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Noah Zivitz

Managing Editor, BNN Bloomberg

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TD Bank Group narrowly beat profit expectations in its most recent quarter as weakness in its capital markets operations offset gains in its bread-and-butter retail banking units.

TD's net income for the fiscal third quarter, which ended on July 31, rose 58 per cent year-over-year to $3.5 billion. Revenue in the quarter was little changed year-over-year at $10.7 billion. On an adjusted basis, TD earned $1.96 per share; analysts, on average, were expecting $1.92. 

The bank's wholesale division - which includes capital markets and investment banking activities - stood out in the quarterly release, as profit tumbled 25 per cent year-over-year to $330 million amid a sharp drop in trading revenue. 

TD's domestic banking unit fared much better as the economy's recovery from the worst of the pandemic boosted lending operations.

Net income from Canadian retail operations surged 68 per cent year-over-year to $2.13 billion as revenue climbed nine per cent to $6.58 billion. The division's mortgage book expanded almost 10 per cent year-over-year to $222 billion. 

TD's extensive U.S. retail banking unit delivered even more impressive profit growth, as net income jumped 115 per cent year-over-year to US$1.05 billion. The division's bottom line benefitted from the release of US$74 million from funds that were previously set aside for bad loans.

"While businesses and consumers are resuming some of their normal activities and more people are getting vaccinated, recent developments and new variants remind us that the global pandemic is not yet over," said TD President and Chief Executive Officer Bharat Masrani in a release. 

Overall credit quality improved at TD, amid a net release of $37 million from total credit loss provisions. In the prior quarter, TD released $377 million from provisions. 

Like the other banks, TD has seen its key capital ratio surge over the last year amid a temporary ban on share buybacks and dividend hikes. In the fiscal third quarter, TD's Common Equity Tier 1 ratio stood at 14.5 per cent, compared to 12.5 per cent a year earlier.