TD Bank's second-quarter profit tops estimates, boosted by real estate lending and better loan margins - The Globe and Mail

Toronto-Dominion Bank’s second quarter profit beat analyst estimates thanks to growth in Canadian personal and commercial banking, improving loan margins and lower loan losses — all of which are common themes across the Big Six banks this earnings season.

TD TD-T reported net income of $3.8-billion, or $2.07 per share, up three per cent from the year prior. However, the bank’s total profit included a one-time boost of $224-million stemming from a lawsuit settlement. After adjusting for one-time items, TD’s earnings amounted to $2.02 per share, down slightly from the year prior, but beating analyst estimates of $1.93 per share.

Like many of its Big Six rivals, TD delivered strong revenues in its Canadian personal and commercial banking arm, with loan growth rising nine per cent from the year prior, driven by residential real estate and commercial lending.

TD’s residential real estate lending business in Canada grew by nine per cent relative to the year prior, while its commercial lending division grew by 16 per cent. Net interest margins, or the spread between the rates at which TD borrows money and then lends it out to clients, also grew, allowing the bank to make more money per loan.

However, TD’s expenses in this division also grew nine per cent which offset some of these gains, as the bank spends to upgrade its technology and increases employee pay.

In the U.S., TD’s retail segment also reported profit growth, albeit at a slower rate than in Canada. The U.S. division includes TD’s stake in Charles Schwab Corp., and the investment hurt the division’s earnings this quarter because profit from it fell nine per cent from the year prior.

The second quarter of 2021 was an unusually busy period for discount brokerages because retail traders were piling into the stock market. Many of these traders have since retreated now that the market is correcting, which lowers trading revenues.

Better earnings from TD’s traditional banking divisions helped to offset weaker profits from wholesale banking.

Heading into earnings season, capital markets profits across the Canadian banks were expected to fall because of a steep drop in dealmaking in recent months. The rocky stock market has made it tough for companies to raise money because investors are timid to support financings, and merger and acquisition activity has slowed significantly because it is difficult to know how to appropriately value a potential acquisition.

TD, however, is partially insulated from this slowdown because its capital markets division typically delivers a slower portion of its total profit relative to some major rivals. TD was also able to partially offset lower advisory fees with strong trading revenues. TD’s wholesale banking profit dropped six per cent from the year prior.

TD’s one-time $224-million gain, reported as part of its U.S. retail profit, is a recovery of losses tied to an alleged Ponzi scheme at Commerce Bank, which TD acquired in 2008. TD previously paid hundreds of millions of dollars to settle lawsuits, and it was seeking partial repayment stemming from insurance policies it had taken out.

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https://news.google.com/__i/rss/rd/articles/CBMidmh0dHBzOi8vd3d3LnRoZWdsb2JlYW5kbWFpbC5jb20vYnVzaW5lc3MvYXJ0aWNsZS10ZC1iYW5rcy1zZWNvbmQtcXVhcnRlci1wcm9maXQtdG9wcy1lc3RpbWF0ZXMtYm9vc3RlZC1ieS1yZWFsLWVzdGF0ZS_SAQA?oc=5

2022-05-26 14:01:00Z
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