Toronto-Dominion profits exceed estimates of Canadian recovery

(Bloomberg) – The Toronto-Dominion Bank’s Canadian operations are boosted by a rebound in consumer spending and the continued strength of the nation’s housing market.

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Retail profits in Canada rose 19% to C $ 2.14 billion ($ 1.7 billion) in the fiscal fourth quarter, the Toronto-based bank said in a statement on Thursday. Overall profit exceeded analysts’ estimates.

Toronto-Dominion saw its mortgage and home equity line of credit balances swell throughout the pandemic, as Canadian home prices soared and sales volumes remained high. The unit posted two back-to-back quarter-over-quarter gains in credit card balances as consumers across the country begin to ramp up spending.

“The recovery is underway, and we are particularly pleased with it as we are a strong retail bank,” CFO Kelvin Tran said in an interview. “We are specially designed for this recovery. “

The bank – released last month from industry-wide restrictions on increasing its dividend and repurchasing shares – also increased its quarterly dividend by 13% to 89 cents per share and said it would repurchase 50 million shares, or 2.7% of the shares outstanding, costing approximately C $ 4.6 billion at the current price.

Toronto-Dominion rose 3.1% to C $ 94.82 at 9:45 a.m. in Toronto. Shares are up 32% this year, compared to a 27% gain for the S & P / TSX Commercial Bank Index.

Net income declined 26% to C $ 3.78 billion, or C $ 2.04 per share, in the quarter ended October 31. Excluding certain items, earnings were Cdn $ 2.09 per share. Analysts put it at C $ 1.96, on average.

The lender’s net interest margin – the difference between what it earns on loans and what it spends on deposits – widened to 1.58% in the fourth quarter from 1.56% in the third. This contrasts with its rivals, notably the Royal Bank of Canada and the National Bank of Canada, which announced narrowing spreads in the last quarter. For Toronto-Dominion, the margin was helped by higher wholesale loan income and better investment income at the U.S. bank, Tran said.

Toronto-Dominion released C $ 123 million in provisions for credit losses. Analysts estimated the bank would set aside C $ 161 million.

The company’s US retail operations did not gain the same momentum as the Canadian division. While the comprehensive personal loan category increased from the third quarter, business loans were down 5.9%. In Canada, business loans have grown sequentially for four consecutive quarters. Total profit for the US unit rose 66% to $ 1.09 billion in the fourth quarter, helped by a reversal in credit provisions.

“In the United States, there is more excess liquidity due to various government programs,” Tran said. “So our clients don’t need to get more loans from the banks right now. “

(Updated actions in the sixth paragraph.)

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