How We Performed

Other income

See supplementary information page 47, tables 5 and 6 (pdf)

Other income on an operating cash basis was $4,424 million in 2003, a decrease of $465 million or 10% from 2002, after excluding the special gain from the sale of the Bank’s mutual fund record keeping and custody business in 2002. In the first and third quarters of 2002, the Bank sold its mutual fund record keeping and custody business and recorded a pre-tax gain of $18 million and $22 million, respectively. The Bank has excluded these special gains in analyzing its performance as they are not recurring events. Reported other income was $4,424 million for 2003, a decrease of $505 million or 10% from 2002.

Trading income reported in other income decreased by $425 million or 80% compared with 2002, while trading-related income generated by Wholesale Banking – which is the total of trading income reported in other income and the net interest income on trading positions reported in net interest income – was $1,158 million for the year, a decrease of $195 million or 14% compared with 2002. The decrease reflects a decline in market activity levels across equity and interest rate structured products compared with last year. The investment securities portfolio realized net gains of $23 million in 2003 compared with gains of $26 million in 2002. The decrease is primarily attributable to market conditions. Overall, the investment securities portfolio has a surplus over its book value of $429 million compared with $228 million at the end of 2002. The decline in other income was also due to losses on derivative and loan sales not booked to sectoral in Wholesale Banking of $113 million. In addition, the decline in other income related to write downs of $39 million in 2003, resulting from other than temporary impairments in certain international wealth management joint ventures. Non-trading foreign exchange income decreased by $61 million in 2003 to address a previously unhedged non-trading U.S. dollar exposure arising from our U.S. dollar Visa business. Somewhat offsetting the decline in other income were increases in discount brokerage fees and commissions of $35 million or 4% and full service brokerage fees and other securities services fees of $26 million or 4% compared with last year. Also, offsetting the decline was a year-over-year increase in fees from card services and service charges of $48 million or 6%, an increase in insurance revenues of $45 million or 12% and an increase in income from loan securitizations of $32 million or 15% as compared with 2002.

Other income was $4,889 million in 2002, a decrease of $1,208 million or 20% from 2001, after excluding special gains from the sale of the Bank’s mutual fund record keeping and custody business in 2002 and special gains from the sale of certain investment real estate assets in 2001. During fiscal 2001, the Bank sold certain investment real estate for a pre-tax gain on sale of $350 million, net of deferrals. The Bank has excluded these special gains in analyzing its performance as they are not recurring events. Reported other income was $4,929 million for 2002, a decrease of $1,518 million or 24% from 2001.

Trading income reported in other income decreased by $789 million in 2002, while trading related income generated by Wholesale Banking was $1,353 million for the year, a decrease of $184 million or 12% as compared with 2001. This was a solid performance given the decrease in market volatility, the continued slow down in corporate origination activity and weak credit markets experienced during 2002. The investment securities portfolio realized net gains of only $26 million in 2002. This represents a significant decrease from net investment securities gains of $216 million in 2001. The decrease is primarily attributable to weaker equity markets leading to fewer exit opportunities in 2002. Overall, the equity investment securities portfolio continued to have a surplus over its book value of $228 million compared with $370 million at the end of 2001. The decline in other income also reflects a decrease in self-directed brokerage revenues of $80 million, or 8%, compared with 2001. This decrease reflects a 15% drop in average trades per day to 98,900 from 116,000 in 2001. Income from loan securitizations decreased by $54 million, or 20%, as compared with 2001, as a result of lower levels of securitized assets. Partially offsetting this decline in other income was a year-over-year increase in insurance revenues of $49 million or 15%. Also contributing to the overall decline in other income was a decrease in property rental income of $52 million as the Bank sold substantially all of its investment real estate in fiscal 2001.