Good day, ladies and gentlemen. Welcome to TD Bank Group’s Third Quarter 2017 Conference Call. 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.

Thank you, Operator. Good afternoon and welcome to TD Bank Group’s third quarter 2017 investor presentation. My name is Gillian Manning, and I’m the Head of Investor Relations at the Bank. We will begin today’s presentation with remarks from Bharat Masrani, the Bank’s CEO, after which Riaz Ahmed, the Bank’s CFO, will present our third quarter 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; Greg Braca, President & CEO, TD Bank, America’s Most Convenient Bank; and Bob Dorrance, Group Head, Wholesale Banking. Please turn to slide two. 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 Q3 2017 report to shareholders. With that, let me turn the presentation over to Bharat.

Thank you, Gillian, and thank you everyone for joining us today. Q3 was a great quarter for TD. Earnings were $2.9 billion and EPS was $1.51, both up 19% from a year ago. All of our businesses performed well in the quarter. Revenue growth was strong as we continue to harness the power of One TD to help our customers meet their financial goals. Insurance claims fell and we recorded a broad-based decline in credit provisions. Our efficiency ratio improved to its lowest level in over three years and we benefited from an improving operating environment with the resilient economic conditions further strengthening performance on both sides of the border. Overall, I’m very pleased with these results, which reflect the power of our client-centric model, a diversified business mix, and the investments we’ve been making to enhance our omni-channel distribution capabilities, increase our productivity and enrich the customer experience. The strength and stability of our earnings has also contributed to robust capital and liquidity metrics. Our Basel III Common Equity Tier 1 ratio ended the quarter at 11%, up 20 basis points from the prior quarter and our leverage and liquidity coverage ratios remain above target. Reflecting the strong fundamentals, we announced our intention to repurchase up to 20 million common shares for cancellation subject to regulatory approval. This builds on the 15 million common share buyback we completed in the second quarter and will better align our CET 1 ratio with our lower risk earnings profile, high-quality balance sheet, and proven ability to generate organic capital, while ensuring we remain well-capitalized with the anticipated closing of the Scottrade acquisition and implementation of IFRS 9. Let me now comment on each of our business and how they performed in the quarter. Our Canadian retail segment earned $1.7 billion, up 14%…

Thank you, Bharat. Good afternoon, everybody. Please turn to slide four. This quarter the Bank reported earnings of $2.8 billion, up 17% year-over-year, and EPS of $1.46, also up 18%. Adjusted earnings are $2.9 billion and adjusted EPS was $1.51, both up 19% year-over-year. Results are strong across all of our businesses. Revenue increased 7%. Net interest income rose 7%, reflecting loan and deposit growth and higher margin on average earning asset in both the Canadian and U.S. Retail segments. Non-interest income rose 6%, primarily due to fee income growth in all businesses and higher trading revenue. Expenses increased 5%, reflecting higher employee-related expenses and investments that we’re making in our businesses. Provisions for credit losses declined 9% year-over-year, reflecting favorable credit performance. Please turn to slide five. Canadian Retail segment’s net income was $1.7 billion, up 14% year-over-year, reflecting strong revenue growth, lower insurance claims, and lower provisions for credit losses. This brings our year-to-date earnings growth to 8%. Revenue rose 4%. Total loan growth was 5% year-over-year with increases in both personal and business lending volumes. Deposits increased by 11%, reflecting growth in core checking and savings accounts, and business deposits. Margin was 2.84%, up 3 basis points quarter-over-quarter, reflecting balance sheet and business mix. Balance sheet mix was favorable as deposit growth outpaced loan growth, reducing the need for wholesale funding. While many factors affect margins and they will continue to fluctuate from quarter-to-quarter, the improving economic environment in Canada is expected to support a more positive trend in the margin on average earning assets. PCL was stable quarter-over-quarter and declined 8% year-over-year. The year-over-year decline was a result of lower provisions in the credit card, personal lending and auto lending portfolios. Expenses increased 4% year-over-year, reflecting higher employee-related expenses and higher investment in strategic technology initiatives,…

Thank you, Riaz, and good afternoon, everyone. Please turn to slide 10. Portfolio quality remained strong during the quarter as evidenced by reductions in gross impaired loan formations, gross impaired loans, and credit losses on both a quarter-over-quarter and year-over-year basis. Gross impaired loan formations ended the quarter at $1.1 billion, down $54 million or 1basis point, driven by lower formations in the Canadian RESL portfolio. There were no new formations in the wholesale portfolio. Turning to slide 11. Gross impaired loans reduced $305 million or 4 basis points for the quarter to $2.99 billion. The decrease for the quarter was due to a $197 million impact from foreign exchange and resolutions outpacing formations in the Canadian RESL portfolio. Moving to slide 12. As indicated in previous quarters, U.S. strategic card PCLs 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. Provisions for credit losses are $512 million for the quarter, down 2 basis points, remaining at cyclically low levels. To conclude, the key takeaways this quarter are, credit quality remains strong across the Bank’s portfolios, and we remain well-positioned for continued quality loan growth. With that, operator, we are now ready to begin the question-and-answer session.

[Operator Instructions] And we’ll first hear from Ebrahim Poonawala of Bank of America.

Good afternoon. I just wanted to follow up. Riaz, you mentioned in terms of -- if I heard you correctly, positive margin outlook, both in Canada and in U.S. going forward. I just wanted to get your thoughts in terms of, it feels like after the GDP data this morning, we’ve seen uptick in the market expectations for potentially September or maybe October rate hike in Canada. Can you talk about, in terms of what happens to the margin, if we don’t get any additional rate hikes? And if we do, and how sensitive is that to the overnight [rate] [ph] versus everything about the five-year part of the curve?

Yes. Ebrahim, as you know, upto now this year, this fiscal year, deposit margins have -- generally tend to widen when you get the interest rate increases that we’re seeing. But, upto now, this year, you would know that in the market, credit spreads have been tightening, and so that can provide some offset into -- as liquidity premiums are compressed. So, overall, product margins have to now remain reasonably stable in aggregate. And in our case, the margin on average earning assets increased mainly because of the mix in the way the balance sheet is funded. So, I think that absent any further increases in interest rates, I think we would expect that the margins continue to bump around and remain reasonably stable.

Understood. And same thing in the U.S., good margin expansion this quarter, if we don’t have the fed moving between now and year-end, should it be stable or there’s still more juice from the June rate hike that should flow through into the fourth quarter?

I think that be a little bit leftover to come through, but it’s now largely reflected in our numbers as the effect of the rate hikes have been reflected fully in the quarter.

Understood. And just very quickly on a separate topic, wanted to get your thoughts on -- you’ve been active in terms of the private label card space. As we think about what’s happening with the retail sector overall, like how do you view that business, like do you still think that’s an area where you want to pick up share, you want to look for portfolio acquisition opportunities or are you reevaluating sort of your long-term investment outlook for that business?

Ebrahim, as you know, in the U.S., we have a very liquid balance sheet and the loan to deposit ratio remains at around 1 to 2. So, I think opportunities to acquire assets on attractive risk sharing terms, continues to remain a priority for us, and we will be continuing to look for those opportunities and cultivate them.

And next, we’ll hear from Meny Grauman of Cormark Securities.

Good afternoon. I wanted to ask about the strong growth in non-interest income in the U.S., 19% year-over-year in U.S. dollar terms, and I understand some of it is related to the accounting changes. But, I was wondering if you could scale that, sort of talk about how much of that is growth, absent that accounting change. And then, also, were there any significant fee increases in the U.S. in Q3, anything in terms of a big jump up in fees? Thanks.

Hi. This is Greg Braca, thanks for the question. So, correct, some of that 19% increase is clearly from the change in fair value accounting that we signaled in Q1. But, I would also signal that there was strong non-interest income, fee income growth across many of the lines of business in the U.S. in Q3. That coupled with three extra days in the quarter on a sequential Q2 to Q3 view contributed to some of that growth.

Okay, thanks. And then, if I could just ask about Canada, you referenced obviously the very strong GDP numbers this morning. And if you look at personal loan growth of 4% year-over-year, a little bit on the lighter side, particularly if you look at mortgages, in particular up 1% year-over-year, credit cards 1% year-over-year. So, I’m wondering why not be more aggressive in mortgages in particular, given the economic environment here? How much of that growth rate is really tied to you are being cautious rather than competitive dynamics?

Hi. It’s Teri. So, in terms of overall RESL growth, I think we feel pretty comfortable, and this is in line, if you particularly take out private label purchases with our mid single digit growth that we’ve been projecting. We do look at total RESL growth, so that mortgages and FlexLine. And again, ex-private label purchases that year-over-year growth should be just shy of 5%. And I think we’re very comfortable, we’ve said before that we lend prudently through the cycle. And we’ve been strategically repositioning that growth towards FlexLine where we have an embedded growth opportunity where it is a product for our customers that is more flexible for the right customer and stickier for us in terms of not having renewals associated with it. And I’d say, given the puts and takes in the Canadian marketplace and some of the changes we’ve made to our lending policies, in particular I’ve noted before, reducing lending to borrowers who are financing multiple rental units above a certain number we’re under indexed in highest growth markets of GVA and GTA, and we’re very comfortable with that. So, I’d say, we’re pretty much on track with what we’ve been projecting. We’ll continue to lend prudently and put good risk-adjusted business on our book.

Next, we’ll hear from Gabriel Dechaine of National Bank Financial.

I also had a card-related question, just a quick one here. Card fees look like they picked up quite a bit, I don’t know if that’s Canada driven. And then, I guess looking forward, Aeroplan, that relationship’s become an important one for you obviously and changes that were announced earlier little while ago. How do you plan to manage through the transition of Aeroplan over the next few years?

So, it’s Teri again. So, just in terms of cards overall, it was a strong quarter for cards, in particular spend levels on visa, on our core credit cards was above industry levels. We feel good about that. The fees are being generated by good growth in that portfolio, particularly again in our core cards. We are managing our growth and repositioning our product line-up, as you’ve seen with the launch of our new cash back credit cards. So, feeling like we’ve got a well sold out now product suite for Canadian cards and cash back was a real gap for us before. In terms of Aeroplan particularly, versus you step back in the travel category, we’re very well-positioned across all of our cards in the travel category with both Aeroplan and our First Class Travel card portfolio and card offerings for our customers. Obviously with Aeroplan, like an Aimia and all the other stakeholders in the market, we are paying close attention to how the situation is evolving. Right now, for our cardholders, given the 2020 date that Air Canada has stated that the offer will remain for our customers. The spend levels on that card are holding up very well, people are still engaging well with the product, acquisitions a little bit later. I would say that and as we pay attention to the evolution, we are watching it closely. Our goal is to ensure that our customers are well-served and they get a good value from the cards that they carry with TD. And again, we’re very comfortable with our overall offerings in this category and across the board, to be able to manage the situation as it unfolds.

You plan on deemphasizing marketing at all of the Aeroplan or no change?

We’d continue to make available all of the cards to our customers that are on our shelves in a way that’s appropriate to meet their needs.

My next question is for Riaz. You’re late to the party on the efficiency momentum in a good way, fashionably late, I guess. And strong efficiency performance, operating leverage this quarter, and that’s very positive. But, we saw that from other banks at the start of the year and then it faded and it’s actually kind of disappointing this quarter. I’m wondering, how sustainable your performance is. Are we going to have some sort of catch-up investment spending on the horizon that might through you off course a little bit or do you expect to smooth things out from here on out or let’s say over the next year or not in perpetuity?

Yes. Gabe, as we’ve said in the past, we do look at each of our businesses and product lines, and assess what opportunities there may be to make investments in each of those businesses and product lines, whether it may be in the customers side of things or the operation side of things. And we don’t necessarily time them in a particular, and they don’t -- they are not really manageable within straight line quarter, quarterly outcome. So, we make the investments when it is appropriate to do so and let you judge whether on a quarter-to-quarter basis how you feel about our performance. I think overall, we have the lowest -- one of the lowest efficiency ratios in the banking industry. So, we feel very comfortable with that.

Well, I guess more directly, like what we saw in the Q1 this year, is that -- we could see something like that developing?

Well, I’ll just remind you, Gabe that when we took restructuring charges that we did in 2015, what we said is that we were making room to make investments, and that is exactly what we did in the quarter subsequent to that. So by the end of Q1 2016, our expenses were at a low point. And as we started making the investments in Q1, you saw a larger growth rate but we told you that that growth rate would moderate and it has been. So, I think we’ve been doing exactly, as you would expect us to do.

Okay, understood. And a quick one for Teri. You said that -- was there any change -- you are not purchasing third-party mortgages as much as you were last year. Has there been any change in the origination mix from more proprietary channels and less in the broker channel?

So, I think I’ve mentioned this before the net margins of those purchases hasn’t been as economic over the past period of time. And as such, we’re purchasing when it makes sense. And so, proprietary originations, as I said, just shy of 5%. We will make purchases when the economics are right.

Our next question comes from Robert Sedran of CIBC.

Just a quick one, a clarification of prepared remarks, actually. So, can you help me understand why you would simultaneously have a DRIP issuing from treasury and a buyback?

Rob, we offer the DRIP, as you know at a 0% discount as a service to those for our investors who like to have an ability to receive their dividends in the form of stock and then we offset that in the annual repurchases to offset the dilutive effect. So, it’s more a service to our retail investors in particular.

So, do you see this as a net buyback or just offsetting the impact of the DRIP?

Well, the offsetting the impact of the DRIP and options buyback was really in the previous quarter; this buyback is more pure.

Okay, thank you. And then, just a follow-up on some of the comments that Teri was making on the FlexLine The growth does seem to accelerate this quarter. I’m just curious if you can provide a little bit of -- little more granularity behind? In other words, are these new accounts to the bank, are they just new accounts on FlexLine period or are they draws from existing lines that are already open? And of the new accounts, are they new to TD or are they perhaps coming from some of your mortgage customers?

So, let me just step back with what I’ve been saying over time. So, we were off market in terms of the competitiveness of our FlexLine products going back a couple of years ago, and we’ve made investments to improve that product. Now, we’re seeing the benefits of that investment pay off. So, it’s very much on strategy. The growth is new originations, utilization is very stable, and primarily that growth is in the fixed term portions of the FlexLine product. We have quite an embedded growth opportunity in this product for our existing TD customers. And so, new originations are in line with strategy.

So, it’s mostly taking for an existing TD customers at the moment rather than new customers of the Bank. Is that fair?

It is both, because we’re signed FlexLine in more than one channel. But, I would say, our primary opportunity that we’ve been focused on is other financial institutions borrowings to TD.

Next, we’ll hear from Nick Stogdill of Credit Suisse.

Hi. Good afternoon. Teri, just sticking with the HELOCs actually. Could you just talk about how B20 might impact your outlook for this product? And would the impact on the FlexLine from B20 be any different for that of a mortgage product?

I am not sure that I see a real impact to the product in terms of the loan-to-values for a fixed origination or float origination would be well in line with evolving B20. So, I am pretty comfortable that we should be able to stay on the pace that we’re on.

Okay. So, FlexLine can continue to grow at the current pace and with the overall market, if B20 did kind of get implemented later this year, there would be no difference…

Sure with the fact that we have an embedded growth opportunity in this product, we have lots of room to continue to originate FlexLine to TD customers in particular.

Okay. Thank you. And then, just on the efficiency in Canadian banking, if we exclude wealth, it looks like a new all-time low below 42%. And I know you’ve been focused on slowing the pace of expense growth there. So, maybe if you could just talk about the sustainability of the efficiency ratio at this level or maybe what we should expect going forward?

If we step back just in terms of the expense growth year-over-year that we’ve been talking about through the year, we’ve been saying that it would moderate over the year, and it has. Like Riaz said, we will continue to invest in our business when it makes sense. I’ve been a bit opaque on what that investment has gone toward in the early parts of the year. But given this quarter, many of those investments are starting to pay off for us with new customer capabilities. We see now from a digital perspective, we continue to be the highest in terms of unique users to our mobile app. 60% of our digital users are mobile active users, which is a new high that we achieved. All of our branches have iPads and Wi-Fi that we can use with our customers to help them take up our digital properties. We this year or this quarter launched such that a Canadian can now purchase a checking account, a savings account or a credit card end-to-end online. And if you are a TD Canada Trust customer, you can do that with a pre-approved card in two minutes. We have digital mortgage application end-to-end start to finish. So, from a digital standpoint, those investments we’ve been making have been paying off. The cash back cards that we talked about are the enhancements to our checking account lineup, and we are the only Canadian bank with mobile app in both traditional and simplified Chinese. And I’d say all that just to say that if we can make those kinds of investments in the future and those pay off, we would continue to do that, and that means efficiency ratio bumps around.

Our next question comes from Scott Chan of Canaccord Genuity.

Hi. Good afternoon. I was wondering if you could give us an update on the Ameritrade-Scottrade acquisition in terms of expected closing date. It seems like, it could be held up by fed approval. Is that something that you could update on?

Hi. Yes. Scott, it’s Greg Braca. I would say that we’ve commented earlier that we expect the transaction to close during the fourth quarter. And all things being equal, we expect that to continue to occur.

Okay, great. And just sticking to the U.S., there is lot of talk on the Canadian side in terms of personal mortgages, HELOCs. Just looking for an update on the U.S. side in terms of kind of the expectations there and what you’re seeing on the ground in terms of growth in products such as the mortgages, HELOCs and potentially auto?

Sure. Thank you. So, well, first, we’ve signaled since Q4 last year that the aggregate loan growth we’ve seen at the Bank in the U.S. was going to come off some of those peaks, because some of commercial and corporate banking businesses we had grown into somewhat of a more of a natural size. But we continue to focus on mortgage, home equity, credit cards and many of the consumer products, given the age and maturity of the business in the U.S., as you’d expect, whether it’s you’re looking at household penetrations, or how much we’ve gotten of the national share of our customers’ wallet versus peers. We still got a lot of upside to go there and we do think there is more growth to come from all of those products.

Next, we’ll hear from Doug Young from Desjardins Capital Markets.

Good afternoon. Teri, just back to you, in terms of the mortgage growth 1%, HELOC growth 11% in that pivot and shift. Just want a clarification, any implications for NIMs or PCLs if that pivot continues?

So, comfortable that there would be no implication to PCLs on the pivot. And in terms of NIMs, FlexLine is a more profitable product for us.

Okay.

And it also is more sticky and that they don’t have renewals on an ongoing basis.

Okay. And then, and Riaz, I guess in past in Q4s, we’ve seen mix tick up as there has been higher accruals, and just trying to get a sense as you’ve signaled in the back half that you expect expenses to come down as we go into Q4. Is this quarter indicative of what we should be thinking of or is there going to be a typical bump up in expenses as we move into Q4?

Dough, there are obviously things such as taxes and other things that do get accrued in Q4. So, it is not unreasonable to a expenses that tick up like that. As you know, we’ve moderate that uptick a fair bit. And I expect that this year will be similar. So, but, overall, what we said is that expense growth would down moderate on a year-over-year basis. And so, I think that continues to -- expect to deliver that.

Is it fair to go back the last few years and just look at the difference in Q4 versus Q3 as a sense or is it -- you indicated that maybe you can moderate some of that sensitivity.

Yes. A lot of that -- it can depend on the level of projects you’re undertaking and issues like that. So, I’m not so sure that that would give you an accurate perspective, but directionally you can get a view.

And then, just lastly, risk-weighted assets in corporate came down $14 billion; I know, exposures came down by a similar amount. It did have a decent impact on your risk-weighted assets in the CET 1. Just hoping to get a little bit more color on that.

Yes. On a quarter-over-quarter basis for risk-weighted assets, Dough, overall, they were down from about $420 billion to $408 billion. A large part of that is FX translation, which materializes into risk-weighted assets. But for CET 1 purposes, we hedge effects. So, you don’t see that impact come through on the CET 1 as much. And then the offset would be through the Basel I floor, which picked up this quarter.

But, corporate itself, then exposure is down, was that FX related or was there just something going on in the corporate loan book, like in the corporate division?

No, I mean, we have treasury activities in the corporate division. So, it would be number of different parts moving around. I wouldn’t attribute it to any one thing.

Next, we’ll here from Sumit Malhotra of Scotia Capital.

I want to start with Teri and maybe Riaz, just on the deposit growth in Canada and how that’s affecting NIM. So, Teri, when I look at the numbers you provided us here, commercial deposits or business deposits for TD in Canada, I think they’re up something like 6% on the quarter and 16% year-over-year. First off, just making sure those numbers are -- those are correct. What is driving that level of commercial growth starting with the quarter, but even if just look back over the last little while, it’s really been accelerating?

So, I would -- I think, I’ve said this once before, I think this is Paul Douglas who leads commercial bank lending business in a very good ways, he’s been focused over many years on organic growth, on building relationships in the marketplace and that consistency and having bankers locally and close to customers has paying off. And we’ve seen that in strong deposit gathering and solid loan growth over a long period of time.

And the deposit uptake has nothing to do with the change in pricing. It just -- it seems strange to see that magnitude of increase without having to pay for it and business is somewhat commoditized?

I can assure you that Paul is not buying [ph] business.

All right, if that’s the case. And Riaz, your comments on NIM benefiting, is this -- I never really thought of TD, especially in the context of the Canadian banks as one that was that wholesale reliant, anyway. But, is this as simple as to say that you’re getting more deposits from actual TD customers, so whatever little bit that is lessening your reliance on having to go outside, that’s the pick-up that you expect to see in NIM?

Well, as you know, if you break down our balance sheet, Sumit, and it’s pretty evident in the sub-pack were looking at business loans that are in Canada, we are a net asset generator; and in the U.S., we’re a net deposit generator. So, in Canada, we do use wholesale funding to fund the Canadian Retail segment and when that loan to deposit ratio -- when the deposits outpace loans in terms of growth, you get a very nice benefit in your margin on average earnings assets.

All right. My last question or second question is going to be for Mark, and looking at and thinking through the trend in your provisions. You gave us a lot of information here, so I’m going to try to keep it high level. But last two quarters, your aggregate provision level on a core base is about 500 million, somewhat noticeably down from what we had seen over the last year, year and a half despite the fact that the loan growth has continued. Specifically, it seems to be the incurred but not identified line. I know, in Q1, there was some noise specifically relating to auto, I believe in the -- auto and credit cards in the U.S. But, I just wanted to ask you, Mark. This new level that you’ve been at in provisioning in the low 30 basis-point range, do you view that as more sustainable then the 40 issue you were running at before? And specifically in the incurred but not identified line, what’s been the key driver that has brought that level down so sharply this quarter compared to where it was running previously?

Let me go answer that in two parts. First, for the loss rate of low 30s or 33 basis points this quarter. I would say, less indicative of a strong credit quality, during benign economic conditions. And I would put that, the lower end of the range, and you’ll probably -- a level that based upon our mix of our balance sheet would be unlikely to get stronger. But, in strong economic conditions, like we’re enjoying and forecasting, something in the 35 to 40 to me would kind of be the range, I would expect. When you talk about provisioning, incurred but not identified, they’ve been maintained relatively constant in terms of dollar amount. So, the percentage you are saying is reducing, which is probably an indication of strength in credit quality. We did build in the -- during the last year and a half in the oil and gas sector, and we did see negative migration during that period, which we’ve seen a reversal of that in the last several quarters. But, those reserves have kind of been taken up by volume growth but that will translate into a lower percentage coverage. But from my perspective, we’re following the very same methodology that we’ve always used for establishing reserves across the portfolio, and that hasn’t changed.

And I’ll leave it by saying, and it was touched on earlier in the call, seemingly improving economic backdrop in Canada. You talked about what you’ve seen in the U.S. for the most part. So, from that perspective, you are not necessarily going to get better from here but a low 30s ratio isn’t out of line with the strong economic environment in both countries. That’s a fair statement in your opinion?

I’m not sure if I go low. [Multiple Speakers]

Thanks for your time.

Our next question will come from Darko Mihelic of RBC.

Thank you. I have three questions. I just want to be real brief with them. Just going back to, Greg, your answer with respect to the fee income year-over-year growth. If I look at it, just want to make sure I understand. This is really purely a modeling question. So, if I think of $124 million increase in those revenues, how much of that is true and how much of that would be just the absence of that previous accounting noise?

Well, I’m not so sure that we have a split up, the category of non-interest income and gave that level of detail. But, what I can say is that we have seen good strong fee income growth because of new account generation, account growth, household growth, and good commercial activities. And after one more quarter, this fair value hedge comparison year-over-year goes away. So that would be more of a true-up than to what we are really generating in fee income on a go forward basis.

Okay. And then, maybe over to Riaz, this fair value accounting is now in the corporate segment. Was it particularly negative or positive this quarter?

Actually, this particular quarter, it wasn’t that influential, Darko.

Okay. And then, my last question is with respect to the Canada segment. What is the impact of the sale of the direct business in Europe? And really, would be helpful to get the revenue expense and net income impact of that. It seems -- sense is that you may have been losing money for you recently. But, any help would help with the model.

Yes. I think, Darko, it’s relatively immaterial operation. So, I get your point about the line items, but I think if you look at retail performance in aggregate, you wouldn’t end up concluding much out of it.

Next, we’ll hear from Mario Mendonca of TD Securities.

Riaz, if we could start with this other, other income that is -- it’s about a $180 million this quarter when I add back the $42 million loss on the European wealth management, and that compares to a loss of $52 million last year. So, that swing is pretty big year-over-year. You gave us a list of things that would have affected that. One of them was treasury activity. Can you give me a sense as to how much the treasury activity would have driven of that nearly $230 million delta year-over-year?

Yes. I think that you’re thinking of within the non-interest income line the components, other. So, there is a fair bit of activity that goes through there, Mario. There is, as I said earlier, the hedging impacts that go through there, the direct investing loss that you mentioned that goes through there. There can be cumulative translation adjustments that get realized into income that goes into there. And so, there is a fair number of, like equity pickup on smaller investments et cetera. So, it is a fairly wide -- lots of different line items that have those kinds of fluctuations. But hedging related activities in last year would have been considerably more negative than this year.

Does that directly fall to the bottom-line?

Well, it does fall to the bottom-line, Mario. But, as we’ve explained before in the past, hedging activities, the hedging effectiveness issue is really an accounting timing issue and less of an economic issue. So, over the course of the hedge term, it all works out. But, because of the way the mark-to-market pieces of the accounting work, you can sometimes and it contributes positively and sometimes it contributes negatively, and it just creates a noise as a result of that, which is why we moved it off to corporate.

Part of where I am going with this, now I want to go to a very broad question is the sequential increase in EPS, adjusted 1.34 to 1.51 is obviously very big. And a portion of that sort of relates to that line and that’s why I am trying to get a better sense of what’s in there, so I can determine the sustainability of the result. But, let me ask it then very broadly, Riaz and perhaps Bharat. Do you see this new move to 1.51 as a new step up and now this is the new sustainable EPS quarter level for the Bank or is this a highly unusual number that we shouldn’t put us much weight or is it somewhere between?

Let me give you sort of some numbers there or thoughts to work with, Mario, and then, I’ll let Bharat address the thematic issues, if you like. All these numbers that we’re referring to, whether it’d be the fact that we had collective allowances a year ago; we don’t have collective allowances this -- in the quarter, this year. We had a better insurance claim performance, because we had catastrophes and Fort McMurray fire last year, we don’t it this year. We talked about the hedging effectiveness, as you pointed out. So, all of these numbers can have the effect of moving our comparisons around a little bit. But, what I would emphasize is that they’re really in the context of business as usual and should be thought of as part of the Bank’s performance.

Mario, what I would add is that if you look at the macro situation, you saw the Canadian GDP number come out today, and you’ve seen the U.S. number get revised up. You’ve seen interest rates move. You look at TD’s business mix in relation to those moves and you say that the overall environment, the operating environment is much more friendly than it might have been a few years ago or even last year. So, you’re seeing that play out in our numbers now. Now, as usual, there are lots of puts and takes here. Sometimes, you might have a situation that a geopolitical event or some economic issue that might be regional or a major move in certain commodities might pull that back. So, it’s hard to predict exactly where you might be. But, I feel that from a operating environment, if you believe that some of these growth numbers in both these major economies will continue to be sustained, then, it’s a positive environment for TD. But as usual, as Riaz just mentioned, you will have -- we’re not running the bank to go quarter-by-quarter, if there are opportunities for us to make the right investments. I think Teri talked about it. We will certainly take advantage of those opportunities. If there are issues that make sense for us that may result in our efficiency ratio moving around, we worry less about that than perhaps some might. So, yes, this can bounce around. But, the overall economic environment and the interest rate environment is more positive than we’ve seen over the recent past.

Thank you. At this time, I would like to turn the call back over to Mr. Bharat Masrani for closing remarks.

Thank you, Operator. And thank you to all of you for joining us today. I know this was a little early as in before, but I’m told by Riaz and Gillian that this was in response to some of the feedback we were receiving. So hopefully, we are -- we’ve been able to do this call in sufficient time. I’m very happy with the quarter. The team’s right across the world, 83,000 strong, continue to deliver for all of our stakeholders. And I look forward to talking to you folks again in the next 90 days or so. So, thanks for joining us. And enjoy the little bit of the summer that is still left. All the best.

Thank you. That does conclude today’s conference. Thank you all for your participation. You may now disconnect.