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Strong Fundamentals
     
1 Valuation
Maintain top quartile
valuation levels:
• Share price/        
  book value: 1st quartile of S&P/TSX Composite Banks Index (1) 2nd quartile 1st quartile of S&P/TSX Composite Banks Index N/A
• Share price/      
   earnings: 1st quartile of S&P/TSX Composite Banks Index (1) 2nd quartile (2) 1st quartile of S&P/TSX Composite Banks Index
Share price growth: Above S&P/TSX Composite Banks
Index (1)
Below the index Above S&P/TSX Composite Banks Index (1)
           
2 Earnings growth
Grow diluted earnings
per share by:
10–15% 8% 10–15% 10–15%
           
3 Return on common equity (ROE)
Achieve an ROE of:
17–19% 17% 17–19% 20%+
           
4 Revenue growth
Achieve revenue
growth of:
5–8% (1)% 5–8% 8–10%
           
5 Expense growth        
  Expense versus revenue: Expense growth less than revenue growth Expense growth nil and revenue growth (1)% Expense growth less than revenue growth N/A
           
6 Portfolio quality
Achieve a ratio of
specific provisions for credit losses to average loans, acceptances and reverse repurchase
agreements (3):
.45–.55% .33% .35–.45% .35–.45%
      .32% net of effect of
credit derivatives (4)
   
           
7 Capital management        
  Capital ratios (3): Maintain strong
capital ratios
9.7% Tier 1 capital ratio 12.8% Total capital ratio versus medium-term goals of 8–8.5% and 11–12%, respectively Maintain strong
capital ratios
8–8.5% Tier 1 capital
11–12% Total capital
           
8 Dividend payout
ratio
 (5)
35–45% 38% 35–45% 35–45%
 

(1) Effective May 2003, the S&P/TSX Composite Banks Index replaced the TSX Banks & Trusts Index.
(2) Computed by us on October 31, 2003, based on analysts’ average diluted earnings per share estimates for 2004.
(3) Calculated based on our Canadian GAAP financial statements.
(4) See discussion on page 46.
(5) Common share dividends as a percentage of net income after preferred share dividends.