The Toronto-Dominion Bank
) reported its fiscal second-quarter 2013 (ended Apr 30) adjusted
earnings of C$1.98 per share, which compared favorably with the
year-ago earnings of C$1.82. Moreover, adjusted net income came
in at C$1.83 billion ($1.80 billion), up 5.6% from the year-ago
Improved results were driven by growth in revenues as well as
strong assets and profitability ratio in the quarter. However,
higher operating expenses were the primary headwinds.
After taking into consideration certain non-recurring items, net
income for fiscal second quarter came in at C$1.72 billion ($1.69
billion), inching up 1.8% year over year.
Behind the Headlines
In the reported quarter, total revenues (on an adjusted basis)
were C$6.03 billion ($5.93 billion), up 4.3% year over year. The
rise was driven by growth in both net interest income and fee
Adjusted net interest income surged 5.4% year over year to C$3.90
billion ($3.83 billion). Moreover, adjusted non-interest income
came in at C$2.12 billion ($2.08 billion), rising 2.2% from the
Adjusted non-interest expenses were C$3.52 billion ($3.46
billion), rising 7.3% year over year. Adjusted efficiency ratio
was 58.4%, deteriorating from 56.8% as of Apr 30, 2012. A rise in
efficiency ratio indicates fall in profitability.
Total provision for credit losses was C$417 million ($410
million), increasing 7.5% from the comparable quarter last year.
Total assets came in at C$826.4 billion ($814.4 billion) as of
Apr 30, 2013, up 12.7% year over year. Return on common equity,
as adjusted, was 15.8% in the reported quarter, down from 16.6%
as of Apr 30, 2012.
Acquisitions during the Quarter
In Mar 2013, Toronto-Dominion announced a deal with HSBC Retail
Services Limited - an indirect wholly-owned subsidiary of
HSBC Holdings plc
) - to acquire its consumer private label credit card portfolio.
The transaction, still subject to regulatory approval, is
expected to be completed in the second half of fiscal 2013.
Moreover, in the same month, Toronto-Dominion completed 2
acquisitions. On Mar 27, the company acquired Epoch Holding
Corporation and its subsidiary Epoch Investment Partners, Inc.
Further, on Mar 13, the company acquired substantially all of
) U.S. Visa and private label credit card portfolio.
Capital Deployment Activities
Along with its earnings release, Toronto-Dominion declared a
quarterly dividend of C$0.81 per share. The dividend will be paid
on Jul 31 to shareholders of record at the close of business on
In addition, Toronto-Dominion announced the repurchase of nearly
12 million of its common shares. As on May 21, 2013, the company
had approximately 9.23 billion common shares outstanding.
We expect Toronto-Dominion's acquisition activities to positively
impact its financials in the long run. Further, the company's
capital deployment activities are going to boost investors'
confidence. However, the persistently low interest rate
environment, weak economic recovery and stringent regulatory
requirements will remain a drag on its financials.
Another Canadian bank,
Canadian Imperial Bank of Commerce
) is scheduled to announce its fiscal second-quarter results on
Toronto-Dominion currently carries a Zacks Rank #2 (Buy).
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