Toronto-Dominion Bank extended a solid run of first quarter earnings from Canadian lenders, reporting a profit that topped $2-billion.
Echoing its peers, TD's bottom line grew because of continued strength in Canadian personal and commercial banking, as well as sizable earnings in wealth management.
TD made $2.04-billion, or $1.07 per share, during the first three months of the fiscal year. After accounting for one-time items, the bank made $2.02-billion, or $1.06 per share, slightly ahead of analysts' expectations of $1.04 per share.
Even after a record year for its Canadian banking arm, TD reported stronger first-quarter results from this unit, with adjusted earnings jumping to $1.3-billion, up 5 per cent from the year prior. Unlike the country's other big banks, TD folds wealth management into Canadian banking, so the division's profit jumped on better loan volumes as well as higher fees from assets under management.
However, TD Insurance, which also reports as part of this group, continues to be a drag on the bottom line. Yet again, the unit saw a spike in severe weather accident claims.
Wholesale banking was a bright spot in the first quarter, with net income of $230-million – the highest in over a year, aided by a jump in trading revenues.
U.S. banking, meanwhile, reported earnings of $492-million that were up over the prior year, but didn't show much momentum relative to the previous two quarters.
TD hiked its quarterly dividend by four cents per share.
Although the bank incurred some significant one-time items during the first quarter, these gains and charges mostly offset each other. The bank incurred a $196-million gain on sale of TD Waterhouse Institutional Services to National Bank of Canada, but also incurred costs amounting to $115-million related to setting up its Aeroplan credit card portfolio.
The latest set of earnings should offer investors some more confidence after a mixed performance in 2013. Although TD reported record profits from Canadian banking and wealth management last year, its total earnings per share barely moved higher, climbing just 0.4 per cent.
The bank was particularly hurt by charges in its insurance unit, stemming from personal injury automobile claims in Ontario and losses from floods in Alberta and the Greater Toronto area last summer.
Because annual earnings growth was muted, TD executives had their pay trimmed last year, falling 2.6 per cent from the year prior.
TD's long-term growth prospects are heavily weighted to the U.S. and recently there had been speculation that the bank would consider buying Citizens' Bank, the U.S. retail banking arm of the Royal Bank of Scotland. Chief executive officer Ed Clark all but shut the door on the idea in January, claiming that banking assets are too expensive right now and that TD's U.S. management is just getting accustomed to their roles. Bharat Masrani, the previous U.S. head, moved back to Toronto when he was named the bank's incoming chief executive officer.