TD Bank's (TD) Q2 Earnings Improve Y/Y, Expenses Increase
Zacks Investment Research | May 26, 2017 08:20AM ET
The Toronto-Dominion Bank’s (TO:TD) shares gained nearly 1.1% following the announcement of the company’s second-quarter (ended Apr 30) fiscal 2017 results. Adjusted earnings came in at C$1.34 per share, up 11.7% year over year.
Improvement in net interest income and lower provisions were partially offset by higher operating expenses. Also, growth in capital and profitability ratios was impressive.
After considering certain non-recurring items, net income for the quarter was C$2.50 billion ($1.88 billion), up 22% year over year.
Revenues & Expenses Increased
Total revenue (on an adjusted basis) came in at C$8.47 billion ($6.36 billion), up 1.9% year over year. The rise was attributable to growth in net interest income, partially offset by a fall in non-interest income.
Adjusted net interest income for the quarter increased 4.7% year over year to C$5.11 billion ($3.84 billion). However, adjusted non-interest income came in at C$3.36 billion ($2.52 billion), decreasing 2.1% year over year.
Adjusted non-interest expenses increased 3.7% to C$4.72 billion ($3.55 billion) from the prior-year quarter.
Adjusted efficiency ratio was 55.8% at the quarter end, up from 54.8% as of Apr 30, 2016. An increase in efficiency ratio indicates lower profitability.
Total provision for credit losses declined 14.4% year over year to C$500 million ($376 million).
Profitability and Capital Ratios Improve
Return on common equity, on an adjusted basis, came in at 14.8%, up from 14.0% as of Apr 30, 2016.
As of Apr 30, 2017, common equity Tier I capital ratio came in at 10.8%, up from 10.1% in the prior-year quarter. Total capital ratio came in at 14.9% for the reported quarter, up from 14.4% as of Apr 30, 2016.
Our Viewpoint
Despite TD Bank’s efforts toward improving revenues, both organically as well as inorganically, the company’s mounting expenses and a stringent regulatory environment are likely to strain its profitability in the near term.
Toronto Dominion Bank (The) Price, Consensus and EPS Surprise
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