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Toronto-Dominion Bank falls short in Q4 earnings amid layoffs and provisions

Published Nov 30, 2023 09:11AM ET
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Toronto-Dominion Bank (TD) reported fiscal fourth quarter earnings today that fell short of analyst expectations, with an adjusted earnings per share (EPS) of C$1.83 compared to the forecasted C$1.90. The shortfall was attributed to a substantial increase in credit loss provisions totaling C$878 million and expenses related to cutting its workforce by more than 3,000 roles, which is approximately a 3% reduction in staff. This move comes as part of a wider pattern of workforce reductions seen across Canadian banks, including the Royal Bank of Canada, Bank of Montreal, and Bank of Nova Scotia.

The bank's disappointing quarter raises concerns over its ability to meet fiscal 2024 goals, such as achieving a 7%-10% EPS growth rate and a return-on-equity above 16% in an uncertain economic climate. Further normalization in credit loss provisions is anticipated, which could pose additional fiscal challenges.

Adjusted non-interest expenses for Q4 were reported at C$7.24 billion, significantly higher than what analysts had predicted. The bank also incurred a post-tax restructuring expense of C$266 million due to the workforce downsizing.

Further complicating Toronto-Dominion's outlook is the ongoing investigation by the US Department of Justice into possible violations of anti-money-laundering regulations. Although the potential fines are speculated to be in the range of US$500 million to US$1 billion, the bank's capital reserves remain robust, partly due to the collapsed deal to acquire Memphis-based First Horizon (NYSE:FHN) Corp.

Despite this financial cushion, Toronto-Dominion anticipates no major financial impact from the investigation but acknowledges the possibility of material effects on upcoming financial disclosures, which could lead to reputational harm and increased compliance costs that may impact its future financial performance.

InvestingPro Insights

Toronto-Dominion Bank's recent earnings miss has put a spotlight on the bank's financial health and future prospects. In light of this, InvestingPro data provides a deeper dive into the bank's performance and potential trajectory. With a market capitalization of $110.47 billion and a price-to-earnings (P/E) ratio at 10.8, which adjusts slightly to 10.65 for the last twelve months as of Q3 2023, TD appears to be valued reasonably within the banking sector. The bank's revenue growth has been notable, with an increase of 14.6% over the same period, indicating an acceleration that aligns with one of the InvestingPro Tips highlighting this positive trend.

However, according to the InvestingPro Tips, there are concerns about the bank's earnings and cash flow, which could potentially lead to dividend cuts despite the bank having raised its dividend for 13 consecutive years. Additionally, the bank's gross profit margins are considered weak, which could be a red flag for investors looking for robust profitability.

For those considering an investment in Toronto-Dominion Bank, it's worth noting that InvestingPro has additional tips available, which can provide further insights into the bank's financial health and stock performance. Currently, there are 11 more InvestingPro Tips available for TD, which can be accessed by subscribers.

Finally, for those interested in the InvestingPro service, there is a special Cyber Monday sale offering up to a 60% discount. Additionally, using the coupon code sfy23 will provide an extra 10% off a 2-year InvestingPro+ subscription, making it a valuable opportunity to access in-depth financial analysis and data.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Toronto-Dominion Bank falls short in Q4 earnings amid layoffs and provisions
 

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