TD earnings beats estimates despite higher expenses

Rising costs partially offset stronger revenues

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Toronto Dominion Bank had a mixed second quarter, seeing its adjusted net income slip two per cent to $3.7 billion from this time last year as rising costs partially offset stronger revenues.

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On an adjusted basis, TD’s earnings came out to $2.02 per share in the three months ending April 30, compared with $2.04 reported in the second quarter last year. Bloomberg analysts had been expecting a profit of $1.93 a share.

The bank’s Canadian retail branch saw a two per cent boost to $2.2 billion compared to the same quarter last year with stronger revenues, though these were somewhat offset by higher non-interest expenses, insurance costs, and credit loss provisions. TD said the momentum in this segment continued this quarter with record revenue in personal and commercial banking stemming from stronger customer activity and commercial lending growth.

The U.S. retail banking unit saw similar growth with a four per cent increase in its net income to approximately $1.4 billion compared to the second quarter last year. While this segment saw higher revenue, this growth was partially offset by higher provisions for credit losses.

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“TD’s second quarter performance reflects the strength of our diversified business model and customer-centric approach,” said TD Bank Group president and chief executive officer Bharat Masrani in a press release accompanying the results. “We have delivered strong revenue growth across our businesses and we enter the second half of the year well-positioned to support households and businesses as they navigate an evolving economic environment.”

TD’s wholesale banking slumped six per cent year-over-year to $359 million on higher non-interest expenses and a lower recovery in credit loss provisions, despite seeing higher revenues.

As a gloomier macroeconomic forecast threatens to weigh on Canada’s banking valuations, Masrani remained confident in TD’s ability to weather the storm.

“As we continue to emerge from the COVID-19 pandemic we face new economic uncertainties and growing geopolitical tensions,” Masrani said. “TD has proven its ability to adapt to changing circumstances and deliver performance and progress.”

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