(Toronto) TD Bank finished its quarterly banking results season by matching other major banks and beating expectations, although analysts note that its performance has lagged in some areas compared to its peers.
Updated yesterday at 4:59pm.
TD reported first-quarter profit of $3.7 billion Thursday, up from about $3.3 billion a year earlier, buoyed by the strength of its retail banking operations in Canada and the United States.
“The Canadian retail sector had a strong quarter as increased customer activity supported record performance in personal and business banking revenue,” TD Chief Financial Officer Kelvin Tran said during an interview.
Most Canadian banks exceeded expectations due to unexpected increases in trading yields as markets were volatile before the interest rate changes. TD benefited less from the trend as its trading volume returned to normal, but Tran said the bank was doing well in other areas.
Our results go beyond mere negotiation. Retail banking has performed very well. We have strong volume growth on both the lending and deposit sides of Canada, and our client business is strong. »
The bank earned $2.02 per share for the quarter ended January 31, compared to $1.77 per share in the same quarter a year earlier.
Revenue totaled nearly $11.3 billion, compared to $10.8 billion in the same quarter last year.
On an adjusted basis, TD said it earned $2.08 per share, up from adjusted earnings of $1.83 per share a year earlier.
Analysts, on average, expected adjusted earnings of $2.04 per share, according to forecasts compiled by financial data firm Refinitiv.
Less efficient than its competitors
Barclays analyst John Aiken noted that while the bank has exceeded expectations, its results may not be as strong as those of its competitors, and not just in the capital markets.
“Margin pressure in domestic retail and weaker loan growth than some of its competitors are likely to attract a negative outlook,” he said in a note.
L’analyste de la Banque Scotia, Meny Grauman, a pour sa part affirmé que la banque avait obtenu de bons résultats dans la gestion de ses dépenses, mais qu’elle était plus faible dans la plupart des paramètres de personnel cis services banc com com in Canada.
“While it’s hard to describe TD’s performance as poor, the extent to which it exceeded expectations was certainly the most modest we’ve seen on the Big Six Banks group this earnings season.”
TD on Monday announced its expansion into the southeastern United States, with the signing of an agreement to acquire First Horizon for $13.4 billion.
The acquisition builds on the existing US operations of TD, which is already one of the 10 largest banks in the United States. With the acquisition of First Horizon, TD estimates that its US franchise will be one of the six largest US banks, with approximately $614 billion in assets and more than 10.7 million customers in 22 states.
Mr. Tran explained that the deal would allow the bank to access new markets such as Tennessee and Louisiana, as well as strengthen its presence in Florida and North Carolina and give it a footprint in places such as Texas and Georgia.
“This acquisition expands our reach, distribution and geographies.”
The bank pays for the transaction with its own plentiful money, which is much in excess of the regulatory requirements.
Disappearance benefits
Grumman noted that TD stock was trading at a premium due to excess capital and the larger bank’s exposure to the central bank’s interest rate expectations, but both drivers have now slowed.
“In the wake of the First Horizon acquisition and the flattening of the curve, these two engines have become, to some extent, a headwind.”
Yield curves flattened as the uncertainty surrounding the Ukraine crisis made the path of interest rate hikes less clear.
The Bank of Canada announced a 25 basis point increase on Wednesday, and said Russia’s invasion of Ukraine was a “major new source of uncertainty.”
The central bank has warned that oil and other commodity prices have risen, which will exacerbate inflation, while negative effects on confidence and supply chains could affect global growth.
Growth has been strong recently, with 6.7% annual growth for the Canadian economy in the fourth quarter. In a preliminary estimate, Statistics Canada also reported 0.2% growth for January, despite the shutdown linked to the Omicron variant.
The company in this story: (TSX: TD)