TD Bank Earnings Dented by Provisions, Restructuring and Rise in Credit-Loss Provisions

By Robb M. Stewart

Toronto-Dominion Bank logged a sharp drop in quarterly earnings as the Canadian lender was squeezed by provisions, restructuring charges and increases in non-interest expenses and credit-loss provisions.

Fiscal second-quarter net income fell to 2.56 billion Canadian dollars, or C$1.35 a share, from C$3.31 billion, or C$1.69, a year earlier.

Stripping out items the bank doesn't believe reflect the underlying performance of its business such as restructuring costs, per-share earnings came in at C$2.04, stronger than the C$1.85 mean estimate of analysts polled by FactSet.

Overall revenue was 11% higher for the three-month period to April 30 at C$13.82 billion, beating the C$12.63 billion expected by analysts.

TD Bank, one of Canada's largest banks, said its credit-loss provision increased to C$1.07 billion, up C$70 million from the prior quarter and C$472 million more than a year earlier. That included a C$64 million quarter-over-quarter fall in impaired provisions for credit losses but a C$134 million increase in performing provisions.

The country's big banks have been setting aside more money against the risk of loan losses as borrowers have been squeezed by sharply higher interest rates, after the central bank begun aggressively lifting its policy rate to tame elevated inflation.

Ahead of the release of its results, TD Bank warned of an initial $450 million provision to cover potential charges it could face in the U.S. related to failings in its anti-money laundering efforts, and said it could face additional penalties as talks with three regulators and the Justice Department continued. The bank said it also recorded a C$205 million after-tax provision for a civil matter provision and litigation settlement.

TD Bank booked C$122 million in after-tax restructuring charges for the latest quarter, which adds to the previous quarter's C$213 million restructuring cost. Reported expenses were 24% higher than in the same quarter a year ago at C$8.4 billion, reflecting the provisions and charges, as well as investment in risk and control infrastructure and other items.

The bank forecast a further roughly C$50 million in restructuring costs ahead, which would close the program and would help lead to about C$400 million in pretax savings this fiscal year.

Across its business, revenue from Canadian personal and commercial banking was up 10% from a year earlier at C$4.84 billion for the quarter and U.S. retail revenue was about 3% lower at C$2.54 billion. Wealth management and insurance division revenue increased 11% on-year to C$3.11 billion, and wholesale banking revenue jumped 37% to C$1.94 billion with growth in global markets and investment banking.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

May 23, 2024 06:48 ET (10:48 GMT)

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