The Toronto-Dominion Bank TD, also known as TD Bank, declined around 1% on the NYSE, following the announcement of its fiscal fourth-quarter 2015 (ended Oct 31) results on Thursday, before the opening bell. Though earnings surged, investors’ concerns were visible on rising expenses and higher provisions.
Adjusted earnings of C$1.14 per share were up 17% year over year. Also, adjusted net income rose 18% year over year to C$2.18 billion ($1.66 billion).
Rise in revenues was partly offset by higher operating expenses and provisions. Growth in assets was impressive, while profitability ratios showed weakness.
After considering certain non-recurring items, net income summed C$1.84 billion ($1.40 billion), up 6% year over year.
For fiscal 2015, adjusted earnings were C$4.61 per share, up 8% year over year, while adjusted net income surged 8% year over year to C$8.75 billion ($7.05 billion). After considering certain non-recurring items, net income summed C$8.02 billion ($6.46 billion), up 2% year over year.
Quarterly Details
Total revenue (on an adjusted basis) amounted to C$8.10 billion ($6.16 billion), up 9% on a year-over-year basis. The rise was attributable to growth in net interest income as well as non-interest income.
Adjusted net interest income rose 10% year over year to C$4.89 billion ($3.72 billion). Further, adjusted non-interest income came in at C$3.21 billion ($2.44 billion), up 7% year over year.
Adjusted non-interest expenses increased 7% year over year to C$4.48 billion ($3.40 billion). Adjusted efficiency ratio stood at 55.3% at the quarter-end as against 56.2% on Oct 31, 2014. Fall in efficiency ratio indicates a rise in profitability.
Total provision for credit losses surged 38% year over year to C$509 million ($387 million).
Total assets grew 15% year over year to C$1.10 trillion ($0.84 trillion) as of Oct 31, 2015. Return on common equity, as adjusted, came in at 13.5% for the reported quarter, down from 14.0% as of Oct 31, 2014.
Our Viewpoint
TD Bank’s focus and efforts stood aligned with its organic and inorganic growth strategies, which will likely boost revenues going forward. Notably, in October 2015, the company acquired a credit card portfolio with $2.2 billion in receivables from Seattle-based major fashion retailer Nordstrom Inc. JWN.
However, mounting expenses and a stringent regulatory environment continue to strain the company’s profitability. Moreover, volatile energy markets and weaker Canadian dollar may further aggravate the situation.
TD Bank currently carries a Zacks Rank #3 (Hold).
Performance of Other Foreign Banks
Royal Bank of Canada RY reported fiscal fourth-quarter 2015 (ended Oct 31) net income of C$2.6 billion ($2.0 billion), increasing 11% year over year. Results benefited from a decline in provisions. Elevated loans and deposits balances reflected organic growth. However, a rise in non-interest expenses and lower revenues were the headwinds.
The Royal Bank of Scotland Group plc RBS reported third-quarter 2015 (ended Sep 30) earnings attributable to shareholders of £952 million ($1.5 billion), up 6.3% year over year. Results were driven by lower expenses. However, reduced net interest as well non-interest income was on the downside.
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