TD Bank (TD) Q2 Earnings And Revenues Improve, Costs Rise

The Toronto-Dominion Bank’s (TO:TD) second-quarter fiscal 2018 (ended Apr 30) adjusted earnings were C$1.62 per share, up 21% year over year. Also, adjusted net income rose 20% year over year to C$3.1 billion ($2.4 billion).

Improvement in revenues was partially offset by higher provisions and a modest rise in operating expenses. Also, growth in capital and profitability ratios, as well as loan and deposit growth remained impressive.

After considering certain non-recurring items, net income was C$2.9 billion ($2.3 billion), up 17% from the prior-year quarter.

Revenues, Provisions & Expenses Increase

Total revenues (on an adjusted basis) came in at C$9.5 billion ($7.4 billion), up 12% year over year. The rise was attributable to growth in net interest income, as well as non-interest income.

Adjusted net interest income grew 7% year over year to C$5.4 billion ($4.2 billion). Also, adjusted non-interest income came in at C$4.1 billion ($3.2 billion), jumping 21% from the year-ago quarter.

Adjusted non-interest expenses flared up marginally year over year to C$4.7 billion ($3.7 billion).

Adjusted efficiency ratio was 50.1% at the quarter end, down from 55.8% as of Apr 30, 2017. A decline in efficiency ratio indicates an improvement in profitability.

Total provision for credit losses increased 11% year over year to C$556 million ($436 million).

Strong Balance Sheet

Total assets came in at C$1.28 trillion ($1 trillion) as of Apr 30, 2018, up 2% from the prior quarter. Net loans grew 2% sequentially to C$622 billion ($484.7 billion), while deposits rose 2% to C$829.8 billion ($646.6 billion).

Profitability and Capital Ratios Improve

Return on common equity, on an adjusted basis, came in at 17.6%, up from 14.8% as of Apr 30, 2017.

As of Apr 30, 2018, common equity Tier I capital ratio was 11.8%, up from 10.8% in the prior-year quarter. Total capital ratio came in at 15.8% for the reported quarter, up from 14.9% as of Apr 30, 2017.

Our Viewpoint

TD Bank’s efforts toward improving revenues, both organically and inorganically, are supported by its strong capital position. Though elevated level of provisions remains a concern, the export-driven economy of Canada is likely to benefit from gradual recovery of the U.S. economy. This, in turn, might aid the Zacks Rank #3 (Hold) company’s growth over the long run.

Toronto Dominion Bank (The) Price, Consensus and EPS Surprise

Toronto Dominion Bank (The) Price, Consensus and EPS Surprise | Toronto Dominion Bank (The) Quote

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Performance of Other Foreign Banks

Canadian Imperial Bank of Commerce’s (TO:CM) second-quarter fiscal 2018 (ended Apr 30) adjusted earnings per share came in at C$2.95, increasing from C$2.64 in the prior-year quarter.

Barclays (NYSE:BCS) incurred first-quarter 2018 net loss attributable to ordinary equity holders of £764 million ($1.06 billion). Net income attributable to ordinary equity holders was £190 million ($248 million) in the year-earlier quarter.

HSBC Holdings (NYSE:HSBC) recorded first-quarter 2018 pre-tax profit of $4.8 billion, down 4% year over year. Further, net income attributable to shareholders of $3.1 billion reflects 1% fall from the year-ago quarter.

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