Good afternoon, ladies and gentlemen. Welcome to the TD Bank Group Q2 2018 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. Good afternoon and welcome to TD Bank Group second quarter 2018 investor presentation. My name is Gillian Manning, and I am 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 second quarter operating results. Ajai Bambawale, 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 and CEO, TD Bank, America's Most Convenient Bank; 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 Q2 2018 Report to Shareholders. With that, let me turn the presentation over to Bharat.

Thank you, Gillian and thank you everyone for joining us today. Q2 was another terrific quarter for TD. Earnings increased 20% crossing the $3 billion threshold for the first time and EPS rose 21% to $1.62. All of our businesses performed well, revenue growth was strong as we continue to drive new business to a differentiated customer experience. We managed expenses well, delivering positive operating leverage across the enterprise and lowering our efficiency ratio. Our capital and liquidity metrics are robust with our CET1 ratio, ending the quarter at 11.8% up 120 basis points from the prior quarter, helped by the new BASEL II floor and continued organic capital generation. And our return on equity increased to 18% reflecting an improving profitability profile. These impressive results speak to the power of our customer centric model, the advantages of our scale and diversification and the discipline we have shown in growing our businesses while staying within our risk appetite. They also reflect good execution against our strategic priorities. Over the last few years, we've been investing in our businesses to elevate our customer service proposition and position ourselves to succeed in the digital world. We have continued to evolve our distribution network to make sure we're providing customers and clients with the right touch points in the right channels at the right time. We're reimagining every step of the customer journey to deliver richer, more seamless experiences and we are leveraging new technologies to help them engage with us more easily and offer personalized solutions they can trust and rely on. To further extend our innovation leadership, we recently became the first Canadian bank to join the Canadian Institute for Cyber Security at the University of New Brunswick. This builds on a cyber security office, which opened in Tel Aviv last…

Thank you, Bharat. Please turn to Slide 5. This quarter, the Bank reported earnings of $2.9 billion and EPS of a $1.54. Adjusted earnings were $3 billion, up 20% year-over-year and adjusted EPS was a $1.62, up 21%. Results were strong across all our businesses. Revenue increased 12%. On a taxable equivalent basis revenue increased 6%, reflecting higher volumes and margins in the Canadian and U.S. retail segment. Credit losses declined quarter over quarter, reflecting the higher PCL in stages one and two taken in the first quarter and a stable economic outlook. Expenses were up 1%. We expect the rate of expense growth to be higher in the second half of the year as we take the opportunity to make further investments in our businesses. Please turn to Slide 6. The Canadian Retail segment net income was $1.8 billion, up 17% year-over-year on good revenue growth, lower PCL and very strong operating leverage. Revenue increased on volume growth, rising margins and higher non-interest income in the insurance, wealth and banking businesses. Loans and deposits grew by 6% year-over-year with increases in both personal and business volumes. Margin was 2.91%, up 3 basis points quarter-over-quarter due to rising rates. Net interest margin has risen 10 basis points year-over-year. Total PCL declined by 19% year-over-year. PCL impaired decreased by 8% reflecting strong credit performance in personal and business banking and PCL performing was nil this quarter. Total PCL as an annualized percentage of credit volume was 23 basis points, down 4 basis points quarter-over-quarter remaining at cyclical loans. Expenses increased 1% year-over-year. I'd also like to bring to your attention that we have introduced new disclosures this quarter for our Canadian real estate secured lending portfolio. In our MD&A and [step back], we are now showing the breakdown of amortizing and…

Well thank you Riaz and good afternoon everyone. Please turn to Slide 11. Credit quality remained strong in the second quarter across all business segments as evidenced by reductions in gross impaired loan formations, gross impaired loans and credit losses. Gross impaired loan formations were $1.15 billion or 18 basis points down 2 basis points quarter over quarter and stable year-over-year. The decrease in the quarter was driven by the US retail segment, largely due to seasonal trends. Canadian retail remained stable and there were no new formations in the wholesale segment. Please turn to Slide 12. Gross impaired loans ended the quarter at $2.99 billion down 2 basis points quarter over quarter and down 6 basis points year-over-year. Canadian retail gross impaired loans remained stable at 20 basis points. Gross impaired loans in our US retail segment were $48 million quarter over quarter, but more than offset by a foreign exchange impact of $81 million. Wholesale segment gross impaired loans decreased $31 million quarter over quarter to a zero impaired loan balance due to the full resolution of all impaired oil and gas exposures. Please turn to Slide 13. This quarter our presentation has been amended to report PCL ratios both gross and net of the partner share of the US strategic card credit losses. In doing so, we remind you that the bank's contractual portion of the credit losses is reported is the U.S. retail segment, whereas the partner share is reported in the corporate segment. The bank's provisions for credit losses in the quarter were $562 million, or 36 basis points down 9 basis points quarter over quarter and stable year-over-year. The decrease in PCL in the quarter was driven by continued strong credit performance in the Canadian retail segment and seasonal trends in the U.S. credit card and indirect order portfolios reflected in lower U.S. retail PCL and specifically for the U.S. strategic card partner share in the lower U.S. corporate segment PCL. Please turn to Slide 14. Quarter over quarter $40 million decrease in embedded PCL primarily reflects continued strong credit performance in Canadian retail and seasonal trends in the U.S. credit card and indirect order portfolios. The quarter over quarter $100 million decrease in performing PCL is due to again U.S. seasonal trends, lower volume growth in the U.S. commercial portfolio and the prior quarter billed in Canadian retail. In summary, credit quality continues to be strong across all the bank's portfolios and we remain well-positioned for continued growth. With that operator we're now ready to begin the Q&A session.

[Operator Instructions] We will now take a question from Meny Grauman from Cormark Securities.

I want to ask about the PCL ratio the step down in Canada. So specifically how substantial do you think that step down is, if you could give us a little more color in terms of what's driving? Is it just the strong, the very low unemployment rate? And some guidance going forward in terms of where you expect that PCL ratio to turn?

Yes, so I'm seeing good credit quality across the Canadian book, I'll say certainly on personal is pretty stable on commercial as well. I think it's the economic environment that's causing that. If I look forward, and I look at history for Canada PCLs tend to be quite stable. So I do expect overall, if you recollect that I'd given guidance around 40 to 45 basis points for the overall enterprise. I think if the macro environment remains supportive I do expect overall to be at the lower end of that range for the full year.

And then if I could just ask on the insurance business it looks like quarter over quarter improvement in earnings quite strong actually, we heard that the quarter wasn't so great I mean that's an understatement for auto insurance in particular, so that performance seems a little bit out of whack with just the bigger picture view of the P&C insurance business for the quarter. So wondering what was driving that if there's any additional insight you can provide on that business specifically?

Its Terri. So we feel good about the growth for the insurance business this quarter as you've cited, definitely premium growth is looking good in the business. There was an item in the quarter that we did note. In revenue there was renewal of some international reinsurance contracts, those -- the timing of which were -- a portion of those renewed in Q2. Some of that was offset in claims. Having said that -- without leaving offsetting claims, having said that if we just look at the core performance of the business we're feeling good about how the business is performing. In terms of auto specifically we would have continued to see elevated claims cost for the repair of vehicles that we talked about last quarter, and that is consistent with the industry. Having said that our prior year development was more favorable than that, and more than offset that trend.

Is there anything, I see -- if I go back to 2017 it looks like the past year's Q2 has been a very strong quarter, is there any seasonality there something that's changed that would make Q2 sort of the strongest quarter of the year in that business?

So, Q2 versus Q3 can sometimes see a weather impact in Q3 for instance that didn't happen last year. I would say there've been a number of investments we've been making in this business over time to improve our customer experience and to improve our capabilities and our claims capabilities and I think those things are paying off including inclusion centers that we've opened to help customers who find themselves in a difficult situation.

We'll now take a question from Steve Theriault with Eight Capital.

Maybe first for Bharat, Bharat you've gotten here 12% CET1, and a relatively modest 1% buyback in place. Wondering now with the elimination of the floor do we expect you to be more active in terms of repurchases given the excess capital, and is 1% the rightsizing for buybacks given where you're capitalized?

Steve, yes, a few things I'd say and we've been consistent on this. Firstly there was the regulatory issues around capital have been less uncertain now, but that's totally clear, and there's a Basel III floor, the output floor I think [Australia] has suggested they are going to be coming up with some kind of guidance soon. So there are a lot of moving parts there although I would acknowledge that it is much more certain today than we had a while ago. I don't know from DDs perspective we've been consistent on this. Our capital deployment framework has not changed. We do want to make sure that we've more than adequate capital to invest in our core strategies. We want to make sure that we have the flexibility should we need to use our capital to build on capabilities we think are critical for the Bank's growth on an ongoing basis. We have signaled that we are keen on acquisitions in certain types of markets in the U.S., certain types of offerings and/or products and we continue to look for those. I've also said that in Canada of course we'll look at anything and everything that comes around, and we'd look at it, seriously as long as all these acquisition opportunities meet our strategy and there's financial hurdles that are appropriate and within our risk appetite. And then of course with all that, if we think that we've done all that and we still have excess capital, we will certainly think about buying back our shares. So that's how we are thinking about it, nothing has changed here. And so we will review this on an ongoing basis, as you rightly pointed out. We did announce a buyback and that is in the market as you know. We had a press release out last one. And so we will continue to consider that and we like acquisitions overall on the capital side.

And then maybe just a quick follow-up for Terri, the new disclosure around the HELOC, the mix of amortizing versus non-amortizing versus the 55%, you give in the disclosure. I'm wondering, can you tell us, if there is any change on this front with rates rising? Has it been pretty steady at around half for the last year, couple of years, is there any movement on that?

So if you think back to some of the prior conversations we have had on this topic and part of the reasons for amending the disclosure is to try to make this growth story more clear. And so you have seen and continue to see in this quarter year-over-year growth specifically in amortizing HELOC and that has been strategy, a scenario where we have an embedded growth opportunity and it's a great product very convenient and flexible for the right TD customer. And so in fact, that growth in the amortizing portion has exceeded and in fact, exceeded and continued to go. So proportionately, it would continue to be a more important part of the HELOC portfolio, I would expect going forward.

We'll now take next question Ebrahim Poonawala with Bank of America.

I just wanted to follow-up. Riaz, I think you mentioned expense growth it was 1% up year-over-year. We have seen pretty significant improvement in the efficiency ratio year-over-year, down to like 50.1% adjusted basis. Just wanted to get a little more color in terms of how much higher expense growth, we should expect for the back half of the year and what that implies in your view for the efficiency ratio?

So as we called out in quarter one, we are looking at opportunities to accelerate some of our investments consistent with our overall strategy and priority. And so I repeat that this quarter we have a number of, let's say couple of hundred million dollars of additional expense initiatives that are in the hopper to be able to execute. And so I think if we are able to execute on all of them by Q3, Q4, I think you could see overall expense growth rates rise by maybe 1% to 1.5% for the year. I think if you look at expenses on a six months basis you also have to keep in mind that the foreign exchange rate does play a role in this. So expense growth ex-FX on a six month basis would have been closer to 2%. So I think if we end the year at 3, 3.5, I think that would be reasonable.

And I just want to follow-up on Steve's question on capital. Is it -- I guess, should we assume that you sort of operate with a little elevated capital level for the time being until you find that the M&A opportunity or until we get better clarity on Basel IV? I'm just wondering is there -- do you see a need to like bring this capital ratio down closer to 11% or not?

We won't feel compelled to bring it down quickly just for the sake of it. I think as I said if there are M&A opportunities then we do look at that, we're a quality buyer and we viewed as such that's our brand. So we look at enough of these but the end of it if we come to the conclusion that for the next little while there is not going to be much use of it, then we will seriously consider increasing our buyback as well. So that's how I position it Ibrahim. I don't think we put timelines that by such and such date if we don't find something then we're going to bring our capital down that's not how we would operate. We would look at what's in the market, what are the opportunities, what might be coming down the pipe as well, because given our size and stated view and what kind of markets we would be interested in acquiring, a lot of inquiries are made of us. So we look at all of those and then at the end of the day if there are none that are acceptable or interesting then of course we will look at buybacks as well.

And just on M&A I think you have previously talked about interest in the US Southeast as far as bank M&A is concerned. Does sort of the environment today -- we have seen one transaction happen earlier this week. Do the valuations any of those look prohibitive to you in terms of doing deal or do you think we're in a better place right now from a regulatory standpoint to able to do a U.S bank M&A?

You rightly point out when you get into a better environment, the value that not is attractive and that's part of if I guess the M&A world. We continue to look at the Florida market, the Southeast of the US is really interesting to us. We have a fantastic franchise there, we worked hard to build it, but we feel there is huge growth opportunities given our footprint in the U.S. The Northeast a lot of folks in the Northeast do have homes or vacation down in the Southeast of the United States also outside Canadian business. I think we have talked about this before. We have a few stores that we opened on the West Coast of Florida that for the most part catered to our Canadian clientele and those are growing very well for us. We like the Florida market, we like the Southeast market. There are some opportunities there that are more interesting than others, but values will be an important consideration for us. As I have had said before not only do they have to fit strategically they have to make a financial sense and of course they have be within our risk appetite as well. So that's why you know we've been more measured because sometimes you meet one or the other and others and all of them are not suitable for us. But that would be an interesting one for us to look at. I think we've also said given our experience in this partnership deals in the credit card field that continues to be of interest to us. I know there is a lot of discussion on whether this is the right time in the cycle to be looking at those types of transactions. We feel that if we get the right partners these businesses are attractive to the cycle and if the right opportunities were to present themselves we had look at it, seriously. So that's what we've said in the U.S. and then of course in Canada given our positioning here any kind of acquisition if it were to come along we would look at seriously. So that's our approach here but I think your key question our values, elevated of course, they are, but there is some offset in the environment and the prospects for the business going forward.

We will now take a question from Gabriel Dechaine with National Bank Financial.

Just a clarification on one of your earlier responses. Riaz, you said expense growth 1% to 1.5% for the year and back half of like 3% to 3.5%, is that -- did I hear that correctly?

No Gabriel I was referring to the whole year. So if you look at the first six months and say that expenses without taking effect into account would be up 2% then if we -- that's another let's say a couple of hundred million dollars into Q3 and Q4 that should give us another 1% growth so that we would end up in the 3%, 3.5% territory for the whole year.

I just want to ask about, and this is for Terri. Some of the pricing actions that we've seen from the bank in the last month or so on the mortgages, some are on the 5-year fixed and then on the variable rate, I guess that market has gotten more competitive. And then also, TD, specifically the fees, some of the banking fees we've seen, some tweaks there. How does that -- am I going to notice that? Should I make a big deal about it because it could have some tailwind effects.

So let me take level pricing and then fees as two separate topics. So real estate secured lending side for certain -- we are constantly watching two things supposed to grades in particular the cost of funds and then the competitive situation. And certainly at the end of April for the five year fixed rate our feeling was that from a yield curve perspective there was a opportunity to raise that rate and others followed us. In terms of the variable interest mortgage as you stated some competitive dynamic there. We are so comfortable that we are originating deals that customers rates that are competitive and continue to feel comfortable with our gross guidance that we have given as low around mid single digit for fiscal '18 for total proprietary real estate secured lending. On the fees side, some of the revenue performance that you would have seen this Q2 would have been the decisions we made around overall fees last year playing their wave through across our businesses. Having said that there are a variety of things we look at and you may recall last year we actually took away the fee from any of our checking customers to make e-transfer and we actually do not charge a TD fee for a non-TD ATM use. So notwithstanding we made a portfolio of changes to fees across our businesses. We also in this quarter we have earned through some of the changes we have made to get back value to our customers in areas that are important to them. So I guess that net-net I'd say the fees that you might have seen communicated this year would have been the same kind of thing we look across the portfolio. We consider where we can add value to customers. We consider how we are doing competitively. We communicate to customers in ways that they could perhaps not pay a fee through different behaviors or activities with us and we make those assessments. In terms of looking out and saying how material would that be, I'd say in the overall scheme of things, these were more tweaks overall for pricing changes in '18 and we expect them to be material in the back half for this year into next year.

The last one here and this is maybe a bit of a random one, but I look across your current portfolio, balances are flat year-over-year. If I look at the non-amortizing HELOC portfolio, if I can find it here. Yes, it's also pretty flat. And if I look at your Canadian commercial real estate portfolio in the wholesale, it's growing but at about a quarter of the rate that I'm seeing from some of the other banks. I'm just wondering if I'm being -- if there's anything there? Are there any markets where you're maybe pulling back. You're seeing things you don't like or is this something that you view and you're not happy with it and you actually want to change it?

So let me do that one in three pieces as well then. So on the commercial loan front, we're growing commercial loans albeit at a lower pace than our overall -- sorry, real estate loans, commercial real estate loans at a lower pace than our overall commercial loans. I would say we're happy with the growth of that business and the risk profile of that business. And as Paul and his team work in the market to deal with our customers they're not shy to not do business that they don't think makes sense from a risk perspective. If you talk about the float HELOC, that again is that strategy that we have been deploying around the improvements we made to our amortizing HELOC product as a credible mortgage substitute for customers. And you may recall we have an embedded growth opportunity where we didn't have those product enhancements or that exact capability to make it a mortgage substitute for customers, over the past few years and we enhanced the competitive of that product and so really we look at total real estate secured lending growth and those amortizing balances have been growing more quickly than the float balances and we're completely comfortable with that. And again hitting the growth that we've been communicating. And then as it relates to cards if you look at the portfolio overall the Visa products are doing particularly well. So these are the enhancements we've made to our line up in particular on cash back and everyday rewards, where we're performing better than what we'd expected when we launched those products. Overall our Visa retail sales are above the Visa industry average and so very comfortable not only with our leadership position in cards but the growth in the Visa portfolio. We've been rationalizing and streamlining the overall cards business, I've talked about this in the past period of time. And so we did sell a portion of the [indiscernible] portfolio some in Q1 some in Q2 and we've done last retail cards services business, those are completely in line with our expectations, and we've been continuing to improving the profitability of our MBNA business by doing fewer lower yielding promotional loans for instance. And so putting all together the portfolio itself is not overall growing quickly as you said but the parts of that that are strategic for the growth for the future are doing particularly well.

Well, it sounds the MBNA is a little bit higher, I guess further out on the risk curve, if you're not pushing that one as much as the other Visa, it sounds similar I guess to what's taking place in the float HELOC in the sense that you're not chasing growth in those markets?

On the MBNA for sure what we're not -- we're really looking at a volume sort of profitability trade off there, the promotional loans is less of a perhaps risk decision more of a -- we want to make sure we're getting paid for the business that we're doing. But overall we definitely are not in the business of chasing risks that's outside our appetite in any lending product.

We'll now take a question from Sumit Malhotra from Scotiabank.

Terri I'll stay with you for a minute. First couple of days, first couple of banks we've heard from there is been some different comments on the trend and the real estate secured books. So when I look at your new disclosure with the amortizing HELOCs and mortgages. Your year-over-year growth is in the 5% to 6% range. Actually didn't look too bad sequentially either in what sometimes is a slower period. As you look out for the second half of the year, I think historically, we can agree that, we have seen stronger real estate related loan growth from the banks in the second half of the fiscal year. Is that your expectation that you should have a relatively normal rate of growth in the range or on a year-over-year basis or are there still some impacts to be [sell] from the changes that have taken place over the past year?

So for sure overall, we would expect to hit the mid-single-digit guidance for fiscal '18. As you noted, on a proprietary basis we spend about 6% total RESL growth year-to-date. At the higher end of that range, if by the end of the year, we were at the lower end of that range I would expect as through the year to deliver similarly, to the proprietary RESL growth we have last year. We did have some pull forward in Q2 for sure of November and December pre-approvals. And Q2 applications were a little bit later. Having said that, we're starting to see a little bit of the spring market come to fruition and we've made significant investments in this business, which gives me the confidence to standby in the guidance. We have been adding to our mobile mortgage specialists in high growth markets. We have continued to invest in our credit operation centers, so that we can [tend] for our customers to the only question, they want answer is to qualify, they can get that answer more quickly. In terms of our branch advisers, we've been tooling them up and given them more training. And then as Bharat mentioned, we've been significantly enhancing our digital capabilities for real estate secured lending for mortgages in particular. And as we're excited now have not only the ability for buyers to understand how much they can afford to connect seamlessly to a branch or an advisor to in a proprietary and exclusive experience seek listings that are in their desired neighborhood to work through a pre-approval hold rate for 120 days and then get mortgage specialists on the phone to help them to the process. And so because of all of those investments I feel confident in the guidance.

One of the areas of differentiation with the group has been utilization or willingness to use the third-party or independent broker channel. You're still one of the banks that, at least from the data I have seen is involved there. How would you characterize from a distribution perspective your use of the third-party independent broker channel? Is that something that you're comfortable with pricing, documentation, those type of issues or is it an area that you have pulled out from any way?

So we want to be available for our customers in their channel of choice and that could be digitally as I just described through the branch, through the mobile mortgage specialists or many customers do speak out the help of a broker and we don't want that to preclude them from becoming a customer of TD on a franchise basis. We're very careful in ensuring that any partner that we deal with the Bank, meets our risk appetite. Those are underwritten to TD standards. There is good second line overview of the adjudication that happens and we don't feel like we're overpaying for those deals versus other deals that we make. So it's a great client acquisition strategy for us.

Thanks for that. Last one for me is for Bharat, when we talk about M&A with TD, maybe I shouldn't but the talking points haven't changed much for number of years whether its credit card portfolios or perhaps adding capabilities in the Southeast U.S. I was wondering, we don't talk too much about is as your investment in Ameritrade, it's probably our fault because it's really strong investment for the bank for a number of years now. This year we are seeing a big increase in part because of some of the changes in the U.S., but also your participation in the Scottrade deal. When it comes the capital deployment how do you think through the merits of helping Ameritrade develop its business? Is that something that your partners with that company drive or is the fact that you on a smaller stake mean you're more focused on growing your own Bank business in the U.S.?

I'm so glad you brought it up Sumit, as you rightly point out it is TD Ameritrade. We have been involved in this sector for many, many years. In fact, we entered the United States in 1996 in the online brokerage business. So it is very much a part of our thinking and as you know TD Ameritrade looked at Scottrade, TD was happy willing to participate in the transaction by acquiring Scottrade Bank. So we're committed. It's been a great business for us, continues to be a great business. We have ongoing programs that that are critical you know for TD to ensure that we have the right offerings for our mass affluent clientele in the United States that is in the millions. So it is an important offering that we have for our clients as well. So it is very much part of TD and then of course if there are opportunities there as was the case with Scottrade you know, we would look at it very seriously and make sure that if it made sense with TD Ameritrade and with TD Bank that we want to do whatever it takes to further the strategic advantage that business has in its market. So it is an important business for us and we are happy to support it and it's done remarkably well for us as well, as you rightly point out.

I will just kind of break in and say that we're a little bit short on time, so I would like to ask the analysts to try to stick to one question.

We will now take question from Robert Sedran with CIBC Capital Markets.

Riaz, like I just want to follow up on your expense comment and I'm sorry I missed it, but as you think about accelerating investment in the second half is there a particular business segment or geography in which that's going to happen? Is it more directed to the U.S. because that's where the tax benefit is coming from, or is it more platform wide?

I think Rob you can think of it as platform wide, we have priority both in Canada as well as the U.S. and across all three segments. So I think you can expect it to be widely dispersed. Does that help Rob.

Sure, I will ask, I had another question -- clarification but I'll take it offline.

We will now take a question from Nigel D'Souza with Veritas Investment Research.

I just had a follow up for Terri on the new HELOC disclosure. I just wanted to make sure I understand the mix there between fixed and floating. Am I correct in saying that the non-amortizing portion is essentially entirely floating and the amortization is fixed? Or is there a mix between floating and mix without book as well?

You were right the first way that you described it. The amortizing is the fixed the non amortizing is the float.

On the single digit -- mid single digit growth rate of '18 is that on the entire RESL book or just the amortizing portion of your RESL book?

We think about it as total real estate secured lending which would include both as amortizing isn't growing more quickly in fact than non-amortizing in our past history or recent history and it would be proprietary growth.

So just to follow up on that point. Are you expecting in the back half that amortizing HELOC balance to offset sequential decline to flattish RESL mortgage book we are seeing in Q2?

We have been offering this to customers that where it makes sense for them as a mortgage substitute. So for some customers the mortgage might be the right product, for others that might be an amortizing HELOC or fixed term HELOC. So I'd consider them as one from a customer perspective and then it would be which is right for which customer.

We will now take a question from Sohrab Movahedi from BMO Capital Markets.

Terri, I wonder if -- are you in a position to talk about what the decline rate in the commercial lending business has been? In other words you said you guys are not shy about turning down deals. Can you comment on -- if the decline rate has been trending higher or lower? And whether or not the spread on the new book, how does that compare with the back book?

As I probably don't have those specifics, so I'd probably take that one offline.

We will now take a question from Darko Mihelic with [RBD] Capital Markets.

Just a quick question on the U.S. NIM and the rather big jump quarter over quarter. I'm wondering if you can just speak to expectations for that going forward maybe mix in a little bit of rate hike sensitivity for me again. It's just that it caught me a little bit off guard and I am wondering if there is something in there that that might make a decline over the next quarter or two?

So quarter over quarter, obviously up 4 basis points. And the main drivers there would be increase in rates and deposit rates in particular. We are seeing lending rates pretty flat and the offset to the rate hikes that we have seen it would be the mix of the business that we continue to grow the deposit book, on an absolute dollar basis faster than the loan book and that would be the offset there. And as we have talked about before the way we should think about this is [sum] of price in June rate hike and all things being equal, and depending on mix and yield curve and all the other things that go into that, we would certainly see an environment for improving NIM should rate hikes continue to occur.

We'll now take a question from Mike Rizvanovic from Macquarie Capital Markets of Canada.

I just want to go back to Terri on your fee-based revenue in Canada. So what I'm wondering is we hear a lot about the cost savings that are set to come in the coming years. What is your view on the risk to revenue? And I'll tell you why I'm asking. So when I do look at other jurisdictions that are far ahead of Canada in terms of the digital transformation, their fee structures are significantly different than what we see here. What are your thoughts on that? Is it more of a longer term view?

So, for certain if that were to play out here it would be an industry impact as opposed to TD specific impact. I think we're continuously ensuring as we think about the products and services that we offer to our customers that they're meeting their expectations and delivering value. And there've been times in the past when some of those fee dynamics have changed and we have continued to evolve the product construct or the cost of doing business to allow us to continue to produce good results notwithstanding those changes.

And so when you do see the J.D. Power rankings come out and for a number of years now, we've seen the online platforms, that do offer free everyday banking fees or no fee banking, if you will. Does that concern you at all? I know it's probably mostly millennials, I would imagine, but they are going to make a growing portion of your client base over time.

When we do research with customers in Canada what they tell us even our most digitally active customers is that it's important for them to have a branch based capability with their bank, they call it a real bank. And so we're continuing to ensure that we're delivering as Bharat said legendary personal connected experiences, omni channel experiences and for customers that even the most digitally active that ability to have some place to go when they've a problem or when their questions are more complex, continues to play an important role for them in selecting their financial institution.

We'll now take a question from Scott Chan with Canaccord Genuity.

Just on the U.S. side, if I kind of look at the loan book in U.S. dollars, on the personal side, it seems kind of flattish across many of the portfolios of HELOCs, mortgages, cards, et cetera. In terms of looking forward should we be thinking about more of the year-over-year growth rate that you exhibit there or is there something in that -- in the quarter that kind of just caused slowness because it's just slowness versus other U.S. peers that seemed a bit slower, than I saw?

I just want to make sure I am clarifying your flattish sort of growth comment, you're talking about Q-over-Q, Q1 to Q2, correct?

Yes, that's right. Yes.

Yes, so if you go back to last year it's not dissimilar to what we would have seen in Q1 to Q2 in 2017, and I do think on the personal lending side you do get the seasonality. People paying down cards and forms of debt coming out of the holiday season, receipt of tax refunds, and things like that. So that's not uncommon. And -- but more generally if I think about the year-over-year business, up 5% certainly we're leading peers and we still remain bullish in our ability to outtake share from our competitors really across many asset classes and if you look over year-over-year basis, auto loans are growing 7%, cards up 15%, commercial story is a little bit different. In commercial is that, we're seeing a lot pay downs, all-time low utilization rates and many, many outlets for commercial assets these days. But again, there, we see ourselves as underweight in certain various commercial businesses and we still see for quite some time to come our ability to take share there as well.

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

Thank you, operator. It's another terrific quarter from TD and I'd like to take this opportunity to thank our 85,000 TD colleagues around the world for continuing to deliver for all of our stakeholders, particularly our shareholders. So thank you for that. And for folks on the phone thank you for joining us this afternoon and we will see you next quarter. Thanks very much.

Once again that does conclude today's conference. We thank you all for your participation. You may now disconnect.