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TD Bank (TD) Falls 2.5% Despite Y/Y Increase in Q4 Earnings


The Toronto-Dominion Bank TD announced fourth-quarter (ended Oct 31) and fiscal 2017 results on Thursday, before the opening bell. Adjusted earnings for the quarter came in at C$1.36 per share, up 11.5% year over year. Also, adjusted net income rose 10.9% year over year to C$2.6 billion ($2.08 billion). However, investors do not seem very satisfied with the results. Consequently, the stock lost 2.5%.

Improvement in revenues was partially offset by higher provisions. Also, growth in capital and profitability ratios was impressive.

After considering certain non-recurring items, net income for the fourth quarter was C$2.7 billion ($2.16 billion), up 17.8% year over year.

Revenues & Provisions Increase, Expenses Decline

Total revenues (on an adjusted basis) for the reported quarter amounted to C$9.07 billion ($7.26 billion), up 3.9% year over year. The rise was attributable to growth in net interest income as well as non-interest income.

Adjusted net interest income for the quarter rose 5.1% year over year to C$5.33 billion ($4.26 billion). Also, adjusted non-interest income came in at C$3.74 billion ($2.99 billion), up 2.5% year over year.

Adjusted non-interest expenses decreased 1% year over year to C$4.74 billion ($3.79 billion). Adjusted efficiency ratio was 52.3% at the quarter end, down from 54.8% as of Oct 31, 2016. A decline in efficiency ratio indicates an improvement in profitability.

Total provision for credit losses rose 5.5% year over year to C$578 million ($462.4 million).

Profitability and Capital Ratios Improve

Return on common equity, on an adjusted basis, came in at 14.7%, slightly up from 13.6% as of Oct 31, 2016.

As of Oct 31, 2017, common equity Tier I capital ratio came in at 10.7%, up from 10.4% in the prior-year quarter. Total capital ratio came in at 14.9% for the reported quarter, down from 15.2% as of Oct 31, 2016.

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 gradual recovery of the U.S. economy. This, in turn, might aid the Zacks Rank #4 (Sell) company’s growth over the long run.

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

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

Performance of Other Foreign Banks

Royal Bank of Canada RY reported fourth-quarter fiscal 2017 (ended Oct 31) net income of C$2.8 billion ($2.2 billion), up 12% from the prior-year quarter.

The Bank of Nova Scotia BNS reported fourth-quarter fiscal 2017 (ended Oct 31) results before the opening bell. Net income for the quarter came in at C$2.1 billion ($1.7 billion), jumping 3% year over year.

Barclays PLC’s BCS third-quarter 2017 net income attributable to ordinary equity holders was £583 million ($763.1 million), reflecting a significant improvement from £190 million in the prior-year quarter.

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