Skip to main content
bank earnings

TD Centre office towers in Toronto are pictured in this file photo.Fred Lum/The Globe and Mail

Toronto-Dominion Bank put an exclamation point on a strong third quarter for Canadian banks with a 17-per-cent leap in profit fuelled by strong results in Canada and the United States.

All six of Canada's biggest banks surpassed analysts' expectations for the quarter that ended July 31, riding a surging domestic economy to better results.

With profit climbing 14 per cent higher in its retail banking arms on both sides of the Canada-U.S. border, TD stood out from a group of outperformers. The bank also enjoyed lower loan losses and strong capital generation, and announced that it intends to extend an existing plan to return capital to shareholders by buying back as many as 20 million more shares if regulators approve.

"I feel good about our performance at this stage of the year," chief executive officer Bharat Masrani said on a Thursday conference call. "This outperformance is partly attributable to a more favourable operating environment in the U.S., and more recently in Canada."

But even as the banks are riding high, TD chief financial officer Riaz Ahmed sounded a note of caution on the economic forces that have allowed banks to grow faster than even they predicted. Housing activity has been slowing while the Canadian dollar strengthens, and there remains uncertainty about the outcome of trade negotiations with the United States and Mexico.

"The Canadian economy has been surprisingly strong, but when you look forward, there's a number of headwinds that need to be taken into account," Mr. Ahmed said in an interview. "I would expect the growth rate to moderate a little bit."

TD's profit for the third quarter was $2.77-billion, or $1.46 a share, up from $2.36-billion, or $1.24 in the same quarter last year.

Adjusted to exclude certain items, TD earned $1.51 a share. Analysts surveyed by Bloomberg had estimated that TD would earn only $1.36 a share.

Revenue was $9.3-billion, or nearly 7 per cent higher than a year ago.

Profit from the bank's core Canadian retail division, which includes wealth management, topped $1.7-billion for the third quarter, up from $1.5-billion a year ago. The increase was mainly due to revenue growth and lower insurance claims.

TD's performance in retail banking in the United States also pushed forward, with profit reaching $901-million, compared with $788-million in the third quarter of 2016. That increase came in spite of a "sentiment of uncertainty" that Mr. Ahmed acknowledged has taken hold in the United States, as promised changes to trade and tax policies remain in limbo. But in the east coast markets where TD is concentrated, "business conditions seem to be good and activity is robust," he said.

Interest-rate hikes in the United States and, more recently, in Canada have also helped.

"TD showed the strongest beat of the 'Big 6' this earnings season, coming in well ahead of expectations," said John Aiken, an analyst at Barclays Capital Canada Inc., in a research note. "Its U.S. platform continued its upward earnings trajectory and its domestic retail operations saw a step up in its profitability after being mired in lower growth over the past few quarters."

Profit from the bank's capital markets arm dipped 3 per cent from a year earlier, to $293-million. But revenue from lending and trading grew, and the decline was due mostly to investments in the bank's U.S. dollar businesses. The unit also faced a tough comparison with TD's results from the same quarter a year ago.

"If you look at the last nine quarters, [$293-million is] the second-highest outing we've had," Mr. Ahmed said. "The fact that it's a mathematical 3-per-cent decline is not something that worries me."

The climate for credit has been almost universally described as benign this quarter, and TD's provision for credit losses – the sum set aside to cover bad loans – fell to $505-million, from $556-million a year ago. Loan losses were lower across the bank's credit card, personal lending and auto lending portfolios, and the bank had fewer provisions for the oil and gas sector in its capital markets arm.

TD's common equity tier 1 ratio – a key measure of a bank's capital levels – rose to 11 per cent, from 10.4 per cent a year ago, setting the stage for TD to boost the size of its share buyback.

"Our capital generation has been quite strong," Mr. Ahmed said. "We thought it made sense to reward our shareholders and pay some of that back."

Toronto’s Air Canada Centre will become Scotiabank Arena next July, after the bank obtained naming rights for the home of the Raptors and Maple Leafs. Here’s a look at the 20-year deal worth $800 million.

The Canadian Press

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:15pm EDT.

SymbolName% changeLast
TD-N
Toronto Dominion Bank
-0.43%60.38
TD-T
Toronto-Dominion Bank
-0.63%81.75

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe