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TD Bank (TD) Stock Falls Despite Q3 Earnings & Revenue Rise

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The Toronto-Dominion Bank’s (TD - Free Report) third-quarter fiscal 2018 (ended Jul 31) adjusted earnings came in at C$1.66 per share, up 10% year over year. Also, adjusted net income rose 9% to C$3.13 billion ($2.40 billion).

Improvement in revenues reflects higher interest rates and growth in the bank’s U.S. retail business. Also, strong capital and profitability ratios, as well as loan and deposit growth remained impressive. Nonetheless, higher provisions and a rise in operating expenses were the offsetting factors. Perhaps this is the reason why the company’s shares declined more than 1% on the NYSE.

After considering certain non-recurring items, net income was C$3.11 billion ($2.38 billion), up 12% from the prior-year quarter.

Revenues, Provisions & Expenses Increase

Total revenues (on an adjusted basis) came in at C$9.88 billion ($7.58 billion), up 6% year over year. The rise was attributable to growth in net interest income and non-interest income.

Adjusted net interest income grew 7% year over year to C$5.66 billion ($4.34 billion). Also, adjusted non-interest income came in at C$4.23 billion ($3.24 billion), increasing5% from the year-ago quarter.

Adjusted non-interest expenses rose 5% year over year to C$5.12 billion ($3.93 billion).

Adjusted efficiency ratio was 51.2% at the quarter end, down from 51.4% as of Jul 31, 2017. A decline in efficiency ratio indicates an improvement in profitability.

Total provision for credit losses increased 11% year over year to C$561 million ($430.2 million).

Strong Balance Sheet, Profitability and Capital Ratios

Total assets came in at C$1.29 trillion ($1 trillion) as of Jul 31, 2018, up nearly 1% from the prior quarter. Net loans grew 2% sequentially to C$635.2 billion ($487.9 billion) while deposits rose 1% to C$838.6 billion ($644.1 billion).

Return on common equity, on an adjusted basis, came in at 17.1%, up from 16.1% as of Jul 31, 2017.

As of Jul 31, 2018, common equity Tier I capital ratio was 11.7%, up from 11.0% in the prior-year quarter. Total capital ratio came in at 15.4% for the reported quarter, down from 15.6% as of Jul 31, 2017.

Our Viewpoint

TD Bank’s efforts toward improving revenues, both organically and inorganically, are supported by its strong capital position. Though elevated level of provisions remains a concern, the export-driven economy of Canada is likely to benefit from the recovery of the U.S. economy. This, in turn, might aid the Zacks Rank #3 (Hold) company’s growth over the long run.

Toronto Dominion Bank (The) Price, Consensus and EPS Surprise

 

Toronto Dominion Bank (The) Price, Consensus and EPS Surprise | Toronto Dominion Bank (The) Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Canadian Banks

Canadian Imperial Bank of Commerce’s (CM - Free Report) third-quarter fiscal 2018 (ended Jul 31) adjusted earnings per share came in at C$3.08, up 11% from the prior-year quarter. Results improved, driven by growth in both net interest income and non-interest income. However, an increase in expenses and higher provisions were the undermining factors.

Bank of Montreal (BMO - Free Report) reported third-quarter fiscal 2018 (ended Jul 31) adjusted net income of C$1.6 billion ($1.2 billion), which increased 14% year over year. Results were primarily driven by rise in revenues and lower provisions. However, higher expenses were an undermining factor.

The Bank of Nova Scotia (BNS - Free Report) reported third-quarter fiscal 2018 (ended Jul 31) results before the opening bell. A rise in revenues and fall in provisions largely drove improvement in results, which was partially offset by elevated expenses.

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