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Toronto-Dominion (TD) Down 4.4% Despite Decent Q2 Earnings
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Shares of Toronto-Dominion Bank (TD - Free Report) have declined 4.4% since the release of its second-quarter fiscal 2023 (ended Apr 30) results. Quarterly adjusted net income of C$3.75 billion ($2.77 billion) increased 1% from the prior-year quarter.
The company recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, the company’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.
Net income of C$3.35 billion ($2.47 billion) increased 12.1% year over year.
Adjusted Revenues & Expenses Rise
Quarterly adjusted revenues came in at C$12.54 billion ($9.26 billion), increasing 13.6% on a year-over-year basis.
Net interest income jumped 16.5% year over year to C$7.43 billion ($5.48 billion). Non-interest income of C$4.94 billion ($3.65 billion) increased 1.1% year over year.
Adjusted non-interest expenses rose 11.6% year over year to C$6.69 billion ($4.94 billion).
The adjusted efficiency ratio was 53.4% as of Apr 30, 2023, down from 54.3% recorded in the prior-year period.
In the reported quarter, Toronto-Dominion recorded a provision of credit losses of C$599 million ($442.17 million) compared with C$27 million recorded in the year-ago quarter.
Balance Sheet: Mixed Bag, Capital Ratios Improve, Profitability Ratios Weaken
Total assets were C$1.93 trillion ($1.42 trillion) as of Apr 30, 2023, declining marginally from the end of the first quarter of fiscal 2023. Net loans rose 1.5% on a sequential basis to C$849.6 billion ($626.86 billion) and deposits decreased 2.5% to C$1.19 trillion ($0.88 trillion).
As of Apr 30, 2023, the common equity Tier I capital ratio was 15.3%, up from 14.7% as of Apr 30, 2022. The total capital ratio was 19.7% compared with the prior year’s 18.5%.
Toronto-Dominion’s return on common equity (on an adjusted basis) was 14.1%, down from 15.9% as of Apr 30, 2022.
Key Developments During the Quarter
In March, TD completed the deal to acquire Cowen Inc. The acquisition accelerated TD's long-term growth strategy in the United States by acquiring a high-quality and rapidly growing investment bank with outstanding talent and highly complementary products and services.
In February 2022 the bank announced an agreement to acquire First Horizon Corporation (FHN - Free Report) . But the deal seems to have fallen victim to the ongoing regional banking crisis in the United States. In May 2023, both companies announced the mutual termination of the transaction as “TD does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon.”
Per the terms of the termination agreement, TD will pay $200 million to First Horizon in cash. This is in addition to the $25 million fee reimbursement to First Horizon under the merger agreement.
Our Take
Supported by a diverse geographical presence, Toronto-Dominion’s efforts toward improving revenues and market share, both organically and inorganically, seem impressive. Also, rising interest rates will support the company’s financials.
Toronto Dominion Bank (The) Price, Consensus and EPS Surprise
Bank of Montreal's (BMO - Free Report) second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93 declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.
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Toronto-Dominion (TD) Down 4.4% Despite Decent Q2 Earnings
Shares of Toronto-Dominion Bank (TD - Free Report) have declined 4.4% since the release of its second-quarter fiscal 2023 (ended Apr 30) results. Quarterly adjusted net income of C$3.75 billion ($2.77 billion) increased 1% from the prior-year quarter.
The company recorded a rise in net interest income on the back of higher interest rates and decent loan demand. Also, the company’s capital ratios were solid during the quarter. However, an increase in expenses and higher provision for credit losses were major headwinds.
Net income of C$3.35 billion ($2.47 billion) increased 12.1% year over year.
Adjusted Revenues & Expenses Rise
Quarterly adjusted revenues came in at C$12.54 billion ($9.26 billion), increasing 13.6% on a year-over-year basis.
Net interest income jumped 16.5% year over year to C$7.43 billion ($5.48 billion). Non-interest income of C$4.94 billion ($3.65 billion) increased 1.1% year over year.
Adjusted non-interest expenses rose 11.6% year over year to C$6.69 billion ($4.94 billion).
The adjusted efficiency ratio was 53.4% as of Apr 30, 2023, down from 54.3% recorded in the prior-year period.
In the reported quarter, Toronto-Dominion recorded a provision of credit losses of C$599 million ($442.17 million) compared with C$27 million recorded in the year-ago quarter.
Balance Sheet: Mixed Bag, Capital Ratios Improve, Profitability Ratios Weaken
Total assets were C$1.93 trillion ($1.42 trillion) as of Apr 30, 2023, declining marginally from the end of the first quarter of fiscal 2023. Net loans rose 1.5% on a sequential basis to C$849.6 billion ($626.86 billion) and deposits decreased 2.5% to C$1.19 trillion ($0.88 trillion).
As of Apr 30, 2023, the common equity Tier I capital ratio was 15.3%, up from 14.7% as of Apr 30, 2022. The total capital ratio was 19.7% compared with the prior year’s 18.5%.
Toronto-Dominion’s return on common equity (on an adjusted basis) was 14.1%, down from 15.9% as of Apr 30, 2022.
Key Developments During the Quarter
In March, TD completed the deal to acquire Cowen Inc. The acquisition accelerated TD's long-term growth strategy in the United States by acquiring a high-quality and rapidly growing investment bank with outstanding talent and highly complementary products and services.
In February 2022 the bank announced an agreement to acquire First Horizon Corporation (FHN - Free Report) . But the deal seems to have fallen victim to the ongoing regional banking crisis in the United States. In May 2023, both companies announced the mutual termination of the transaction as “TD does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon.”
Per the terms of the termination agreement, TD will pay $200 million to First Horizon in cash. This is in addition to the $25 million fee reimbursement to First Horizon under the merger agreement.
Our Take
Supported by a diverse geographical presence, Toronto-Dominion’s efforts toward improving revenues and market share, both organically and inorganically, seem impressive. Also, rising interest rates will support the company’s financials.
Toronto Dominion Bank (The) Price, Consensus and EPS Surprise
Toronto Dominion Bank (The) price-consensus-eps-surprise-chart | Toronto Dominion Bank (The) Quote
TD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Another Foreign Bank
Bank of Montreal's (BMO - Free Report) second-quarter fiscal 2023 (ended Apr 30) adjusted earnings per share of C$2.93 declined 9.2% year over year.
During the reported quarter, BMO completed the acquisition of Bank of the West and its subsidiaries from BNP Paribas. The company recorded higher revenues, a rise in loans and deposit balances during the quarter. However, an increase in expenses and higher provisions were the undermining factors.