Toronto-Dominion (TD) Q4 Earnings Fall On Higher Expenses
Zacks Investment Research | Dec 08, 2019 08:36PM ET
Shares of The Toronto-Dominion Bank (TSX:TD) declined around 3.4% on the NYSE, following the announcement of its fourth-quarter fiscal 2019 (ended Oct 31) results on Thursday. Investors’ concerns were visible on rising expenses and higher provisions.
Adjusted earnings of C$1.59 per share were down 2.5% year over year. Also, adjusted net income declined 3.3% year over year to C$2.95 billion ($2.23 billion).
Rise in revenues was partly offset by higher operating expenses and provisions. Growth in assets was impressive, while profitability ratios displayed weakness.
After considering certain non-recurring items, net income summed C$2.86 billion ($2.16 billion), down 3.4% year over year.
For fiscal 2019, adjusted earnings came in at C$6.69 per share, up 3.4% year over year, while adjusted net income was up 2.5% year over year to C$12.5 billion ($9.4 billion). After considering certain non-recurring items, net income summed C$11.7 billion ($8.8 billion), up 3.5% year over year.
Revenues Improve, Expenses & Provisions Rise
Total revenues (on an adjusted basis) amounted to C$10.3 billion ($7.8 billion), up 2% on a year-over-year basis. This upside resulted from growth in net interest income, partly offset by lower non-interest income.
Adjusted net interest income rose 6.9% year over year to C$6.2 billion ($4.7 billion). Yet, adjusted non-interest income came in at C$4.2 billion ($3.2 billion), down 4.5% year over year.
Adjusted non-interest expenses flared up 3.8% year over year to C$5.5 billion ($4.2 billion). Adjusted efficiency ratio stood at 42.5% at the quarter-end as against 43.2% on Oct 31, 2018. Fall in efficiency ratio indicates a rise in profitability.
Total provision for credit losses surged 52% year over year to C$400 million ($302 million).
Balance Sheet & Capital Ratios Strong, Profitability Ratios Weaken
Total assets came in at C$1.42 trillion ($1.08 trillion) as of Oct 31, 2019, up 1.4% from the prior quarter. Net loans inched up 1.3% on a sequential basis to C$684.6 billion ($519.9 billion), while deposits escalated 1.9% to C$887 billion ($673.6 billion).
As of Oct 31, 2019, common equity Tier I capital ratio was 12.1%, up from 12%. Total capital ratio was 16.3% compared with the prior year’s 16.2%.
Return on common equity, on an adjusted basis, came in at 14%, down from 16.3% as of Oct 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, rising provisions for credit losses poses a near-term concern.
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