Toronto-Dominion Bank’s focus on retail banking in Canada and the U.S. paid off last quarter as rising interest rates made lending to consumers more profitable. Still, concerns about its loan-loss provisions and delays to a major deal weighed on the stock.

The bank’s U.S. business saw its net interest margin — the difference between what it earns on loans and what it pays for deposits — expand to 3.29 per cent in the quarter ended Jan. 31 from 3.13 per cent in the previous three months. Its Canadian retail operation got a similar boost, helping overall profit top analysts’ estimates.

Toronto-Dominion’s large retail-banking businesses on both sides of the U.S.-Canadian border are benefiting from rising interest rates that let it charge more for loans, as well as a sizable base of deposits that’s holding its funding costs down. Total net interest income rose to $7.73 billion (US$5.68 billion) in the fiscal first quarter, up 23 per cent from a year earlier. However, the bank set aside more capital to absorb loan losses than analysts expected, which held back profit.

The bank reported “a somewhat mixed quarter,” Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, said in a note to clients. “Margins were strong, outperforming peers, and expenses were contained, while on a negative note, the bank saw a larger-than-expected provisions for credit losses jump.”

Toronto-Dominion set aside $690 million in provisions for credit losses, more than the $597.4 million analysts projected.

Toronto-Dominion shares fell 1.4 per cent to $89.44 at 9:34 a.m. in Toronto. They’ve gained 2.1 per cent this year, compared with a 5.2 per cent increase for the S&P/TSX Commercial Banks Index.

Net income fell 58 per cent to $1.58 billion, or 82 cents a share, the Toronto-based bank said Thursday. Excluding some items, profit was $2.23 a share, more than the $2.20 analysts estimated.

The bank is looking to expand its presence in the U.S. with the US$13.4 billion acquisition of First Horizon Corp., which would fill in its footprint in the U.S. Southeast. First Horizon was told by Toronto-Dominion that it doesn’t expect to receive the necessary regulatory approvals by May 27 — as projected in early February — and that it can’t provide a new expected closing date, according to a regulatory filing Wednesday.

Toronto-Dominion’s US$1.3 billion acquisition of Cowen Inc., meanwhile, received all its necessary regulatory approvals. The takeover, which is poised to bolster Toronto-Dominion’s capital-markets franchise in the U.S., was completed Wednesday.

In a negative turn of events, the bank said earlier this week that it agreed to pay more than US$1.2 billion to settle a lawsuit by investors claiming it aided R. Allen Stanford’s US$7 billion Ponzi scheme more than a decade ago. The bank denies wrongdoing in the matter.