Yahoo Finance TD Bank misses expectations as profit falls and credit loss provisions climb
Toronto-Dominion Bank’s net income fell to $2.96 billion in the third quarter, as the lender posted higher credit losses and weaker earnings in its U.S. retail segment.
On an adjusted basis, the bank earned $3.7 billion, down two per cent from the same period last year, or $1.99 per diluted share. That figure was down from $2.09 per diluted share last year and missed analyst expectations of $2.03 per share.
Provisions for credit losses in the period ended July 31 checked in at $766 million, a jump from $351 million the year prior.
The bank said provisions for the quarter were largely recorded in the Canadian consumer lending portfolios and reflected current credit conditions and volume growth. Total PCL for the quarter as an annualized percentage of credit volume was 0.35 per cent.
By segment, It said PCL was higher by $209 million in Canadian personal and commercial banking, while PCL was up by $142 million in U.S. retail. It was also up by $64 million in the corporate segment.
On a year-over-year basis, profits from Canadian personal and commercial banking fell $23 million to $1.655 million and U.S. retail was down $128 million or 9 per cent to $1.314 billion.
Reported net income in the wealth management and insurance segment was down $71 million to $504 million, a 12 per cent decrease from the third quarter last year. TD said this reflected the impact of more severe weather-related events and lower transaction revenue in this segment.
The adjusted net income for capital markets was up 39 per cent year-over-year to $377 million.
The corporate segment posted a wider net loss of $782 million, compared to $752 million in the third quarter last year. The bank said the increased loss was primarily due to higher net corporate expenses reflecting litigation expenses during the quarter, partially offset by higher revenue from treasury and balance sheet management activities.
The bank also incurred a $306 million payment related to the termination of its proposed First Horizon transaction, as well as $227 million in other acquisition costs.
TD announced its intention to repurchase up to 4.9 per cent of its outstanding shares, tripling the amount of its previous buyback program.
Barclays analyst John Aiken said that while he believes the buyback will offset any disappointment from shareholders, he does anticipate the miss — highlighted by weakness from its U.S. platform — will “attract some bears.”
“While we do not anticipate an overtly negative reaction to TD’s earnings, we would be surprised if it did not underperform against RY today,” he wrote in a client note Thursday morning.
TD also revealed Thursday that it has been responding to regulatory authorities and law enforcement in the U.S. concerning the Bank Secrecy Act’s anti-money laundering compliance program, including in connection with an
investigation by the United States Department of Justice.
It said it anticipates monetary and/or non-monetary penalties to be imposed.
“I’m really confident that in time we will deliver the required enhancements, so I think best to leave it at that,” chief executive Bharat Masrani said during Thursday’s earnings call.
Shares of TD closed down 3.23 per cent at $80.67 in Toronto.
• Email: dpaglinawan@postmedia.com
