The Toronto-Dominion Bank
) reported fiscal third-quarter 2013 (ended Jul 31) adjusted
earnings of C$1.65 per share, which compared unfavorably with the
year-ago earnings of C$1.91. Moreover, adjusted net income came
in at C$1.59 billion ($1.54 billion), down 12.7% from the
Results were disappointing mainly due to a decline in fee income
and higher operating expenses, partially offset by increased net
interest income. Rise in asset holdings was a tailwind for the
After taking into consideration certain non-recurring items, net
income for fiscal third-quarter came in at C$1.52 billion ($1.47
billion), down 10.3% year over year.
Behind the Headlines
Total revenue (on an adjusted basis) was C$5.86 billion ($5.68
billion), rising marginally on a year-over-year basis. The rise
was driven by growth in net interest income, partially offset by
decline in non-interest income.
Adjusted net interest income surged 8.6% year over year to C$4.15
billion ($4.03 billion). However, adjusted non-interest income
came in at C$1.72 billion ($1.67 billion), falling 15.0% from the
Adjusted non-interest expenses were C$3.66 billion ($3.55
billion), up 13.3% year over year. Adjusted efficiency ratio
increased to 62.5% from 55.4% as of Jul 31, 2012. An increase in
efficiency ratio indicates decline in profitability.
Total provision for credit losses came in at C$477 million ($463
million), increasing 8.9% from the comparable quarter last year.
Total assets came in at C$835.1 billion ($812.30 billion) as of
Jul 31, 2013, up 3.6% year over year. Return on common equity, as
adjusted, was 13.0% in the reported quarter, down from 16.4% as
of Jul 31, 2012.
Other Developments in the Quarter
In Aug 2013, Toronto-Dominion signed a deal with
National Bank of Canada
) to divest TD Waterhouse Institutional Services, the bank's
institutional service business. The deal is worth $250 million
and is subject to price adjustment based on asset retention. The
agreement is expected to close by the end of this year subject to
Moreover, in the same month, Toronto-Dominion became the primary
credit card issuer for Aeroplan, the royalty program of
Aimia Inc., with effect from Jan 1, 2014.
Capital Deployment Activities
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Along with its earnings release, Toronto-Dominion declared a
quarterly dividend of C$0.85 per share, up 4.9% compared with the
prior-quarter payout. The dividend will be paid on Oct 31 to
shareholders of record at the close of business on Oct 3.
We expect Toronto-Dominion's acquisition activities to positively
impact its financials in the long run. Further, the company's
capital deployment activities will surely boost investors'
confidence. However, rising expenses, weak economic recovery and
stringent regulatory requirements will remain a drag on its
On Aug 29, another Canadian bank,
Canadian Imperial Bank of Commerce
) reported fiscal third-quarter adjusted earnings of C$2.29 per
share. This compared favorably with the year-ago earnings of
Toronto-Dominion currently carries a Zacks Rank #3 (Hold). A
better performing stock is
Grupo Financiero Galicia S.A.
), which has a Zacks Rank #1(Strong Buy).