TD profit gains on reversal of pandemic loan-loss provisions, rise in retail banking revenue - theglobeandmail.com

A TD Bank branch in Toronto's financial district, on Jan. 4.

Fred Lum/The Globe and Mail

Toronto-Dominion Bank reported higher third-quarter profit as retail banking revenue increased and the bank reversed loan loss provisions earmarked earlier in the COVID-19 pandemic.

Retail banking loans in Canada rose 7 per cent, driven by strong demand for mortgages, but TD also leaned on higher fee-based revenues that help offset narrower profit margins on loans squeezed by low interest rates.

In the bank’s U.S. retail arm, loans fell 5 per cent year-over-year as customers flush with cash paid down balances. But revenue from the division increased 5 per cent as customers have started to spend more on purchases such as dining in restaurants and travel.

TD had record sales on credit cards in the third quarter, driven by pent up demand for purchases as public health restrictions ease.

“What we’re particularly encouraged by is we’ve seen those levels of activity on our cards and really some of the industries where we are particularly strong – for instance, our presence in the travel space – are only beginning to recover,” said chief financial officer Riaz Ahmed, in an interview. “So we’re very well positioned to participate in the continued recovery.”

For the quarter that ended July 31, TD reported profit of $3.545-billion, or $1.92 per share, compared with $2.25-billion, or $1.21 per share, in the same quarter last year.

Adjusted for certain items, TD said it earned $1.96 per share, ahead of analysts’ consensus estimate of $1.92 per share, according to Refinitiv.

All six major banks reported third-quarter profits that beat analysts’ expectations this week, but TD surpassed estimates by the narrowest margin of 4 cents per share.

Like its peers, rising confidence in an economic recovery even as the Delta variant spreads helped TD recover provisions for credit losses that had been earmarked early in the COVID-19 pandemic to cover loans that were at risk of default. The bank released $37-million in the quarter, after setting aside nearly $2.2-billion a year ago.

“We remain confident in the economic recovery,” Mr. Ahmed said. “The Delta variant is driving an increase in case counts. But look, at the same time, as vaccination takes hold, we remain confident in our collective ability to maintain the reopening of the economy and to keep on our path to recovery, acknowledging that conditions remain fluid for now.”

Third-quarter profit from TD’s Canadian retail banking division was up 68 per cent to $2.13-billion, compared with a year earlier. And TD’s U.S. retail profit nearly doubled year-over-year to $1.295-billion. But both profit totals declined modestly from the second quarter.

The bank’s wholesale division reported profit of $330-million, as busy levels of market activity over the past several quarters started to calm.

The bank kept its quarterly dividend unchanged at 79 cents per share as the country’s banking regulator has temporarily restricted dividend increases.

TD also announced Thursday that it has appointed Cherie Brant, a partner in the Indigenous law group at Borden Ladner Gervais LLP. Her legal expertise includes areas such as energy and Indigenous infrastructure, and she has experience in environment, social and governance issues.

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2021-08-26 12:12:19Z
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