TD Bank Rises on Solid Q2 Earnings - Analyst Blog

The stock price of The Toronto-Dominion Bank TD, also known as TD Bank, rose 2.7% following the company's robust fiscal second-quarter 2014 earnings (ended Apr 30) reported on May 22. Adjusted earnings of C$1.09 per share compared favorably with C$0.95 earned in the prior-year quarter. Moreover, adjusted net income was C$2.07 billion ($1.87 billion), up 13.5% year over year.

Results benefited from top-line growth and lower provision for credit losses partially offset by higher expenses. Moreover, rise in asset holdings was a tailwind for the quarter.

After considering certain non-recurring items, net income came in at C$1.99 billion ($1.80 billion), up 15.8% year over year.

Quarterly Highlights

Total revenue (on an adjusted basis) was C$7.44 billion ($6.73 billion), up 12.1% on a year-over-year basis. The rise was driven by growth in net interest income and non-interest income.

Adjusted net interest income rose 12.6% year over year to C$4.39 billion ($3.97 billion). Moreover, adjusted non-interest income came in at C$3.04 billion ($2.75 billion), up 11.5% from the year-ago quarter.

Adjusted non-interest expenses were C$3.92 billion ($3.54 billion), rising 11.3% on a year-over-year basis. Adjusted efficiency ratio improved to 52.8% at the quarter-end from 53.1% as of Apr 30, 2013. Decline in efficiency ratio indicates rise in profitability.

Total provision for credit losses were C$392 million ($354 million), down 6.0% from the comparable quarter in the previous fiscal year.

Total assets were C$896.47 billion ($815.43 billion) as of Apr 30, 2014, marking a year-over-year increase of 8.5%. Return on common equity, as adjusted, was 16.6% in the reported quarter, up from 16.1% as of Apr 30, 2013.

Our Viewpoint

TD Bank's organic and inorganic growth strategies are expected to aid top-line growth going forward. Moreover, the company's efficient capital deployment activities will continue to boost investors' confidence.

However, the sluggish economic growth, increasing expenses and stringent regulatory environment will weigh on the profitability in the forthcoming quarters. Further, the subdued economic scenario in the U.S. (the largest trade partner of Canada) will continue to pose as an added disadvantage.

TD Bank currently carries a Zacks Rank #3 (Hold).

Among other foreign banks, The Bank of Nova Scotia BNS is scheduled to report its fiscal second-quarter 2014 results on May 27, while Bank of Montreal BMO and Canadian Imperial Bank of Commerce CM is expected to report on May 28 and May 29, respectively.

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