TD Bank wraps up banks’ earnings season with ‘stand out’ results, strong U.S. earnings
TD reported on Thursday that profit for the quarter ended Jan. 31 was $2.35 billion, a seven-per-cent drop from last year. The decline was mostly caused by a one-time, net charge to earnings of $453 million, which was triggered by tax reform in the United States.
Notwithstanding the tax hit and other items, TD’s adjusted earnings were $2.95 billion for its first quarter, up 15 per cent over last year, “reflecting growth across all business segments,” the bank said. Adjusted earnings per share were $1.56, beating analysts’ expectations.
“As the Big-6 banks finish their reporting season, we believe TD’s results stand out compared to the group,” said Scott Chan, analyst at Canaccord Genuity.
TD also said the lower corporate rate in the U.S. “had and will have a positive effect” on earnings — as it will for other Canadian banks with businesses in the U.S. — and said the amount of benefit the bank receives could vary.
In reporting the quarterly results, TD suggested that it could end up beating its own its own expectations.
“All of our businesses are performing well and the operating environment remains favourable,” said Bharat Masrani, president and chief executive officer of TD, in a release. “While there are risks on the horizon, if these positive conditions persist, adjusted earnings growth for the full year may exceed our medium-term targets.”
TD said profit for its Canadian retail banking business was about $1.76 billion for the quarter, up 12 per cent from a year ago. The bank said revenue grew seven per cent to $4.97 billion, due to rising loan and deposit volumes, “strong” levels of client trading, and a growing wealth business.
“We continued to make progress extending our legendary service levels into the digital channel, introducing a tool to personalize new account openings and attaining the leading market share in e-transfers,” the bank noted.
On the U.S. side, TD’s retail unit recorded a 28-per-cent jump in quarterly adjusted net income compared to last year, to $1.02 billion. The bank’s U.S. operations saw growth in the volume of loans and deposits, and a benefit from the lower corporate tax rate as well.
“TD did not quantify the benefit of U.S. tax reform but noted that it had and will have a positive impact going forward – the bank may also look to reinvest some of the savings,” noted Nick Stogdill, analyst at Credit Suisse.
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