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Toronto-Dominion (TD) Stock Down 1.7% Despite Solid Q2 Earnings

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Toronto-Dominion Bank’s (TD - Free Report) second-quarter fiscal 2021 (ended Apr 30) adjusted net income of C$3.78 billion ($3.00 billion) increased significantly from the prior-year quarter.

Results were aided by a rise in non-interest income. Also, the company recorded a recovery of credit losses in the reported quarter, which was a major positive. However, a decline in net interest income (NII) and higher expenses were the undermining factors. Probably because of the negatives, shares of the company fell 1.7% on the NYSE, following the release late last week.

After considering non-recurring items, net income was C$3.70 billion ($2.94 billion), increasing significantly year over year.

Adjusted Revenues Decline, Expenses Rise

Total revenues amounted to C$10.23 billion ($8.13 billion), down 2.8% on a year-over-year basis.

NII declined 5.9% year over year to C$5.84 billion ($4.64 billion). However, non-interest income was C$4.39 billion ($3.49 billion), up 1.5% from the prior-year quarter.

Non-interest expenses increased 12.7% year over year to C$5.69 billion ($4.52 billion).

Efficiency ratio was 55.6% as of Apr 30, 2021, up from 48.0% as of Apr 30, 2020. A rise in the efficiency ratio indicates a fall in profitability.

In the reported quarter, the company recorded a recovery of credit losses of C$377 million ($299.4 million) against a provision recorded in the year-ago quarter.

Balance Sheet Strong, Capital & Profitability Ratios Improve

Total assets were C$1.67 trillion ($1.36 trillion) as of Apr 30, 2021, down 3.8% from the end of the first quarter of fiscal 2021. Net loans increased marginally on a sequential basis to C$708.4 billion ($576.7 billion) but deposits declined 1.8% to C$1.12 trillion ($0.91 trillion).

As of Apr 30, 2021, common equity Tier I capital ratio was 14.2%, up from 11.0% on Apr 30, 2020. Total capital ratio was 18.0% compared with the prior year’s 15.3%.

Return on common equity (on an adjusted basis) was 17.1%, up from 7.3% as of Apr 30, 2020.

Our Viewpoint

Supported by a diverse geographical presence, Toronto-Dominion’s efforts toward improving revenues — both organically and inorganically — seem decent. However, rising expenses might hurt the company’s profitability to some extent.

Toronto Dominion Bank The Price, Consensus and EPS Surprise


Toronto Dominion Bank The Price, Consensus and EPS Surprise

Toronto Dominion Bank The price-consensus-eps-surprise-chart | Toronto Dominion Bank The Quote

Toronto-Dominion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

Barclays (BCS - Free Report) reported first-quarter 2021 (ended Mar 31) net income attributable to ordinary equity holders of £1.70 billion ($2.34 billion), up significantly from the prior-year quarter.

UBS Group AG (UBS - Free Report) reported first-quarter 2021 net profit attributable to shareholders of $1.82 billion, up 14% from $1.60 million in the prior-year quarter.

HSBC Holdings (HSBC - Free Report) reported first-quarter 2021 pre-tax profit of $5.8 billion, up 79% from the prior-year quarter.

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