Toronto-Dominion (TD) Q3 Earnings Grow On Higher Revenues
Zacks Investment Research | Aug 29, 2019 09:00PM ET
The Toronto-Dominion Bank’s (TSX:TD) reported third-quarter fiscal 2019 (ended Jul 31) adjusted earnings per share of C$1.79, up 5.5% year over year. Also, adjusted net income rose 6.7% to C$3.34 billion ($2.51 billion).
Results reflected a rise in revenues on the back of higher interest rates and improvement in loan balance, coupled with growth in the bank’s retail segment in both the United States and Canada. The company’s Wholesale Banking segment’s performance was decent too. However, higher provisions and a rise in operating expenses were the offsetting factors.
After considering certain non-recurring items, net income was C$3.25 billion ($2.45 billion), up 4.6% from the prior-year quarter.
Revenues, Expenses & Provisions Rise
Total revenues (on an adjusted basis) came in at C$10.5 billion ($7.90 billion), up 6.1% year over year. The rise was attributable to growth in net interest income and non-interest income.
Adjusted net interest income grew 6.5% year over year to C$6.02 billion ($4.53 billion). Also, adjusted non-interest income came in at C$4.48 billion ($3.37 billion), increasing 5.4%.
Adjusted non-interest expenses rose 4.3% to C$5.23 billion ($3.99 billion).
Adjusted efficiency ratio was 50.5% at the end of the quarter, down from 51.6% as of Jul 31, 2018. A fall in efficiency ratio indicates an improvement in profitability.
Total provision for credit losses increased 16.8% year over year to C$655 million ($493 million).
Balance Sheet & Capital Ratios Strong, Profitability Ratios Weaken
Total assets came in at C$1.41 trillion ($1.06 trillion) as of Jul 31, 2019, up 3.6% from the prior quarter. Net loans grew 1.9% on a sequential basis to C$675.9 billion ($512.2 billion) while deposits declined slightly to C$870.3 billion ($659.5 billion).
As of Jul 31, 2019, common equity Tier I capital ratio was 12.0%, up from 11.7%. Total capital ratio was 16.1% compared with 15.4% a year ago.
Return on common equity, on an adjusted basis, came in at 16.2%, down from 17.1% as of Jul 31, 2018.
Our Viewpoint
While TD Bank’s efforts toward improving revenues, both organically and inorganically, are supported by its diverse geographical presence, rising operating expenses deter bottom-line growth to some extent. Further, increasing provisions for credit losses pose a near-term concern.
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