The Toronto-Dominion Bank
), also known as TD Bank, rose 2.2% following the company robust
fourth-quarter fiscal 2013 earnings (ended Oct 31) on Dec 5.
Adjusted earnings of C$1.90 per share compared favorably with
C$1.83 earned in the prior-year quarter. Moreover, adjusted net
income was C$1.82 billion ($1.75 billion), up 3.6% year over
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For fiscal 2013, adjusted net income was C$7.2 billion ($7.1
billion), up 1.2% year over year.
TD Bank's results were driven by increased revenues, which were
partly offset by higher operating expenses. Moreover, rise in
asset holdings was a tailwind for the quarter.
After taking into consideration certain non-recurring items, net
income for the quarter came in at C$1.62 billion ($1.56 billion),
up 1.6% year over year.
Total revenue (on an adjusted basis) was C$7.0 billion ($6.7
billion), up 6.1% on a year-over-year basis. The rise was driven
by growth in net interest income and non-interest income.
Total revenue for fiscal 2013 was C$ 27.2 billion ($26.7
billion), up 5.9% year over year.
Adjusted net interest income rose 8.9% year over year to C$4.2
billion ($4.0 billion). However, adjusted non-interest income
came in at C$2.8 billion ($2.7 billion), up 2.2% from the
Adjusted non-interest expenses were C$3.9 billion ($3.7 billion),
rising 11.2% on a year-over-year basis. Adjusted efficiency ratio
improved to 46.5% at the quarter-end from 47.7% as of Oct 31,
2012. Decline in efficiency ratio indicates rise in
Total provision for credit losses came were C$352 million ($339.0
million), down 37.7% from the comparable quarter in the previous
Total assets were C$862.5 billion ($812.30 billion) as of Oct 31,
2013, marking a year-over-year increase of 3.6%. Return on common
equity, as adjusted, was 15.0% in the reported quarter, down from
15.5% as of Oct 31, 2012.
In September, TD Bank entered into a definite agreement with
Aimia Inc. (Aimia) and
Canadian Imperial Bank of Commerce
) to become the primary issuer of Aeroplan Visa credit cards with
effect from Jan 1, 2014. Moreover, last month, the company
declared another deal with Aimia, which entitles TD Bank to be
the key issuer of Aeroplan credit cards. However, CIBC, the sole
issuer of the particular cards at the time raised objections.
As per the mutual agreement, 50% of CIBC's Aeroplan credit cards
will be acquired by TD Bank for $162.5 million. Of the total
amount, $50 million will be paid when the deal closes and the
remainder over the next 3 years).
In December, U.S. based
) modified its agreement with TD Bank. The amendment extends the
existing agreement's date of expiry from Jan 24, 2016 to Jan 24,
2021. It also enables TD Ameritrade to carry out more share
buybacks. According to the amended agreement, if any share
repurchases by TD Ameritrade leads to Toronto-Dominion Bank
having more than 45% interests, the latter will have to shed its
stake. Notably, as of Sep 30, Toronto-Dominion Bank owned 42%
stake in the brokerage firm.
Capital Deployment Update
Along with the earnings release, TD Bank announced payment of a
stock dividend of one common share for each issued and
outstanding common share, which implies a two-for-one stock
split. The payment of the stock dividend will be made on Jan 31,
2014 to shareholders of record as of Jan 23.
Additionally, TD Bank declared a quarterly dividend of 86
Canadian cents per share, which was 1.2% higher than the
prior-quarter payout. The dividend will be paid on and after Jan
31, 2014, to shareholders of record at the close of business on
Jan 6, 2014.
We expect TD Bank's acquisition activities to boost its
financials in the long run. Further, the company's capital
deployment activities are expected to raise investors'
confidence. However, increasing expenses, weak economic recovery
and stringent regulatory requirements will likely weigh on the
TD Bank currently carries a Zacks Rank #3 (Hold). A better-ranked
foreign bank is
HDFC Bank Ltd.
) with a Zacks Rank #1 (Strong Buy).