Decent First Quarter for Toronto-Dominion; We Don't Expect First Horizon Acquisition to Add Value

Wide-moat-rated Toronto-Dominion reported decent fiscal first-quarter results. Adjusted earnings per share were CAD 2.08, representing year-over-year growth of 14%. Credit costs remained quite low at only CAD 72 million. Net revenue was up 5% year over year, an average result, as net interest income increased 4.5% and fees increased 5.5%. This puts the bank slightly ahead of our expectations on net interest income and relatively in line on fees. Expenses were up 3% year over year, a bit ahead of the 2% rate we are projecting for the full year. Given that both NII and expenses are slightly ahead of our annual growth rates, we don’t anticipate making any material changes to our CAD 97/$76 fair value estimate. We view the shares as fairly valued.