TD posts record U.S. earnings — and Trump’s tax cuts will just push that profit higher
The Canadian lender, which has more branches in the U.S. than its home country, had record profit of $952 million from its U.S. retail business in the fiscal first quarter, a 19 per cent surge from a year earlier. Earnings will get a further boost from a tax bill President Trump signed into law in December, adding about $300 million to the bottom line this year. The lower rates may boost annual profits at Wall Street’s biggest banks by more than $10 billion, based on what they paid in taxes over the past three years.
“To the extent that their objective might have been to earn a more competitive tax environment internationally, one would have to agree that this package certainly achieved that,” Chief Financial Officer Riaz Ahmed said in a phone interview Thursday after the Toronto-based lender posted profit that beat analysts’ estimates.
Toronto-Dominion’s U.S. retail bank tax rate is now in the 11 per cent to 12 per cent range, Ahmed said, suggesting a benefit of $55 million to $60 million a quarter this year. The windfall rises to $300 million after including the bank’s stake in TD Ameritrade, he added.
Toronto-Dominion Bank will benefit more than any other Canadian lender from the U.S. tax changes. Royal Bank of Canada anticipates an annual benefit of $250 million from the changes, and expects its full-year tax rate will drop from 35 per cent to the lower end of a 22 per cent to 24 per cent range, CFO Rod Bolger said in a Feb. 23 earnings call. Royal Bank, which owns Los Angeles-based City National and has significant capital markets and wealth operations in the U.S., is using a blended rate of about 23 per cent for each quarter in 2018, he said.
Bank of Montreal, whose U.S. exposure includes its Chicago-based BMO Harris Bank and capital markets operations, estimates an additional $100 million to its U.S. earnings this year. Canadian Imperial Bank of Commerce, which last June bought Chicago-based PrivateBank, said the tax cuts will be “beneficial” but didn’t provide an estimate.
Here’s a summary of Toronto-Dominion’s quarterly results:
• Net income fell 7 per cent to $2.35 billion, or $1.24 a share, from $2.53 billion, or $1.32, a year earlier.
• Adjusted earnings, which exclude a $453 million charged tied to the tax changes and other one-time items, were $1.56 a share, the bank said. That beat the $1.46 average estimate of 12 analysts surveyed by Bloomberg.
• The bank raised its quarterly dividend 12 per cent to 67 cents.
• Canadian retail earnings, which includes banking and wealth management, rose 12 per cent to $1.76 billion.
• Earnings from wholesale banking rose 4.1 per cent to $278 million.
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