Toronto-Dominion Bank Earnings: Weak Results Due to US Operations and High Insurance Expenses

Wide-moat-rated Toronto-Dominion Bank reported weaker-than-expected fiscal fourth-quarter results on higher costs as it works to put its regulatory issues in the US behind it. Adjusted net revenue increased 12.5% to CAD 14.9 billion while adjusted net income fell 8% from last year to CAD 3.2 billion. These results translate to a return on equity of 11.7%, below the firm’s historical performance. TD Bank also suspended its medium-term financial targets of 7%-10% earnings per share growth and a 16% return on equity. While this was not surprising to see following the asset cap placed on its US operations, which will be a headwind for growth, it is still disappointing. That said, we do not expect to materially alter our CAD 88/USD 64 fair value estimate.