TD Bank beats second-quarter estimates as Canadian unit helps offset U.S. weakness

Toronto-Dominion Bank (TD) posted fiscal second-quarter 2024 results on Thursday, beating analyst estimates as the bank kicks off a streak of earnings for Canadian banks through the rest of the month.

TD Bank reported revenue that exceeded expectations, but its reported net income was low due to more than C$1 billion in one-time charges such as restructuring and provisions for ongoing investigations into the bank’s anti-money laundering (AML) practices.

Revenue rose more than 11% year-over-year to C$13.82 billion ($10.11 billion), above analysts’ expectations of C$13.53 billion, according to estimates compiled by Visible Alpha.

However, net income of C$2.56 billion, or C$1.35 per share, was lower than analysts’ expectations of C$3.02 billion and C$1.57 per share. The bank omitted the estimates due to a number of one-off charges related to various legal and restructuring costs.

On an expense-adjusted basis, TD’s earnings of C$3.79 billion, or C$2.04 per share, topped analysts’ expectations of C$3.45 billion and C$1.84 per share.

Profits from TD’s home country business and the bank’s wealth management business increased 7% year-over-year to C$1.74 billion and 19% to C$621 million, respectively, helping to offset a 59% decline in earnings to C$580 million. U.S. operations . The decline in the U.S. was largely driven by one-time charges related to an anti-money laundering investigation, but revenue still declined 16% to C$1.27 billion on a net-adjusted basis due to the decline in revenue and an increase in provisions for credit losses (PCL).

TD also announced a quarterly dividend on Thursday morning of C$1.02 per share, which will be paid on July 31 to shareholders holding a record number of shares at the market close on July 10.

Updates on U.S. regulators’ investigation of AML practices

The largest one-time charge was C$615 million in connection with investigations by U.S. regulators and law enforcement agencies into whether the AML policies of TD and other banks failed to prevent money laundering in multiple cases across the United States

TD previously revealed that it was one of the banks under investigation, but a “Wall Street” daily a report released earlier this month revealed that some of the money that may have been laundered was linked to illegal drug sales in the U.S.

“The bank has been cooperating in good faith with U.S. regulators and authorities for many months and is working diligently to complete these investigations so that investors have greater clarity,” the company said. “A comprehensive review of TD’s U.S. AML program is already underway and will strengthen our program globally.”

TD shares on the New York Stock Exchange (NYSE) rose about 2.5% to $57.50 about an hour before Thursday’s opening bell, but are still down about 11% this year.