Toronto Dominion Bank Reports Mixed Third-Quarter Results, Fee Burden (NYSE:TD)

Toronto Dominion Bank (NYSE:TD) warehouse fell by 4.2% in premarket trading on Thursday after the bank reported adjusted earnings for its fiscal third quarter that fell short of consensus estimates. Operationally, its Wholesale Banking unit grew sharply in the quarter, while Wealth Management & Insurance’s results rose double-digit growth. Growth in Canadian Personal & Commercial Banking and US Retail was more subdued.

Late Wednesday, the company announced it would take a $2.6 billion after-tax reserve for potential settlements related to Bank Secrecy Act/anti-money laundering program investigations. The company also said it would sell 40.5 million shares of Charles Schwab (SCHW) stock.

Adjusted earnings per share in the fiscal third quarter were C$2.05 ($1.51), missing the consensus for visible alpha of C$2.07, and rose from C$2.04 in the second quarter to C$1.95 in the third quarter of 2023.

The adjusted Q3 2024 amount excludes CAD3.57 billion ($2.63 billion), or $2.04 per share, of a reserve related to the bank’s anti-money laundering program; CAD81 million, or CAD0.05 per share, restructuring charges; CAD60 million, or CAD0.03 per share, acquisition and integration costs; CAD56 million, or CAD0.03 per share, amortization of acquired intangible assets; CAD46 million, or $0.03 per share, the impact of the completed capital preservation strategy related to the FHN acquisition; and CAD18 million, or CAD0.01 per share, acquisition and integration costs related to the Schwab transaction.

These charges resulted in a net loss of CAD$0.14 per share compared to earnings per share of CAD$1.35 in Q2 and CAD$1.53 in Q3 2023.

Total revenue of CAD14.2 billion for the quarter ended July 31, 2024 exceeded Visible Alpha’s consensus of CAD14.0 billion and increased from CAD13.8 billion in the prior-year quarter and CAD12.9 billion in the same period a year ago.

Net interest income of CAD7.58 billion increased from CAD7.47 billion in Q2 and CAD7.29 billion in Q3 2023.

Noninterest income of C$6.60 billion increased from C$6.35 billion in the previous quarter and C$5.63 billion a year earlier.

The credit loss provision of CAD1.07 billion remained roughly unchanged in the second quarter and increased from CAD766 million in the third quarter of 2023.

Total loans, net of provisions for losses, increased to CAD938.3 billion from CAD928.1 billion at April 30, 2024. Total deposits increased to CAD1.22 trillion from CAD1.20 trillion at April 30.

Adjusted return on equity was 14.1%, compared to 14.5% in Q2 and 13.8% in Q3 last year.

Canadian Personal and Commercial Banking net income of CAD1.87 billion was down 3% QoQ and up 7% YOY. Revenue of CAD4.84 billion was down 1% QoQ and up 10% YOY, with the YOY change reflecting volume growth and higher margins.

U.S. Retail adjusted net income, including TD’s investment in Charles Schwab (SCHW), was CAD1.27 billion, up 5% QoQ and down 17% YoY. Net interest margin of 2.99% declined 4 basis points QoQ due to balance sheet composition and higher funding costs.

Wealth Management & Insurance net income of CAD621 million was up 12% QoQ and 19% YOY; revenue of CAD3.11 billion was down 1% QoQ and up 11% YOY, with the YOY change reflecting higher insurance premiums and wealth fee income.

Wholesale Banking generated revenue of CAD1.94 billion in Q3, up 9% QoQ and 37% YoY, reflecting the inclusion of TD Cowen and higher trading, securities fee and lending revenues; adjusted net income of CAD441 million was up 48% QoQ and 107% YoY.

Conference call at 8:00 a.m. Eastern Time.

Previously, TD Bank, non-GAAP EPS was CAD 2.05; adjusted revenue CAD 14.24 billion