TD reports lower Q1 profit, beats analysts’ estimates while provisions for loan-loss lower than expected
Toronto-Dominion Bank posted slightly lower first-quarter profit, but topped analysts’ estimates as on higher capital markets and wealth management activity while provisions for loan losses were lower than anticipated.
TD’s net income fell by 1 per cent to $2.79-billion, or $1.55 per share, in the three months that ended January 31.
Adjusted to exclude certain items, including U.S. balance sheet restructuring, the bank said it earned $2.02 per share. That beat the $1.96 per share analysts expected.
“While expenses remain somewhat elevated, we delivered solid earnings, which positions us well as we begin the new fiscal year,” TD chief executive officer Raymond Chun said in a statement. “U.S. AML remediation remains our top priority and we continue to make consistent progress to strengthen the Bank.”
In October, TD pleaded guilty to conspiracy to commit money laundering after a lengthy investigation by U.S. regulators and the Department of Justice. The officials levied several severe penalties and remediation requirements, including an asset cap that restricts the bank’s growth in its U.S. retail division.
TD sold its stake in U.S.-based investment dealer Charles Schwab Corp. in February for about $20-billion, a major step in the bank’s strategic review to rejig its U.S. business.
The bank has been restructuring its U.S. balance sheet to free up capacity to provide products and services to its clients without exceeding the asset cap. In February, TD struck a deal to sell US$9-billion in U.S. residential mortgage loans as part of its plan to divest from portfolios it considers non-essential to its business.
TD has reduced its U.S. assets, but it could make further divestments from certain portfolios, including auto loans.
“There’s a lot of progress being made there, but we’re looking at the business mix, we’re looking at simplifying our portfolio, and if it meets those tasks, then we’re not shy to making the decision,” TD chief financial officer Kelvin Tran said in an interview.
In December, TD suspended its financial targets for 2025. While the bank has been incrementally unveiling progress in its strategic plan, investors will have to wait until the bank’s provides updated financial targets at its investor day later this year.
TD is the final major Canadian bank to report earnings for the first quarter. Bank of Nova Scotia, Bank of Montreal and National Bank of Canada reported earnings earlier in the week. Canadian Imperial Bank of Commerce and Royal Bank of Canada also released earnings Thursday.
In the quarter, TD set aside $1.21-billion in provisions for credit losses – the funds banks set aside to cover loans that may default – which was slightly lower than analysts anticipated. In the same quarter last year, TD set aside $1-billion in provisions.
Total revenue rose 2 per cent in the quarter to $14.05-billion and expenses were flat at $8.07-billion.
Canadian personal and commercial banking profit was $1.83-billion, up 3 per cent from a year earlier, driven by record revenue as on higher loan and deposit growth.
Profit from the bank’s U.S. arm tumbled 61 per cent to $342-million, as TD restructures its balance sheet and remediates its anti-money laundering failings.
The wealth management and insurance division generated $680-million in profit, up 23 per cent on higher insurance premiums and fee-based revenue driven by market and asset growth.
Capital markets profit rose 46 per cent to $299-million, driven by higher trading revenue and underwriting fees.
This article was first reported by The Globe and Mail
