Toronto-Dominion Bank earned $1.79-billion in the first quarter, up from $1.48-billion a year ago, and raised its dividend by 5 per cent.
TD skews more towards consumer banking and less towards investment banking than many of its rivals, and roughly half of its profits this quarter came from its core Canadian consumer and business banking division, which earned $920-million. That's 11 per cent higher than a year ago, as both lending and deposits grew and fewer borrowers struggled with their debt payments. But consumer lending volumes grew by only 5 per cent, as households seek to delever, while business lending grew 13 per cent.
TD said the operating environment for Canadian lending will remain challenging this year, and it is forecasting only moderate revenue growth.
Its U.S. consumer and business banking division, meanwhile, brought in $315-million, a large increase from a year ago, due to a variety of factors including fee growth, gains from selling securities, and a lower tax rate. But TD increased its provisions for bad loans from the U.S. business by 14 per cent, in large part because of the growth in the amount of mortgage and auto loans that it has made.
TD said it expects to open more than 30 new branches or "stores" in the U.S. this fiscal year.
Profits from TD's wealth management and insurance operations amounted to $377-million, up 8 per cent from a year ago. The bank's wealth business took in higher fees thanks to increased client assets, while TD said its insurance business benefited from fewer weather-related claims. On the other hand its stake in U.S. online brokerage TD Ameritrade earned $47-million, down 15 per cent from a year ago.
And TD's wholesale or investment banking division saw its profits fall 18 per cent to $159-million, with the bank citing lower trading-related revenue from its fixed-income businesses.
"It was a soft start to the year, despite good client-related activity," Bob Dorrance, the head of that division, stated in a press release. "We expect to capitalize on increased market activity in originations, M&A and advisory as macroeconomic conditions stabilize."
TD said its dividend will climb by four cents to 81 cents beginning in April, as it seeks to increase its dividend payout ratio over time.
"Overall we were very pleased with our strong start to 2013, and we're encouraged by signs of improvement in the global economy," said CEO Ed Clark. "However, we remain cautious as slowing growth and the low interest rate environment impact our businesses. We will continue to strategically invest in our businesses while prudently managing our expense growth."
After factoring out a number of one-time items, TD's adjusted earnings amounted to $2 per share in the latest quarter, up from $1.86 per share a year ago, topping the forecasts of analysts who expected the bank to earn about $1.93.
"Revenues were in line with our expectations while expenses came in higher than we had forecast and provisions for credit losses came in lower than our forecast," RBC analyst Andre-Philippe Hardy wrote in a note to clients. "Relative to street expectations, we believe loan losses accounted for the bulk of the better than expected earnings."