Canadian banks: Breaking down Q2 numbers

PETER HAYNES: Welcome to episode 39 of TD Securities Podcast series, Bid Out, a market structure perspective from North of 49th. I'm your host, Peter Haynes, and today I'm joined by Mario Mendonca, Managing Director and Senior Financial Services Analyst for TD Securities. Mario is here to talk to us about the Canadian banks, a sector that represents nearly a quarter of the S&P/TSX composite, and yet seems to get overlooked by a lot of investors, nondomestic in particular, when they think about risk-on in Canadian equities.

Before we get started, a quick reminder to our audience. This podcast is for informational purposes. The views described in today's podcast are of the individuals and may or may not represent the views of their firm. And of course, the content of this podcast should not be relied upon as investment, tax, or other advice. Mario, thanks for being our podcast guest today.

MARIO MENDONCA: Happy to be here, Peter.

PETER HAYNES: Great. So you've covered the Canadian banks now for close to 20 years, and the last eight of which were at TD Securities. What's the biggest change in how you look at banks today versus when you started your career?

MARIO MENDONCA: Well, one thing that has remained constant is the resilience of the banking sector. The one thing I distinctly-- I remember having to learn the hard way early on in my career is, when it appears something's going wrong in the banking sector, as a very young analyst, a new analyst, I read too much into that "what could go wrong" scenario.

And what I've learned over the years, and what's really improved, I think, my coverage of the group, is to, the moment I feel something's gone wrong, look for what element of the universal banking model will offset that. And this crisis that we went through, or this pandemic that we're going through, is a perfect example of how I learned to cover banks. When it looked like the world was falling apart in March, rather than turn very negative on the banks, I upgraded the banks.

And I did it because I knew that there would be a number of other important offsets, not the least of which was the spike we saw in trading revenue. So when I think about how my coverage has changed over time, what's really changed for me is not to overreact to negatives, to instead look for the clear offsetting positive in the universal bank model.

PETER HAYNES: Makes me wonder whether that's good advice for any new analyst that's joining our industry now, is just to not get too caught up in the noise of the day-to-day, especially with social media and all the other things that seem to be driving so much of what happens in capital markets.

Now, earlier this week, Bank of Nova Scotia reported its second quarter, ended April 30. And this completed the reporting season for the big six Canadian Banks. Now that the dust's settled on the quarter-- and I know today you published, I think, a 51-page report summarizing things-- what stood out for you in terms of the sector? And was there one bank that stood out for you in 2Q 2021?

MARIO MENDONCA: Yeah. What stood out for me is that estimates remain too low. This might be an interesting thing to think about. After the banks reported Q1, the average Canadian analyst raised their estimates, their 2022 estimates, by 8%. Now that the banks have reported Q2, the average Canadian analyst has raised their estimates by another 6%. So since the beginning of this year, the 2022 estimate has gone up 14%. And that's the most I've ever seen in terms of consensus increases in a given year.

Now, part of that relates to credit. And credit is recovering very abruptly. But really, what it reflects is how the recovery is faster than people are building in. And what I believe is that we're probably going to see a few more quarters where the banks beat consensus estimates.

So there's momentum. There's momentum here for estimates to continue to move higher. I think that was one of the important takeaways I had coming out of the quarter. There were a number of other more sort of detailed things that we can get into in a bit. But that one really stood out for me.

Now, in terms of the bank that really stood out, yeah, what we learned, again, is that BMO, Bank of Montreal, is in the right place at the right time. And let me explain what I mean by this. It is a capital markets-heavy bank. And capital markets were strong. They don't have as much demand and notice deposits. So the decline in interest rates isn't really hurting their margin the way it is for a number of other banks.

They're not heavy in credit cards, and credit cards have been down. And they've done a tremendous job of taking their efficiency ratio, which we calculate as expenses to revenue. They were at the very height of the group. They've now-- they're now pretty much in line with the group.

So Bank of Montreal delivered the very best pre-tax, pre-provision profits. We should talk a little bit above that definition at some point. But they deliver the best pre-tax pre-provision profit growth this quarter. They did in the last quarter.

So when I think about the future, what I'm really thinking about is, can BMO continue this level of performance? Or have some of the key drivers started to evolve? And that's a topic that we can talk about. But I've been thinking a lot about-- who are the winners going forward as the key drivers of all?

PETER HAYNES: Well, Canadian banks come at an interesting time with their reporting cycle, because they're not on the traditional calendar quarter, like the US banks. So the second quarter for Canadian banks ended April 30. Now, as an analyst you get a sneak peek on what might come from Canadian banks when the US universal banks report, because they are on the calendar quarter.

How did the Canadian banks compare to US peers in this particular quarter? And how does a bank like TD fit into this analysis, given it has such a significant footprint in the US?

MARIO MENDONCA: What is clear from looking at US results versus Canadian results is that capital markets were strong in both. But you really want to have a very large US capital markets franchise right now. That's where we're seeing very strong momentum. Royal and Bank of Montreal have been the key beneficiaries, probably Royal more so than anyone, of the strength in the US. TD's franchise in the US is built, and we all know that. But it's certainly not comparable to what Royal or BMO have in the US. So TD's smaller US capital markets franchise is somewhat of a disadvantage given the strength we're getting out of the US capital markets area.

But another really important factor that's starting to unfold in the US is-- or not unfold, we've seen this for some time now-- is when rates decline, the effect on bank margins in the US is far greater than what we've seen in Canada. So a bank like TD with a very large US franchise and a lot of US excess deposits, TD have seen their margins come in far more than--

Here, let me give you an example. TD's all-bank margin, the way I estimate it or calculate it, was down about 35 basis points year over year. That's the all-bank margin, which reflects the US and Canada and everything else. That would compare to, for some banks, 10 basis points, 8 basis points.

So what's clearly happening for TD is, TD is not necessarily benefiting from the big capital market push in the US, but is getting hurt a little bit by the margins in the US. On the flip side, the US reopening could drive very strong credit card spending, commercial loan growth, consumer loan growth. And TD stands to benefit from that as the reopening trade unfolds later on this year.

PETER HAYNES: On the flip side, we talked a lot about RBC's exposure to capital markets in the US. And I know in your report you published today, you talked a little bit more about how people maybe don't fully appreciate that BMO now has a significant capital markets presence south of the border. How did they do in terms of their capital markets activities?

And does-- do we need to start thinking about BOM and RBC a little bit more like the US universal banks because of their significant US capital markets presence?

MARIO MENDONCA: So let me describe it first in relation to the total revenue. Among the big six, national banks, actually, still generates more revenue, relative to the size of the bank, from capital markets. And just so we're clear on the definition here, when I say "capital markets revenue," I'm referring to trading revenue, underwriting and advisory, securities brokerage, and security gains. But security gains are a very small part of that. About 60% of capital markets revenue is trading revenues. It's the dominant portion of total capital markets. And for national, 26% of the revenue comes from capital markets-related revenue. For Bank of Montreal, it's now 22%, 23%. And for Royal, it's actually 21%. So oddly, in relation to the size of their revenue base, National and BMO are now more leveraged in capital markets than Royal. Now, this could change, because Royal's at around 20%, 21%. Royal could sort of pop back up again.

But I think the Street has to change their thinking a little bit. More often than not, people say, well, National and Royal are the big capital market banks. I wouldn't go that far. I would say National, BMO, and Royal are the big capital markets banks. And I think in BMO's case, a lot of it is the progress they've made in the US.

But what's really stood out this quarter-- and this is worth thinking about for a moment-- Bank of Montreal, Capital Markets-Related Revenue, what we refer to as CMRR, was up 16% year over year this quarter. Now, part of it is the success of expansion in the US. Another part-- we can't discount this part-- was that in Q2 2020, the year ago quarter, BMO did not have a particularly strong quarter. So then we have the effect of delivering very strong capital markets-related revenue growth, in part because last year wasn't so hot. By contrast, TD's capital markets-related revenue was down about 2% year over year. That's in part because TD had a very strong Q2 2020.

PETER HAYNES: I've always thought that when people think about the Canadian banks and when there's risk-on in Canada, and people are getting along the banks, they view the sector homogenously. Do you think that when you talk to investors, they still think of this sector homogenously? And if they do, is that the correct perspective?

MARIO MENDONCA: I find that question particularly interesting, because there are times when my coverage of the Canadian banks essentially is-- like, I almost think of it as one massive bank that's the consolidation of the six. And what I'll do-- and this is why-- this is when things are kind of steady state, not exceptional growth, not collapsing. But there have been times in my career where that's exactly how I do it.

I add them all up together. I look at it as one big bank, and I'll make a call on the sector. And I don't worry too much about what I think of as an individual bank. That approach was the right approach in early 2020. And I'll explain why.

Everything fell apart in 2020-- March 2020, as we all know. Everything fell apart. All the banks were cheap. So the report I wrote was just buy the bet. Because to me, it didn't matter whether there was going to be revenue growth in one area or another. They just all looked so cheap.

Now we've got to be a little bit careful, because the themes that really animated the sector later on in 2021, for example-- sorry, later in 2020, early 2021-- the themes, for example, like capital markets being the driver, net interest margin declining, credit card spending low, those things are evolving. And the winners that we saw early in 2021, maybe late 2020, could change.

As these things evolve, some banks-- like BMO and National, for example, that have been in the perfect place and have really outperformed in the first half of '21-- may not be the outperformers in the second half of '21 if I'm right that the themes are changing. And so they're homogeneous, I agree. And in fact, I look at it that way. But there are times-- and we're in one right now, I think-- where you have to be a little bit more discriminating.

PETER HAYNES: Well, that's kind of like the market these days, Mario. When the market is directional, everything moves. And then you get into the stock pickers' environment. So as a follower of the bank sector, it's clear to me you got to know when you're in that environment where you want to be either along the sector as a whole, market weight, versus taking bets. And from what I'm hearing you say, now is the time to start trying to differentiate the good from the bad and maybe putting some of those bets on. But I've got to tell you, as I worked my way through your report today, I started to think I live in the world of market structure, and we're accused of constantly having a crazy number of acronyms that nobody understands. And I'm reading your report, and there's a whole bunch of acronyms in there, some of which I don't know.

So one of them that I keep hearing about, and I need you to explain is what you mentioned earlier, this so-called pre-tax pre-provision-- I can't even say that, it's tongue twister. PTPP. When did this metric start becoming important, and what exactly is it?

MARIO MENDONCA: Pre-tax, pre-provision. So it's your earnings before taxes and before you record your credit losses. So it's essentially revenue minus expenses, but you don't take into account anything to do with credit losses.

The reason why this came about-- and there's been various times in the US where they use it. But the reason why this came about in Canada is largely because in Q1'18, a new accounting standard came to be, IFRS 9. And IFRS 9 changed the way the banks record credit losses.

In the past, we had what we called an incurred loss model, meaning only after losses have truly been incurred do you record the credit loss. But under IFRS 9, which I said-- as I said, came about in Q1'18, we moved to something called an expected loss model.

So I'll give you an example what that means. In March of 2020, when it looked like the world was falling apart, the banks' expectation of future losses obviously went through the roof because of everybody-- people were losing their jobs. So the banks built up billions and billions of dollars of expected credit loss. So as a result, their earnings collapsed in Q2 and Q3 2020. Absolutely got murdered, because they were building up billions of future credit loss.

The question then became, for myself and other analysts in the sector, is these are expected credit losses. They're not real. The banks haven't lost any money. So we started to look at pre-tax pre-provision as a way to gauge what sort of the underlying earnings power of the banks were, because we didn't want to take into account all these expected credit losses.

Now the reverse is happening. The expected credit losses didn't materialize, because in some respects, we sort have socialized the losses by all the government support we have. So now, all these massive expected credit losses are being released back into earnings. And so the banks have reported record results over the last two quarters. But really, it's coming from the release of those credit losses.

So just as we did in 2020, exclude the big massive credit losses of 2020, now we're excluding the massive credit releases that are essentially just the reverse of 2020. So it actually makes a lot of sense to look at it this way, because you certainly wouldn't want to penalize them for the big credit losses that were expected in 2020. And similarly, you don't want to reward them for the big credit releases that we're getting now. That's why pre-tax pre-provision has become so popular.

PETER HAYNES: And to be clear, Mario, has this been universally adopted in the banks in the United States and across the different-- all the analysts and investors that you talked to? Does everybody think of things in that same fashion? Or are some people saying, the IFRS rules exist for a reason, we need to consider these potential losses, and we need to kind of accept that volatility going forward?

What's your feeling, that everybody's kind of in that PTPP world?

MARIO MENDONCA: Probably. I can relay the nature of the conversations I have with investors. We start off with a quick EPS discussion. And then as soon as I get into the EPS discussion, I break it into two parts. I say, EPS was up 150% this quarter, but it came from pre-tax pre-provision being up 4%, and credit release reserves of whatever. 90% of the reserves were released, something to that effect.

So we're still focused on EPS. But when we drill down EPS, we now break it into parts so we can understand it. But in terms of the acceptability of pre-tax pre-provision profits, absolutely. Not only do the banks talk about it in their presentations now, probably even more than their EPF. But I spend more time talking to investors about it.

And when I listen to US calls-- in fact, the pre-tax pre-provision discussion dominates most calls. And it has to, because the credit provisions are so absurd-- well, "absurd" is not the right word. They're so volatile under these new accounting standards. So it makes sense. PETER HAYNES: Let's carry on with that discussion around the conversations that you're having with investors. So as you talk through the quarter and the outlook for the future, what's top of mind with the investor community right now, as you speak about Canadian banks? And were there any common themes that you heard from the analyst community in the management Q&A on the six calls?

MARIO MENDONCA: We spent a lot of time on the calls talking specifically about the effect of interest rates. So what everybody is preparing for is inflation. At some point, we're going to get inflation. At some point, we're going to have the price in inflation. And that means higher interest rates.

So the banks, most of them spend some time disclosing the sensitivity to their earnings from higher interest rates. And I think the analyst community rightfully spent a lot of time trying to dissect that disclosure. And it became clear-- I mean, again, this is something I was well aware of and I'd written about as early as January 2021, where I'd sort of broken up the group into parts, the ones that looked like they could be very sensitive to rising rates and the ones that seem less sensitive to rising rates.

And I think there was a big discussion around that on the call that made sense. Other than that, what investors are really asking about, virtually every single call I have with investors is, when are the banks going to raise dividends? When are they going to buy back stock? What are they going to do with all this excess capital? Because here, I think you know, our banks are sitting on massive capital ratios right now.

We thought the world was going to fall apart. So buybacks weren't allowed. Dividend increases weren't allowed. The banks were told to retain capital.

And they did, and now they're sitting on extremely high capital ratios. And they're kind of looking for a place to go. So investors are appropriately really focused on capital deployment.

PETER HAYNES: So the US banks are ahead of Canadian banks in the sense that they don't have the same restrictions on returning capital to shareholders-- excess capital to shareholders beyond existing dividend rates or buybacks. In Canada, obviously, there are those limitations, and everybody's kind of sitting here. When is OSFI going to change the rules?

So what's your best guess on when OSFI will allow banks to return some of that excess capital? And maybe also, from a fundamental perspective, what exactly does it mean when banks are holding too much capital? What does that do to their ratios that it causes so much of an issue for investors to sort of understand valuations?

MARIO MENDONCA: So capital ratio for a bank, very simply, is the shareholders' equity that they have on their balance sheet-- so assets minus liabilities, which is deduct the goodwill. It doesn't include any goodwill. That's an intangible. So think of it as tangible shareholders' equity. I'm simplifying a little, but that's a decent way of looking at it.

And let's divide that by the risk that the banks take. The credit risk is the biggest one. But there's also the market risk, operational risk. So it's the capital divided by the risk.

Now, what's happened over the last little while is, because the banks aren't paying-- aren't raising dividend, buying back stock, or doing deals, their shareholders' equity has continued to rise. It's gone up significantly.

So the numerator of the calculation is getting really, really high. But the denominator, which is the measure of risk, well, it didn't unfold that way. The risk didn't spike, in part because we kind of socialized the risk with all the government support that was sent there. So the denominator never rose as much as we expected, but the numerator continued to climb. So as a result, our capital ratios got very high.

Now, what does that mean? What are the implications? Well, if your capital is really high, if the prices here are weak, the return on equity is depressed when your capital is too high. Now, that's not a problem for today, because the banks are still making a lot of money. In fact, the last two quarters, all six of the big banks reported record earnings. So their ROEs are just fine.

But what happens when credit reserve releases that we've seen, what happens when those start to fade away and we go back to more of a normal earnings environment? Well, we're going to lose a bunch of ROE points, and that's not good, because ROE is one of those key things we look at to drive valuation for a bank.

So at some point, we're going to need to use this capital. So really, I guess-- I think the way to address the question is, having all this capital is a great thing-- great shareholders' equity, very strong, all that stuff. But there are implications long term if we don't start using the capital. Now, the first question you came at me with was, what is my best guess on when we're going to do this?

I really think OSFI-- OSFI, our regulator who regulates all the large financial decisions-- I think OSFI is going to follow the reopening. So I think OSFI really doesn't want to move until Canada looks sort of normal again.

So when Ontario and the other big provinces, when things start to reopen again, and we're back at restaurants and we're back sort of somewhat normal-- which maybe could be in the next-- hopefully in the next few months, I think that's the trigger that OSFI is going to use, along with a very high proportion of the population being vaccinated, that's the trigger they're going to use to say, OK, we're through the worst of this.

And that's when the banks are going to be allowed to raise dividends and buy back stocks. Now, I'll wait to see if you want to get into it. But we should talk a little bit about what this means, like what kind of dividend increases we might see, what kind of buybacks or acquisitions we might see. But in terms of the timing, maybe in the next month or two? And then later on this year, we'll start seeing them return capital.

PETER HAYNES: Let's carry on that theme. How important, as you look at the banks on a go-forward basis, what are those exact key metrics that you're looking at in terms of your valuations? And how much of your outlook is predicated on a "sooner rather than later" ability for Canadian banks to be able to return that excess capital?

And then finally, just to throw in a curve ball, is there any chance any of those Canadian banks will actually invest that capital rather than return it?

MARIO MENDONCA: Whether they raise dividends in a month or six months doesn't matter. I'm not worried about the now or six months. It's not going to affect my outlook. What matters more is when the time comes that they all do it, that they all raise their dividends.

And I want to see big, chunky dividend increases. I want to see 5% dividend increase. I would really like to see double-digit, 13%, 14%, 15% dividend increases to reflect a couple of things. Number one, lost times-- it's been a long time since they raised dividends-- and two, confidence in their future earnings power. By raising the dividend a good chunky amount right off the bat and the moment they end, that would send the right message to the Street. But whether it's now or six months from now, I don't really care.

In terms of buybacks, I don't think that our banks are going to buy back 5%, 6% of their shares outstanding when the time comes. That doesn't seem right to me. From a banking perspective, if I were a senior guy at a bank, I don't know if I'd want to buy back that much stock, because there are probably real opportunities, organic growth opportunities, that may absorb some of this excess capital.

There could be great wealth acquisitions, advisory acquisitions, advisor acquisitions in the US, regional bank deals. So I would really rather-- if it was totally up to me, this is how I think I would do it. I'd do a big, chunky dividend increase, something like 13%, 14%, demonstrate to the Street how confident I am in earnings. I'd start buying back some stock, maybe in the 2% to 3% range. Just enough to sort of wet the beak of the people that want it wet.

And then I would really be actively looking for something that advances my strategic opportunities and options in the US. Maybe that's the US regional tank. Maybe it's advisors. Maybe it's the capital markets acquisition. But really, take advantage of this time to do a deal.

And if the Street doesn't like it because it looks expensive, tough. It doesn't matter. Just deal with it. The Street will be bust. Oh, you paid too much for x, y, z. Fine. In two to three years, you will look back and say, yes, this was still the right time to do it. It was expensive. In fact, look at TD's acquisitions of Banknorth and Commerce Bank. People are wringing their hands about how expensive these deals were at the time. Imagine TD today without Commerce and Banknorth. What would TD be without that big US franchise?

So I say, go ahead. Overpay if you have to. It will be worth it in the long run.

PETER HAYNES: One thing I thought was interesting, Mario, back just after the US election, we saw some buying in the sector, banking sector, from outside Canada. And historically, we found certainly that nondomestic accounts, and from the US in particular, tended to underweigh Canadian banks. So it was really nice to see a risk-on perspective on the sector from nondomestics.

Why do you think the global accounts tend to underweigh Canadian banks? Is it that ongoing theme that we have some pending mortgage crisis in Canada because of a lack of understanding of guaranteed mortgages? Is that the theme that always keeps the International investor out of Canadian banks? And is the tide turning?

MARIO MENDONCA: Yeah, that's really-- so I'm working at home now, so I don't have call display the way I did. I could probably do it on my cell phone. But I remember sitting in my office at TD before this all came down, looking at the call display. And if I looked over and it was a 212 number, so I knew where this was coming from-- at least that was the area-- that's still the area code for New York, I'm pretty sure. So I see that call coming through, and I knew what kind of call it was going to be.

It was going to be a US hedge fund investor, and they were going to beat the drum on how bad Canadian housing was, how the mortgage market was going to destroy the Canadian banks. And I would go through my list of reasons why the Canadian housing market was different from the US.

And it happened over and over again. Every couple of years, the US guys would get so hot on this trade and how the Canadian housing market was going to destroy the Canadian banks. And I think to this day you still have that.

The opposite was true when I get that call coming out of the UK or somewhere in Europe. Invariably, they were calling to say, wow, your Canadian banks are really stable, especially compared to the basket cases we have here in Europe. So I always found it interesting at how, just based on the call display number that came up on my phone, I knew exactly what kind of conversation I was going to have.

I'm finding more now that US investors, they were sort of dabbling in the Canadian banks for a little while. They've kind of gone to the side. I don't hear from them very much anymore. I'm getting a little bit more of the European interest. I'm getting a emails and calls on that. But I wouldn't overstate it. It's not-- the activity hasn't been that great outside of Canada.

The bread and butter for me is the big Canadian investor, big dividend funds in Canada. Those are the guys that I speak to. I would say 90%, 95% of my time is spent on the big Canadian investor still.

PETER HAYNES: Well, just as we finish up here, and thinking about maybe more broad based themes, or I'll call it existential threats to the sector, people talk a lot about disintermediation of the trusted parties like banks, and the move to digital banking, in particular from the millennial crowd. Do you believe this threat truly is material to the position of banks?

And as a follow-on, do you think the Canadian banks are doing enough to prepare for changes to customer behavior?

MARIO MENDONCA: Our Canadian banks have some very, very big advantages that I don't think are going away any time soon. The scale, the trust advantage within-- with customers are not easily surmounted. So while I do see a lot of pressure on bank margins, sort of like at the margin like the payments business where digital players come in and nibble away the margin, there is that threat.

But I-- again, I've learned over time never to overstate things too much when it comes as a threat to the Canadian banks. They are very capable of putting the people, the resources, the money at work to compete in any way in Canada. And that includes digitally.

So about five years ago, it was all the rage for analysts to talk about the fintech threat, and how it was the end of the Canadian banking sector. It turned out to be anything but. The Canadian banks partnered with fintech. They bought some fintech. And they advanced their digital strategy.

I don't see our Canadian banks threatened by this digital threat. I mean, I'm sure there are people out there right now that think this is the end of the banking sector, that it will be destroyed by the fintech threat. I completely disagree. Our Canadian banks are very capable and have the resources.

And don't forget, they have that advantage of trust. Consumers still trust Canadian banks. And you can't over that advantage too easily. So no, I'm not overly fussed about it.

PETER HAYNES: Well, Mario, we covered a lot of ground here today in terms of understanding the banks and breaking down the numbers. I really appreciate your time. And just as a reminder to our listeners, Mario's team has published a detailed report today, a deep dive on the most recent quarter and outlook for Canadian banks in the future. So if you want to dig in a little bit more, please take a look at that report. Mario, I want to thank you very much today for joining our podcast series. And I really do hope that you get to spend some time thinking about the banks as you wander around the fairways, or maybe the rough, at Scarboro Golf Club this summer. So all the best and thank you very much.

MARIO MENDONCA: Thank you. See you, Peter.

This material is intended to provide commentary on economic, political or market conditions.

Not Advice: The information contained in this material is for informational purposes only and is not intended to provide professional, investment or any other type of advice or recommendation, or to create a contractual or fiduciary relationship. Neither TD Securities (USA) LLC (“TD Securities USA”) nor any of its affiliates (collectively, “TD”) makes any representation or warranty, express or implied, regarding the accuracy, reliability, completeness, appropriateness or sufficiency for any purpose of any information included in this material. Certain information may have been provided by third-party sources and, while believed to be reliable, has not been independently verified by TD, and its accuracy or completeness cannot be guaranteed.

Not Securities or Derivatives Research: This material has not been produced, reviewed or approved by TD’s securities or derivatives research departments. The views of the author may differ from others at TD, including TD securities or derivatives research analysts.

Not Independent: The views expressed in this material may not be independent of the interests of TD.