TD Bank to take C$600 million telecom provision; TD Securities to reduce corporate lending

By Sara Rosenberg

New York, July 18 - TD Bank Financial Group said it will take a C$600 million loss provision against potential problems in its corporate telecommunication loan portfolio and a C$250 million provision for certain loans in its U.S. corporate portfolio.

Furthermore, TD Securities is reducing the size of its corporate lending portfolio, particularly in the higher risk telecommunications companies and reducing capital associated with this portfolio by one third over three years.

At the end of the second quarter, TD said its telecom and cable portfolio stood at C$4.9 billion. With the sectoral provisions and reductions in the portfolio, it now stands at C$3.8 billion, of which C$1.5 billion is investment grade.

"While no one can give guarantees on future developments, we have been thorough and realistic in establishing this strategic direction and related provisions. I am confident that by taking decisive action to deal with our credit challenges we have put the telecom issue behind us," said A. Charles Baillie, chairman and chief executive officer of TD Bank Financial Group, in a news release.

"We intensively reviewed our non-performing loans again and believe our provisions are adequate, however, we have gone further and have identified any performing loans where we could see potential problems in light of developing market issues."

The bank anticipates taking the full C$1.3 billion of the loan loss provision guidance provided in April and it will take C$400 million of these provisions in the third quarter. With the new C$850 million new loan loss provisions, the company's expected loan loss total for 2002 is C$2.15 billion, the company said.

Due to the additional provisions, third quarter earnings will be reduced by C$0.89 per share resulting in an anticipated loss between C$0.46 and C$0.51 on a fully diluted cash operating basis.

"While TD Canada Trust is expected to have growth in the quarter and TD Wealth Management to have flat or slightly lower earnings, slower capital markets will continue to depress the earnings of TD Waterhouse and TD Securities," Baillie said. "TD Securities has been a good business for us, but they were being held back by the cloud that hung over our corporate lending book. It is important to remember that many parts of the telecom sector remain quite strong."

"TD Securities will play a significant role in TDBFG's future, providing us with a source of high margin growth," Baillie said. "We will focus on our Canadian franchise, as well as our niche global businesses where we are competitive."

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