NEW YORK, April 26 /PRNewswire/ -- Steve McDonald, Chief Executive Officer
of TD Waterhouse Group, Inc., the global online financial services firm
(NYSE: TWE; TSE), today announced a combination of expense and revenue
initiatives designed to increase the firm's annualized pre-tax income by
$200 million by calendar year-end in light of overall weakness in the
financial markets. The firm expects to see annualized improvement of
$175 million in pre-tax income by the end of the fourth quarter of fiscal 2001
through infrastructure expense reductions of $125 million, as well as
segmented pricing adjustments that will provide additional annual revenue of
at least $50 million. The firm anticipates the remaining $25 million will be
achieved during the first fiscal quarter of 2002.
These initiatives will help TD Waterhouse achieve a 30% pre-tax,
pre-marketing operating margin excluding goodwill, which is the high end of
the firm's target range, by the end of the fourth fiscal quarter of 2001. The
initiatives will also be announced during McDonald's presentation to investors
at the UBS Warburg Global Financial Services conference in New York this
morning.
"Market volatility and declining share valuations have pushed many of our
customers to the sidelines and resulted in decreased trading activity and
margin borrowing," McDonald said. "Our revenue is still derived primarily from
trading and margin interest, nevertheless, we achieved solid performance in
some key areas. New account openings have been between 50,000 to 57,000 per
month since last June, and net new assets are tracking $4.5 billion for the
second fiscal quarter, in line with the second half of last fiscal year.
However, to create shareholder value in this environment we intend to execute
our plan to decrease expenses and increase revenues."
Specifically, the firm will:
-- Continue to use attrition to reduce the workforce in our global
operations. At February 1st, there were 8,180 associates at TD
Waterhouse, and the firm will have reduced that number to approximately
7,500 by April 30th without layoffs. For the third fiscal quarter of
2001, our goal is to continue using attrition to reach
7,000 associates, and if current market conditions persist without
sustained improvement the firm will further reduce that target to
6,700 for October 31. Given these reductions, $60 million of the
$125 million in annualized expense reductions will come from
compensation and benefit costs by the end of the fourth fiscal quarter
of 2001.
-- Extract operating efficiencies through the use of technology. For
example, making customers' monthly statements, tax documents, and trade
confirmations available via the web reduces production and mailing
costs, as well as communication costs. This offering also provides a
service enhancement in the form of an archive accessible to customers.
-- Use customer segmentation to make every customer profitable by
personalizing the services we deliver through products like Select and
Select Plus, our platforms for active investors.
-- Realize all of these initiatives without any significant restructuring
charges.
"The impact of these initiatives in the current quarter is modest.
However, in the third fiscal quarter of 2001, we will see the impact of 45% of
the expense reduction initiatives, and by the end of the fourth fiscal quarter
of 2001, all but $25 million of the $200 million initiative should be
achieved," McDonald said. "Based on this, we believe we are on the way to
achieving our pre-tax, pre-marketing operating margin goal of 30% by the end
of the fourth fiscal quarter of 2001. Our ability to leverage the flexibility
inherent in our business model in response to challenging market conditions is
evidence of the management team's commitment to enhancing shareholder value.
Additionally, I am pleased to note that we have been able to rely on natural
attrition to achieve these goals and therefore minimize the negative impact
for our Associates."
TD Waterhouse Group, Inc., (NYSE: TWE; TSE), also known as "TD
Waterhouse," provides investors with a broad range of brokerage, mutual fund,
banking and other consumer financial products on an integrated basis.
Worldwide, TD Waterhouse currently services 4.5 million customer accounts in
the United States, Canada, the United Kingdom, Australia, and Hong Kong. The
firm also has joint ventures in Japan, Luxembourg and India to serve investors
in those countries. TD Waterhouse can be found on the Internet at
http://www.tdwaterhouse.com and on America Online at Keyword: TD Waterhouse.
TD Waterhouse's majority owner is TD Bank (NYSE: TD; TSE), which holds
approximately 89% of the outstanding share capital of TD Waterhouse.
Headquartered in Toronto, Canada, with offices around the world, TD Bank
Financial Group offers a full range of financial products and services to
approximately 13 million customers worldwide.
This release contains projections and other forward-looking statements
regarding future events and our future financial performance. These
statements are based on management's current beliefs and expectations. These
beliefs and expectations are based on assumptions that are subject to risks
and uncertainties that may cause actual results to differ materially from
these statements. The forward-looking statements contained in this release
speak only as of the date hereof and we do not undertake any obligation to
provide updates on or corrections of such statements in the future as a result
of subsequent developments or otherwise. The risks and uncertainties that may
cause actual results to differ materially from these statements include, but
are not limited to, (i) general economic conditions, (ii) market volatility,
(iii) decreased trading activity by our customers, (iv) customer attrition,
(v) the development and acceptance of new products and services, (vi) system
delays and failures, (vii) competition, (viii) a slowdown in the expected rate
of employee attrition, (ix) the success of our expense reduction initiatives
in achieving their expected benefits, and (x) our ability to estimate when our
expense reduction initiatives will affect our operating results. For a
discussion of risks and uncertainties that may cause actual results to differ
from those reflected in such forward-looking statements, please refer to our
filings with the Securities and Exchange Commission, including the information
included under the heading "Item 1. Business-Risk Factors" in our Annual
Report on Form 10-K for the fiscal year ended October 31, 2000.
SOURCE TD Waterhouse Group, Inc.
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Related links:
http://www.tdwaterhouse.com
CONTACT:
Media - Melissa Gitter, First Vice President,
Public Affairs, 212-806-3522, or Analysts - Kevin Sterns,
Executive Vice President & Chief Financial Officer, 212-908-7301,
both for TD Waterhouse Group, Inc.
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