TD, CIBC make it six-for-six in bank earnings bonanza
The Toronto-Dominion Bank joined its Big Six peers in beating first-quarter earnings expectations Thursday despite profit erosion in its U.S. banking division.
Net income for the three-month period ending Jan. 31, representing the bank's fiscal first quarter, rose 10 per cent year-over-year to $3.28 billion. On an adjusted basis, TD earned $1.83 per share; analysts were expecting $1.49 on average.
TD's Canadian retail banking operations led the way, as profit climbed 14 per cent year-over-year to $2.04 billion as revenue inched higher and loan loss provisions fell.
Similar to its peers, TD benefited in the latest quarter from significantly improved credit as it set aside $313 million in total for loans that could go bad, compared to $917 million in the previous quarter and $919 million a year earlier.
The bank's large-scale operations south of the border were a drag on profit in the first quarter. Indeed, total net income in the division fell 13 per cent year-over-year to US$776 million. Stripping out its stake in The Charles Schwab Corp., TD's U.S. retail banking profit slid 16 per cent to US$615 million.
“We believe it was a lower quality earnings-per-share beat overall for TD at first look relative to what we’ve seen with the bank’s peers this quarter given the much higher dependence on [provisions for credit losses] to drive that outperformance. Most concerning in our view was the sequential margin compression on both sides of the border, particularly U.S. retail,” wrote Credit Suisse Analyst Mike Rizvanonic in a report to clients Thursday.
TD's capital markets activity helped mitigate that weakness in the U.S. as net income in the bank's so-called wholesale unit surged almost 56 per year year-over-year to $437 million.
"TD reported strong results in the first quarter, benefiting from our diversified business model, focused approach to managing the COVID-19 crisis and an improving macroeconomic environment," said TD CEO Bharat Masrani in a release.
And with the big Canadian banks still waiting for clearance from the federal regulator to resume share buybacks and dividend hikes, TD's Common Equity Tier Capital ratio reached 13.6 per cent in the latest quarter, compared to 11.7 per cent a year earlier.