(Bloomberg) -- Toronto-Dominion Bank is anticipating greater credit deterioration in Canada over the U.S. in the aftermath of the coronavirus pandemic.

  • The Canadian lender, which has a U.S. retail banking network that stretches from Maine to Florida, set aside C$1.14 billion ($825 million) for souring loans in the U.S., compared with C$1.15 billion for its domestic operations. Higher provisions eroded profit in the fiscal second quarter, with results missing analysts’ estimates.

Key Insights

  • Toronto-Dominion said on May 8 that it would set aside C$600 million tied to U.S. credit cards that consist primarily of its retailer partners’ share of provisions, though those are offset and won’t affect earnings. Still, overall provisions at the bank reached a record C$3.22 billion in the quarter ended April 30, about five times the amount a year earlier.
  • Toronto-Dominion also said earlier this month that it expected about C$1.1 billion in loan-loss provisions for its U.S. retail division. The higher provisions contributed to a 73% earnings decline in the U.S. division, to C$336 million.
  • Canadian personal and commercial banking is Toronto-Dominion’s largest business, accounting for almost half of the bank’s overall earnings. Provisions in the domestic banking business reached C$1.15 billion, contributing to a 54% drop in earnings, to C$642 million.
  • The bank’s TD Securities capital-markets division had quarterly earnings of C$209 million, compared with C$221 million a year earlier.

Market Reaction

  • Shares of Toronto-Dominion have fallen 14% this year through Wednesday, compared with a 16% decline for the eight-company S&P/TSX Commercial Banks Index.

Get More

  • Second-quarter net income fell 52% to C$1.52 billion, or 80 cents a share. Adjusted per-share earnings totaled 85 cents, missing the 88-cent average estimate of 11 analysts in a Bloomberg survey.
  • Read more about Toronto-Dominion’s quarterly results here.

©2020 Bloomberg L.P.