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Noah Zivitz

Managing Editor, BNN Bloomberg

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TD Bank Group kept pace with its peers in dishing out rewards to its shareholders on Thursday.

The bank announced it will raise its quarterly dividend 13 per cent to $0.89 per share, effective Jan. 31. It also said it's seeking regulatory approval to repurchase up to 50 million of its shares. 

All five of the big Canadian lenders that have reported this week announced similar moves after the Office of the Superintendent of Financial Institutions recently ended its ban on buybacks and dividend hikes. Bank of Montreal, the last of the Big Six banks to report earnings, will announce its results on Friday. 

TD's full-year profit climbed to $14.3 billion compared to $11.9 billion in 2020, the bank also announced on Thursday. In the fiscal fourth quarter, which ended Oct. 31, net income fell to $3.8 billion from $5.1 billion a year earlier when it got a $1.4-billion lift from the sale of its stake in TD Ameritrade. 

On an adjusted basis, TD earned $2.09 per share in the most recent quarter. Analysts, on average, were expecting $1.96.

TD's American unit was the primary driver in the fiscal fourth quarter, as the division's net income surged 66 per cent year-over-year to US$1.09 billion. Stripping out an investment in Charles Schwab, profit for the core U.S. retail banking operations soared 123 per cent to US$897 million as revenue climbed and US$62 million was freed up after previously being set aside for loans that could go bad. 

In Canada, TD's retail banking division saw profit rise 19 per cent year-over-year to $2.14 billion. Similar to the U.S., revenue rose year-over-year and credit quality improved. However, those factors were partially offset by an eight per cent rise in expenses -- which TD said was due to higher variable compensation and investments in technology. 

Meanwhile, the bank's wholesale division -- which comprises activities like capital markets and investment banking -- was a drag on profit as net income from that unit slid 14 per cent to $420 million. TD said its trading revenue in the quarter fell to $510 million from $761 million a year earlier. 

"We  ended the  year  in  a  position  of  strength,  with a  growing  base of  customers  across  highly  competitive  and  diversified  businesses  and  a  robust capital  position, enabling  us  to increase  our  dividend  and providing us  with a strong  foundation  upon which to  continue  building  our  business  in  2022," said TD President and Chief Executive Bharat Masrani in a release.

That “robust capital position” was a hot topic among analysts on Thursday. Indeed, the closely watched Common Equity Tier 1 ratio rose to 15.2 per cent in the latest quarter from 14.5 per cent in the fiscal third quarter. 

“All segments came in better than forecast with Canada Personal & Commercial and U.S. Personal & Commercial driving most of the better-than-expected results. TD’s CET 1 ratio also increased significantly and now looks very excessive when compared to peers,” said RBC Capital Markets Analyst Darko Mihelic in a report to clients. 

 

Editor’s note: The original version of this story incorrectly presented the dividend increase as being 11 per cent. We regret the error.

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