have a certain amount of the balance sheet that is risk weighted using internal risk based models and some that is risk weighted using standardized models. And the process of movement from standardized to risk based models includes development of internal data and capabilities and models, which then get approved by the regulators and then once the regulators are satisfied with them, you implement them. So the fact that we introduced U.S. retail model in Q3 was just one aspect of our balance sheet that transitioned in Q3. So I don’t think you should take away from that that the effect was so soon. But it is an effect that low risk banks would feel faster than high risk banks.

Okay. My next question is rate related and I've seen you raise prices on mortgages this quarter as of other banks and I'm wondering what that does to and we've seen the five year rate increase as well. I am wondered what that does to your margin outlook for the Canadian business in particular. And then pursuant to that, if it's not going to cause your margins to go up, what kind of rate increases do we need to see for this margin issue to kind of dissipate materially and how long does that take to go through your tractors I guess?

So it's Teri. Just on margins in general and then talk about rest as we go through, so obviously we have the highest absolute margins in Q4. We were flat in CAD P&C and as you mentioned we had the benefit of our factoring strategy and acquisitions over the last several years, but we can't outline interest rates and to your point, that takes a few years to work its way through. Because we have a majoritively fixed rate, mortgage portfolio and very large and growing, fixed rate mortgage portfolio, reserve portfolio overall, we are more differentially impacted. We expect as we look ahead to 2017 that that margin compression that we've experienced this year will moderate over the full year. There will be bumpiness in quarters, but we should expect it to moderate in the next year and obviously when you look at the re-pricing, when the re-pricing is only for new originations or renewals, that takes a bit of time to work its way through the mortgage book.

All right. But there is no ballpark, rates have to go up by X before we start to see margins increasing in Canada again.

We don’t have something like that to talk about.

I think in relation to one part of that which is factoring strategy that you talked about Gabriel, what you have to do is look at what five to seven year swap rates might be doing today compared to what they might have been five to seven years ago. So I think you have to look at what rate are you coming off and at what rate are you going on. And so you'll see that the swap rates today are still lower than what they might have been historically and that will give you an indication of where rates need to be.

Okay. Thank you. And Mark didn't say limit yourself to one question. So I asked a couple.

Okay. No issues.

We will go next to Meny Grauman at Cormark Securities.

Hi good afternoon. Just wanted to better understand your revision to your growth targets for the Canadian Retail business and I think Bharat you mentioned the yield curve, but I'm wondering is this change just driven by the outlook for margins or is there something else as well that is causing this via reappraisal?

So it's Teri. I will take it. If you recall when we had our Investor Day there were a couple of rate increase embedded in that target that we set and obviously the context has changed both around that and around real estate secured lending, since the time that we had Investor Day. So those are the two main factors that have caused us to change the outlook. Having said that, next year's outlook I would say you should expect similar growth in loan and deposit books for CAD P&C. You should expect again as I said compression in margins moderating. Expenses will be elevated as has been said in the first half of the year and you take that together with PCL's growing largely in line with the volume growth of our businesses and you should expect better performance from CAD P&C next year.

On the expense front, if I look at sort of the run rate savings that you're looking for from your restructuring announcements it definitely looks at the lower end of the peer group and you've talked about it before, but I'm wondering given the upward pressure you're seeing on expenses, why not be more aggressive in terms of restructuring into next year? I guess the question is are you contemplating in light of this outlook maybe taking more restructuring charges?

I don’t think so Meny there. What I would say to you is you have to look at, what we said in 2015 when we took the restructuring charges that we would get productivity benefits that we would reinvest and so if you look at 2016 for the whole year ex the impact of currency and acquisitions, our expense growth rate was in the mid-2s. And within that envelope, we made some very significant investments in the items that I talked about earlier. So I don’t think that you should see that as pressure on expenses. I think you should see it as good expense management and delivering operating leverage this year and making the investment that we feel are necessary to make. So I think you can continue to expect that we will do that and that it may result in occasional quarter bumpiness in expenses, but that doesn’t bother me too much.

Thank you.

We will go next to Sumit Malhotra with Scotia Capital.

Thanks, good afternoon. A couple of sensitivity questions and I want to go back to something you gave us, it's been a few years now and I'll direct this to Riaz and he can send it to long appropriately. The rate sensitivity, the bank had given us the net interest income sensitivity, the changes in rate increments both at the short and long end of the curve and you had gone as far as to break that up geographically. Just because it has been a few years and obviously the composition and size of the balance sheet has changed, are you in a position to update those numbers?

So Sumit, what we gave in Q2 2013 was an illustration to give you a perspective on how our bank thought about asset liability management and interest rate sensitivity. I don’t intend to update that as a guidance matter on an ongoing basis because a fair bit of it you could reasonably expect would be proprietary to us. But to your point lot has changed. The deposit look growth, your currency has an impact at geographical mix of our deposits plays a role. How much of your rates are -- deposits are floating versus fixed. So there is a number of assumptions that go into that. But I think what you can take away is that we are a deposit heavy bank and therefore as interest rates go up as you would expect our deposit margins would widen and the impact of which I would refer you to Bharat's outlook remarks for you to get a perspective on how we think about it.

And it's still the short end of the curve. I think it's fair to say that's more beneficial to the bank from a net interest income perspective. Is that correct, am talking sense?

The yield curve steepens, if the yield curve steepens very substantially, then the longer side of the curve could overwhelm the shorter end of the curve. So that's why -- that's what I mean that it's subject has so many assumptions that you really have to build your model to kind of get to that perspective on how you would view different bank's profiles.

Okay. I may follow up with you offline on that. The second one -- last one for me is on your tax rate in the U.S. it's obviously with the aftermath of the Presidential Election, there has been a lot of focus on corporate tax rates. TD's tax rate in the U.S. banking segment has averaged about 17% for few years now. And I recall the bank telling us that, that lower rate had to do with some of the -- some certain programs that you participated in. If there was to be a meaningful corporate tax rate reduction in the U.S., given where you're being taxed into this segment, would you benefit in a material way or is your tax rate where it stands right now already as good as it gets for the bank in the U.S.?

I think Sumit the way you should think about that is the tax rate is established by reference to statutory rates that are in place at the time and then there is deducts from that. So for example as an example we participate in various community reinvestment activities that are subject to tax credits etcetera and so those tend to be deductions that get you to your effective tax rate. So if the overall tax rate would reduce, then yes we would have benefits come up.

Thanks for your time.

We will go next to Peter Routledge with National Bank Financial.

Hi thanks. Just a question on the impact, potential impact of the proposed changes to housing finance, specifically on your funding strategy in Canada if these are set itself out as having pretty advanced and innovative funding approach that certainly capitalized on the housing planned system as it existed and it's changing. Big picture question, how does it change your funding strategy, particularly lending risk sharing?

I think that you are correct that we took our mortgage portfolios and securitized them and fund and use them. So what we are doing now is just continuing to diversify our funding strategies using more global markets and more products such as covered bonds in order to create new funding strategies and of course Longbow has had a very strong balance sheet management programs, so that we can experience the benefits of having some of the best rating and keeping our name in demand. So that's an aspect of our treasury funding strategy that we spend a lot of time and spend a lot of time with our fixed income investors to make sure that we're creating continuous attract and being an attractive name out there and as you know that allowed us to crack the U.S. dollar subordinated debt market this year in a very attractive way. So we're just resorting to more traditional methodologies and maintaining our innovation and focus on this area.

Absent yield curve changes to the shift in strategy either increase your funding cost or make them more volatile?

Probably a little bit of both because you are going to more traditional market methodologies and global markets. So the covered bond market is a helpful source of stability. So you would see that our -- that you would see some increase in cost of funds which is partly also the margin compression story we’ve been talking about. And you always want to be more careful with the volatility that the global markets would pose. So we do have fair bit of -- we’re very active in funding and making sure that we're funding our balance sheet well in advance of needs.

And just final related question on NHA MBS balances. So, these would be your balances on balance sheet, which I believe qualifies high-quality liquid assets under the LCR. Those balances may shrink. They just may not be as much NHA MBS, is this -- does this pose an additional headwind for your margin again absent any other change or do you think it's just nominal?

No, I think that this is more an issue for the global industry about availability of HQ and the eligible assets. So you’ve seen banks pick up more of their balance sheet in sovereign and treasury bonds. So I think it's more a matter of managing your liquidity than anything else.

But if you had set $35 billion in NHA MBS you had $25 billion, that wouldn't materially impact your all bank margin?

I just have to substitute other low investments to maintain the liquidity yes.

Okay, thanks.

[Operator Instructions] We’ll go next to Sohrab Movahedi with BMO Capital Markets

Hey, thank you. A couple of numbers question maybe for Mark and then a broader one for Bharat. Mark, what’s the percentage of your nonconforming mortgages -- of the portfolio, what percentage of the portfolio with nonconforming mortgages, call it defined as non-residents newcomers and self employees, what percentage would that be?

It would be roughly 1% on the existing portfolio.

Perfect and then just a quick follow-up on that one as well, if I look at your, if I asked you to tell me what you would review to be the higher risk end of your mortgage portfolio by LTV and Beacon scores some sort of a credit score, what would be the thresholds that you would use?

Well, I think the idea of a Beacon score below 650 with a loan-to-value above 75% if you want to identify the high risk sector, that would be an appropriate way of looking at it, which I’ve seen our peers have done, but I think that’s a fairly traditional way of looking at it.

And so what percentage of your portfolio would be in that bucket?

Well, with no coincidence, around 1%.

Okay. Thank you. And I guess Bharat the broader question I would have is as you’ve given us the outlook we have a feel for what Canadian Retail is going to do. I have a feel for what U.S. is going to do, if you were going to handicap the direction arrow on your ROE as a bank next year or next couple of years two, three years doesn’t matter, is it pointing higher or is it flat or do you think it’s still going lower.

Sohrab, firstly on the -- as you said different segments, you have a sense for what our thinking is and for the overall bank, some of the indications out of the U.S. might talk about the growth in volumes and our business there. You see what's happening with the yield curve there. What's happening with the currencies. So that enhance my comment on we do have a chance to get into our 7% to 10% target that we had set out over the medium term. Now on ROE, obviously with the percentage of the bank's earnings that come from the U.S. does impact our ROE so there could be some pressure from that perspective, but on the other hand, we are putting on very good risk adjusted businesses. We are happy with how we’re tracking with our ROE given the type of business model that we run, the percentage of our business that is retail oriented versus not, the volatility that you experience out of TD is more predictable that’s our view. And if you put all those things together, we’re happy with how we are tracking on the ROE, but you will see some bumpiness year-over-year depending on where our earnings growth is coming and where it may reverse so itself.

Okay. Maybe I've misunderstood it, but Mark, Mike Pedersen was talking a little bit about improvement in -- potential improvement in margins, not even factoring in any rate increases and the like, why wouldn't that be accretive to the U.S. segment's ROEs all else equal?

Sohrab, can I give you a technical answer.

Yes, sure.

That you have a situation under current IFRS accounting rules where the goodwill gets translated as well. So what you're seeing in the ROE is essentially your earnings get translated and your capital gets translated and that translation adjustment as you know goes to shareholder's equity and therefore also raises your capital base. So historical price that you paid for that goodwill from a currency perspective is irrelevant under the IFRS rules. So, if you see a stronger dollar, like if you had our rising U.S. earnings and your dollar was flat through your acquisition price, yes, your ROE would go up. But as the U.S. dollar strengthens, you would have different impacts. So, that’s what Bharat is telling you is that you have to look at the performance of the U.S. retail segment and U.S. dollars and then also look at the Canadian dollar translation of the goodwill in relation to the price that was originally paid and that's what causes that lumpiness.

That's perfect. So absent Canadian dollar further depreciating against the U.S. dollar, in your scenario you would see an ROE improvement.

Yes.

Yes you would and just having said that for in Mike’s business in U.S dollar terms when you measure it of course with improving margins and growth in our business and we are generating, very good what we call operating ROEs out of the U.S. so we're trying to -- we would see better ROEs within our U.S segment.

Okay and then outside of the U.S segment but at a total bank level, Terry has also talked about the stuff. Just generally speaking, how do you feel about the direction are on the ROE over the next two to three years.

It’s hard to put a particular number Sohrab, but our view is that ROE, as we put on more business over time, we should see improvements especially with some of the sentiment you see in the market with respect to what's happening in the U.S. Over time we feel in Canada it will readjust to a more normal environment then what we’ve seen recently and that should help our business. Apart from the margin you have also this issue in Canada where GDP growth is more muted and when is expected to continue for the next couple of years. So all these factors would play a role in how the bank does, but having said all that, as I started answering the question that given our balance sheet, given the type of risk profile that we run in the bank, the type of volatility you experience out of TD we think our ROE is reflective of that and we're pretty happy with how we are performing.

Thank you very much.

Thank you.

This concludes our question-and-answer session. At this time, I would like to turn the conference back to Mr. Bharat Masrani for closing remarks.

Thank you very much operator and again very happy with how TD has been able to deliver. Very good numbers for the years and this fiscal year end as well and I would like to take this opportunity once again to thank our nearly 80,000 colleagues around the world who continue to deliver for our customers as well as our shareholders. And for folks on the phone, in case if you do not get together in the near term I wish you happy holidays and good health and we will see you in the new year. Thanks very much operator.

Thank you. This concludes today's conference. We do thank you for your participation. You may now disconnect.