Toronto-Dominion (TD) Q4 Earnings Rise, Costs Jump, Stock Up
Toronto-Dominion Bank’s TD shares moved marginally up on the NYSE in response to fourth-quarter fiscal 2020 (ended Oct 31) results last week. Adjusted net income climbed slightly from the prior-year quarter to C$2.97 billion ($2.25 billion).
Results were supported by higher net interest income (NII). However, rise in provisions, fall in loan balance and lower non-interest income were headwinds.
After considering certain non-recurring items, net income was C$5.14 billion ($3.89 billion), increasing 80% year over year.
In fiscal 2020, adjusted net income was down 20.3% year over year to C$9.97 billion ($7.54 billion). After considering certain non-recurring items, net income summed C$11.9 billion ($9 billion), up 1.8%.
Adjusted Revenues Rise, Expenses Increase
Total revenues (on an adjusted basis) amounted to C$10.42 billion ($7.88 billion), up nearly 1% on a year-over-year basis. This upside resulted from growth in NII.
In fiscal 2020, revenues increased 2.8% year over year to C$42.23 billion ($31.93 billion).
Adjusted NII rose 3.1% year over year to C$6.37 billion ($4.82 billion). However, adjusted non-interest income came in at C$4.06 billion ($3.07 billion), down 2.6%.
Adjusted non-interest expenses increased 3.3% from the prior year to C$5.65 billion ($4.27 billion).
Adjusted efficiency ratio was 54.2% compared with 52.8% on Oct 31, 2019. Rise in efficiency ratio indicates a fall in profitability.
Provision for credit losses jumped 2.9% year over year to C$917 million ($693.45 million).
Solid Balance Sheet & Capital Ratios, Weak Profitability Ratios
Total assets came in at C$1.72 trillion ($1.29 trillion) as of Oct 31, 2020, up 1.1% from the fiscal third quarter. Net loans fell marginally on a sequential basis to C$717.5 billion ($538.46 billion) and deposits grew 4% to C$1.14 trillion ($0.86 trillion).
As of Oct 31, 2020, common equity Tier I capital ratio was 13.1%, up from 12.1% on Oct 31, 2019. Total capital ratio was 16.7% compared with the prior year’s 16.3%.
Return on common equity — on an adjusted basis — came in at 13.3%, down from 14% as of Oct 31, 2019.
Our Viewpoint
While Toronto-Dominion’s efforts toward improving revenues — both organically and inorganically — are supported by a diverse geographical presence, rising operating expenses are deterring bottom-line growth to some extent. Further, rising provisions for credit losses pose a near-term concern.
Toronto Dominion Bank The Price and Consensus
Toronto Dominion Bank The price-consensus-chart | Toronto Dominion Bank The Quote
Toronto-Dominion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Canadian Banks
Royal Bank of Canada RY reported fourth-quarter fiscal 2020 (ended Oct 31, 2020) net income of C$3.2 billion ($2.4 billion), up 1% from the prior-year quarter’s reported tally.
Bank of Montreal's BMO fourth-quarter fiscal 2020 (ended Oct 31) adjusted net income came in at C$1.61 billion ($1.22 billion), slightly up year over year.
The Bank of Nova Scotia BNS reported fourth-quarter fiscal 2020 (ended Oct 31) adjusted net income of C$1.94 billion ($950 million), down 79% year over year.
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